Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Friday, November 29, 2013

Reverse Mergers l The Game Changers

Reverse Mergers l The Game Changers

Reverse Mergers l The Game Changers

SEC Report Reveals $439,000,000 Remains For Bounties

SEC Report Reveals $439,000,000 Remains For Bounties

Form 10-K For Smaller Reporting Issuers

Form 10-K For Smaller Reporting Issuers

Form 10-K For Smaller Reporting Issuers

Due Diligence in the Form S-1 Registration Process

Due Diligence in the Form S-1 Registration Process

Wednesday, November 27, 2013

Crowdfunding v Rule 506(c) l Going Public Bootcamp

As of September 23, 2013, the JOBS Act has permitted general solicitation and advertising in Rule 506 private placements. While crowdfunding is not yet legal, both the SEC and FINRA have proposed rules for crowdfunding.  There is still some confusion about the difference between crowdfunding and Rule 506(c) offerings particularly in going public transactions.
While Rule 506(c) allows issuers to engage in general solicitaiton and advertising, the crowdfunding rules have not been implemented by the Securities and Exchange Commission (“SEC”).  Rule 506 offerings are the most commonly used exemption in going public transactions that involve resale registration statements on Form S-1.

Seed Stockholders l Going Public Bootcamp

The going public process involves a number of steps that vary depending on the characteristics of the private company wishing to go public, and whether it will become a Securities and Exchange Commission (“SEC”) reporting issuer.
All companies seeking public company status must meet certain requirements in order for their securities to be publicly traded. One requirement is that the issuer obtain sufficient shareholders to establish a trading market.

Sponsoring Market Makers l Going Public Bootcamp

One step in going public transactions is obtaining a stock trading or ticker symbol from theFinancial Industry Regulatory Authority (“FINRA”). For a company to obtain a ticker, a sponsoring market maker must submit an application on Form 211 on the issuer’s behalf to the FINRA.
Sponsoring markets makers have become one of the  most important players in the going public process because they are the only ones who can apply for a ticker symbol. 

Reverse Mergers l Going Public Bootcamp

Over the last eight years, the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) have overhauled the rules and regulations applicable to reverse merger transactions.
Not only have the SEC and FINRA jumped on the bandwagon to eliminate them, but, as will be explained, Depository Trust Company (“DTC”) and national securities exchanges have joined in their efforts.
Only last month, DTC issued proposals for specific procedures for eligibility for issuers going public reverse mergers with public shell companies.

FINRA Halts ALL OTC Equity Securities

On Thursday, November 7, 2013, the Financial Industry Regulatory Authority, Inc. (“FINRA”) halted trading in all OTC Equity Securities pursuant to FINRA Rule 6440(a)(3). FINRA determined to impose a temporary halt because of a lack of current quotation information.
The halt was imposed to protect investors and ensure a fair and orderly marketplace.  The regulator added that it would notify the market when trading will resume. Though FINRA didn’t call the halt until 11:25 a.m., according to the Wall Street Journal the problem was discovered around 6 a.m., when OTCMarkets, whose OTC Link handles the vast majority of over-the-counter transactions, realized it had what it later described as a “connectivity issue” that also paralyzed its websites.

SEC Sanctions Auditor Sherb & Co

On November 6, 2013, the Securities and Exchange Commission (the “SEC”) announced sanctions against a New York-based auditing firm, its founder, two other partners, and an audit manager for their roles in the failed audits of three publicly traded China-based companies.
According to the SEC, an investigation found that Sherb & Co. LLP and its auditors falsely represented in audit reports that they had conducted the audits in accordance with U.S. auditing standards when it fact they did not. One issuer they audited China Sky One Medical Inc. has since been charged by the SEC with financial fraud.

SEC Suspends Trading of Nevada Gold Corp

On November 27, 2013, the Securities and Exchange Commission (the “SEC”) announced the temporary  suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange  Act”), of trading in the securities of Nevada Gold Corp. (“NVGC”), of Del Mar, California at  9:30 a.m. EST on November 27, 2013, and terminating at 11:59 p.m. EST on December 11,  2013.
The SEC order reflects that the SEC suspended trading in the securities of NVGCbecause of questions  regarding the accuracy and adequacy of assertions by NVGC, and by others, to investors in press  releases and promotional material concerning, among other things, the company’s assets,  operations, and financial condition. This order was entered pursuant to Section 12(k) of the  Securities Exchange Act.

SEC Registration Statement Procedures

SEC Review & Comment Process
The Securities and Exchange Commission (“SEC”) oversees the securities laws and is the key regulator of securities offerings and securities professionals, including:
♦ Securities exchanges;
♦ Securities brokers and dealers;
♦ Investment advisors;
♦ Mutual funds;
♦ Attorneys; and
♦ Accountants.
The offer and sale of securities is regulated by the Securities Act of 1933, as amended (the “Securities Act”).  Section 5 of the Securities Act requires any offer or sale of securities be registered with the SEC or exempt from registration.

SEC Periodic Reporting

An issuer with a class of securities registered under Section 12 or subject to Section 15(d) of the Securities Exchange Act of 1934  must file periodic reports with the Securities and Exchange Commission pursuant to Section 13(a) and Section 15(d).
Review by SEC
The requires the SEC to review a issuer’s periodic reports at least once every three years. The SEC may review a issuer’s reports more often if:
The issuer files a registration statement under the Securities Act, as a part of a review of the registration statement.

Going Private Transactions

A public company that is fully reporting with the SEC typically has a class of securities registered with the Securities and Exchange Commission (“SEC”). Registration may be required because the company’s securities are widely held or traded on a national securities exchange such as NASDAQ.
Often times microcap issuers cannot afford the costs and time commitment of management required to be public and they envy the simplicity of privately held company status. In light of increased regulation and lack of funding opportunities, public companies are asking themselves what were we thinking?

The Frankfurt Quotation Board

Deutsche Börse is the world’s largest stock exchange organization by revenue, profitability and market capitalization. In April 2012, Deutsche Börse Group announced that it would close the First Quotation Board of the Frankfurt Stock Exchange because of “massive and frequent suspected cases of market manipulation.”
The First Quotation Board segment of the Frankfurt Stock Exchange open market has been closed to new admissions since December 2011 and will close entirely on  December 15, 2012. This means that companies currently listed on the First Quotation Board segment must upgrade to either the Entry Standard, General Standard or Primary Standard segment of the exchange or they will be delisted.  For the approximated 450 affected companies the question now arises whether they intend to comply with the stricter rules or prefer to leave the stock exchange.  The closure of the First Quotation Board will make the Second Quotation Board now known as the Quotation Board, an appealing option for issuers seeking to become publicly traded.

Form 10 Registration & Reverse Mergers

Many issuers seeking to raise capital often attempt to go public using a reverse merger with a public shell.   Blank Check Companies which file Form 10 Registration Statements (“Form 10 Shells”) are being marketed as a method for private companies to obtain public company status. 
Often Form 10 Shells are not a timely solution or cost effective method for a private company to obtain public company status. Most Form 10 Shells are not structured properly for a publicly traded company and most do not have ticker symbols.

SEC Approves FINRA Rule 5123

The Securities and Exchange Commission (the “SEC”) recently approved the Financial Industry Regulatory Authority (“FINRA”) proposals to amend Rule 5123 governing FINRA members who participate in private offerings of securities (“Rule 5123″).
Rule 5123
Rule 5123 requires FINRA members selling securities in non-public offerings such as private placements or who participate in the preparation of private placement documents such as memorandums, term sheets or other disclosure documents to submit such disclosure documents with FINRA within fifteen days after the first sale of securities or state that there were no offering documents used. Rule 5123 will become effective on December 3, 2012.

SEC Publishes Rule 506 Compliance and Disclosure Interpretation

On November 13, 2013, the Securities and Exchange Commission (the “SEC”) Division of Corporation Finance issued several useful Compliance and the Disclosure Interpretations related to Rule 506(c) .
The Rule 506(c) Compliance and Disclosure Interpretations are summarized below.
If, prior to the effective date of Rule 506(c), an issuer started its offering in reliance on what was formerly Rule 506 (now Rule 506(b)), and that issuer now wants to continue the same offering under Rule 506(c) then the issuer must file an amendment to its previously filed Form Dand check the box indicating that is now relying on the exemption afforded by Rule 506(c). It should be noted that where an issuer continues to rely on what was formerly Rule 506 now Rule 506(b it is not required to file an amended Form D.

Financial Statement Requirements in Form S-1 Registration Statements

Private companies registering securities on a Form S-1 registration statement during a going public transaction must provide specific financial information to the Securities and Exchange Commission (“SEC”).   This financial information includes the issuer’s balance sheet, statement of shareholders’ equity, income statement and statement of cash flows.  This blog post discusses the financial statement requirements of Form S-1 registration statements in going public transactions.

The SEC Issues Exempt Offering Stats

In its recently proposed Regulation Crowdfunding (“Reg CF”), the Securities and Exchange Commission (“SEC”) released interesting statistics on the types of unregistered offerings that have been popular with smaller issuers over the past few years.  Since the crowdfunding proposals won’t become effective till mid-summer at the earliest, companies interested in initiating offerings and going public in the next few months should take note.

170 Companies Conduct Rule 506(c) Offerings

On October 30, 2013, Keith Higgins, the newly appointed Director of the Securities and Exchange Commission’s Division of Corporate Finance, provided some useful information about the number of issuers relying upon new Rule 506(c) of the JOBS Act in his recent speech to the U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Securities, Insurance, and Investment.
According to Higgins, since Rule 506(c) of Regulation D became effective, more than 170 issuers used the rule to conduct their offerings.

OTC Pink Sheets Insights

Q. What are the OTCMarkets OTC tiers available to Pink Sheet companies?
A. Companies on the Pink Sheets are assigned to one of three tiers by the OTCMarkets based upon the amount of disclosure the Company provides to the public.  The OTC Pink Current Information is the highest of these tiers, created for companies that voluntarily provide specific disclosures to the OTCMarkets.

U.S. IPO Market Attracts Foreign Issuers

As the number of U.S. companies launching initial public offerings (“IPOs”) by filing registration statements increased throughout 2013, foreign issuers joined in on the going public and capital raising process.  While their numbers are still relatively small compared to their U.S. counterparts, statistics show that foreign IPOs and going public transactions have more than doubled from 2012.
While listing on a U.S. exchange has long been considered an achievement that confers prestige on foreign companies, the economic crisis of 2008 put a damper on enthusiasm for initial public offerings and going public transactions in the U.S. generally.  That appears to be changing.

SEC Publishes JOBS Act Guide

The Jumpstart Our Business Startups Act, or JOBS Act, is intended, among other things, to reduce barriers to capital formation, particularly for smaller issuers in going public transactions.  The JOBS Act requires the SEC to adopt rules amending existing exemptions from registration under the Securities Act of 1933 and creating new exemptions that permit issuers of securities to raise capital without filing a registration with the SEC.
On July 10, 2013, the SEC adopted amendments to Rule 506 of Regulation D and Rule 144A under the Securities Act to implement the requirements of Section 201(a) of the JOBS Act.  The amendments became effective on September 23, 2013 and provide numerous benefits to issuers in the going public transaction.

The Securities Attorney’s Review of Documents in Going Public Transactions

The securities laws require companies to provide disclosures during the going public process. These disclosure requirements apply to private companies going public on national securities exchanges and the OTCMarkets alike. These disclosures are typically provided on a Form S-1 registration statement.
In the going public process, issuers must generally disclose information about their business operations, financial condition, risks, management, litigation and shareholders, in addition to how many shares will be offered and at what price.  The securities lawyer’s role in the going public process varies, depending upon the size of the company, its type of business, its assets, revenues, location and other factors. Most importantly, the role is defined by whether the issuer files a registration statement with the SEC.

The Role of Markets Makers In Going Public Transactions

The  final step in going public transactions is for the soon-to-be-public company to obtain a stock trading or ticker symbol. In order to obtain a ticker symbol, the company seeking to go public’s stock must first be listed on a national securities exchange or qualify for quotation on the OTCMarkets’ Pink Sheets, OTCQB, or OTCQX markets.  (The Over-the-Counter Bulletin Board—OTCBB—is still an option, but an unpopular one; only a handful of issuers trade there.) 
Even when the company seeking to go public has filed a Form S-1 or Form 10 registration statement with the Securities and Exchange Commission (“SEC”), a market maker must file a Form 211 pursuant to Rule 15c-211 with the Finance Industry Regulatory Authority (“FINRA”). Only a market maker can file a Form 211 with FINRA to obtain a ticker symbol assignment.

Social Media And The Going Public Process

On April 2, 2013, the Securities and Exchange Commission issued a report clarifying its stance on the use of social media sites like Facebook and Twitter upon completion of going public transactions. The SEC has determined issuers may use social media to report key information in compliance with Regulation Fair Disclosure (Regulation FD), as long as investors are alerted to the specific social media that will be used to disseminate such information.  Additional limitations continue to apply to communications during the Form S-1 registration statement process.

Securities Lawyers In Going Public Transactions

Every offer and sale of securities is regulated by both state and federal securities laws, and all securities offerings must be registered or exempt from federal and state securities registration laws.
Failure to comply with these laws can have significant negative consequences for issuers. Assisting a private company in a going public transaction is an intricate process, and it is important to have an experienced securities attorney who will help you navigate through the process and related regulations.

The SEC’s Proxy Rules

Most public companies hold a stockholders’ meeting annually and hold special meetings to vote on special corporate actions such as name changes and mergers.  Shareholder voting on takes place either in person or by proxy.
Proxy solicitation is governed by a number of rules and regulations including: (i) state corporate law; (ii) stock exchange listing requirements; (iii) SEC proxy rules; and (iv) the issuers’ articles and bylaws.

Seed Stockholders In Going Public Matters

The going public process involves a number of steps that vary depending on the characteristics of the private company wishing to go public, and whether it will become a Securities and Exchange Commission (“SEC”) reporting issuer.
All companies seeking public company status must meet certain requirements in order for their securities to be publicly traded. One requirement is that the issuer obtain sufficient shareholders to establish a trading market. These initial shareholders are known as “Seed Shareholders”.

Form 10-K For Smaller Reporting Issuers

Form 10-K is a comprehensive annual report filed by SEC reporting companies that details information about the issuer and its operations.    Form 10-K is required pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”).
Form 10-K includes most of the information that would also be provided in a registration statement for an offering of securities filed under the Securities Act of 1933, as amended (the “Securities Act”).

Sponsoring Market Makers In Going Public Transactions

One step in going public transactions is obtaining a stock trading or ticker symbol from the Financial Industry Regulatory Authority (“FINRA”). For a company to obtain a ticker, a sponsoring market maker must submit an application on Form 211 on the issuer’s behalf to the FINRA.
Sponsoring markets makers have become one of the  most important players in the going public process because they are the only ones who can apply for a ticker symbol.

Rule 144′s Safe Harbor For Shell Companies

In 2008, Rule 144 of the Securities Act of 1933, as amended changed the reverse merger process in going public transactions by prohibiting shareholders of public shell companies from relying upon its safe harbor.
Rule 405 defines a shell company as a registrant with no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.

Concurrent Private and Public Offerings

Issuers often require capital during the going public process for their operations until their registration statement on Form S-1 is declared effective.  The SEC’s integration doctrine addresses the circumstances under which an issuer can raise capital while a registration statement under the Securities Act of 1933, as amended is pending.
The integration doctrine under was created to prevent companies from improperly avoiding registration by dividing a single securities offering into multiple offerings to take advantage of Securities Act exemptions that would not be available for the combined offering.  The SEC has takes the position that the filing of a registration statement does not eliminate a company’s ability to engage in a concurrent private offering, whether it is commenced before or after the filing of the registration statement if certain conditions are met.

Confidential Submission of Registration Statements In Going Public Transactions

The Jumpstart Our Business Startups Act (the “JOBS Act”) allows an “emerging growth company” to submit a draft of its Form S-1 registration statement and exhibits to the Securities and Exchange Commission (the “SEC”) on a confidential basis.  This allows private companies in going public transaction to ease into public company status. This blog post addresses the common questions we receive about emerging growth companies during the going public process.

Prospectus Delivery In Going Public Transactions

Under the Securities Act of 1933 as amended (the “Securites Act”),  issuers conducting direct public or initial public offerings (“IPO”) in going public transactions must adequately disclose material information to investors.
In going public transactions, these disclosures are most often provided in a Form S-1 Registration Statement.   Upon effectiveness of its S-1 registration statement, the issuer provides potential investors with a prospectus which forms a part of the registration statement.  The prospectus consists of two parts.

SEC Suspends Trading of Nevada Gold Corp

SEC Suspends Trading of Nevada Gold Corp

SEC Suspends Trading of Nevada Gold Corp

SEC Suspends Trading of Nevada Gold Corp

SEC Suspends Trading of Nevada Gold Corp

SEC Suspends Trading of Nevada Gold Corp

The Quiet Period In Going Public Transactions

Issuers who go public using a registration statement on Form S-1 must comply with the ”quiet period” of the Securities and Exchange Commission (“SEC”).   During the quiet period, the SEC limits the information that can be released to the public. The failure to comply with the SEC’s requirements is known as gun-jumping. he quiet period applies from the time a company files a registration statement with the SEC until the SEC’s staff declares it effective.

Insights On FINRA Rule 6490

FINRA Rule 6490, enacted over two years ago requires issuers of securities not listed on exchanges to provide timely notice to FINRA of certain corporate actions. Rule 6490 applies to corporate name changes, forward stock splits, reverse stock splits, distributions of cash or securities such as dividends, stock splits, rights, subscription offerings and other corporate actions. 

Going Public Alternatives for Foreign Issuers

Foreign companies seeking access to the U.S. public markets have several options in going public transactions.    Often, foreign companies seeking to raise capital from investors obtain public company status in the U.S. to attract investors.
Foreign companies that go public in the U.S. may complete a public offering by registering securities with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”). 

Regulation Crowdfunding

Regulation Crowdfunding

Regulation Crowdfunding

Going Public Using a Form S-1 Registration Statement

Going Public Using a Form S-1 Registration Statement

Going Public Using a Form S-1 Registration Statement

Shelf Registration Statements in Going Public Transactions

Shelf Registration Statements in Going Public Transactions

Shelf Registration Statements in Going Public Transactions

Tuesday, November 26, 2013

OTC Pink Sheets 101

Q. What are the OTCMarkets OTC tiers available to Pink Sheet companies?
A. Companies on the Pink Sheets are assigned to one of three tiers by the OTCMarkets based upon the amount of disclosure the Company provides to the public.  The OTC Pink Current Information is the highest of these tiers, created for companies that voluntarily provide specific disclosures to the OTCMarkets.

Financial Statement Requirements in Form S-1 Going Public Transactions

Private companies registering securities on a Form S-1 registration statement as part of going public transaction must provide specific financial information to the Securities and Exchange Commission (“SEC”).   This financial information includes the issuer’s balance sheet, statement of shareholders’ equity, income statement and statement of cash flows.  This blog post discusses the financial statement requirements of Form S-1 registration statements in going public transactions.

The SEC Analyses Exempt Offerings

In its recently proposed Regulation Crowdfunding (“Reg CF”), the Securities and Exchange Commission (“SEC”) produced some interesting statistics on the types of unregistered offerings that have been popular with smaller issuers over the past few years.  Since the crowdfunding proposals won’t become effective till mid-summer at the earliest, companies interested in initiating offerings in the next few months should take note.
Many startups begin by raising capital from family and friends.  Funds may be raised through donations, loans, or the sale of stock.  Unfortunately, family and friends are rarely able to contribute large amounts, and the startup will soon be forced to look elsewhere for money.

The Multijurisdictional Disclosure System For Canadian Issuers

The Multijurisdictional Disclosure System (“MJDS”) was adopted in July 1991 by the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators to facilitate cross-border public offerings of securities between the U.S. and Canada. The Multijurisdictional Disclosure System provides Canadian issuers with attractive options for accessing the U.S. capital markets.

SEC Announces First Deferred Prosecution Agreement

On November 12, 2013, the Securities and Exchange Commission (the “SEC”) announced a deferred prosecution agreement with Scott Herckisa, a former hedge fund administrator at Hellelwhite Fund LP, who assisted the SEC in an investigation involving Berton M. Hochfeld, a hedge fund manager who allegedly stole assets from investors.
Deferred prosecution agreements reward individuals and companies who provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation.  In return for the information provided, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings.

Initial Public Offerings Increase in 2013

Initial Public Offerings (“IPOs”) launched on the U.S. markets are in an upswing once again.  As one consequence of the economic crisis of 2008, many qualified companies chose to postpone or entirely avoid going public.  Wall Street cheered statistics from October 2013, which show that 33 companies rose more than $12 billion in the course of the month.  That is the greatest number of U.S. IPOs embarked upon in a single month since 2007.
Many of those IPOs were sponsored by private equity firms.  Between April and October, funds raised in private equity launches were up 77 percent, compared to the same period in 2012.

How Foreign Issuers Can Benefit from the JOBS Act

As the Securities and Exchange Commission (“SEC”) finishes the rule-making that provides a structure for full implementation of the JOBS Act, much has been written about its impact on smaller U.S. businesses.  Less has been said about the benefits it may confer on foreign issuers trading in U.S. markets.
Emerging Growth Companies
Foreign issuers, like their U.S.-based counterparts, may be defined as an “emerging growth companies” if they have less than $1 billion in annual gross revenues, have not raised more than $1 billion in debt, and have not conducted an SEC registered public offering prior to December 8, 2011.  If they wish to make an initial public offering, the securities laws provided them with relaxed disclosure requirements.

Foreign Issuers Embrace U.S. IPO Markets

As the number of U.S. companies launching initial public offerings (“IPOs”) by filing registration statements increased throughout 2013, foreign issuers joined in.  While their numbers are still relatively small compared to their U.S. counterparts, statistics show that foreign IPOs have more than doubled from 2012.
While listing on a U.S. exchange has long been considered an achievement that confers prestige on foreign companies, the economic crisis of 2008 put a damper on enthusiasm for initial public offerings and going public transactions in the U.S. generally.  That appears finally to have changed.

SEC Issues Small Entity Compliance Guide For JOBS Act

The Jumpstart Our Business Startups Act, or JOBS Act, is intended, among other things, to reduce barriers to capital formation, particularly for smaller companies in going public transactions.  The JOBS Act requires the SEC to adopt rules amending existing exemptions from registration under the Securities Act of 1933 and creating new exemptions that permit issuers of securities to raise capital without SEC registration.

SEC Chairman Mary Jo White Welcomes More Trials

One policy change new chairman Mary Jo White has brought to the Securities and Exchange Commission (“SEC”) requires some defendants to admit to wrongdoing if they wish to settle with the agency. It has long been the SEC’s policy in enforcement cases to try to settle litigation rather than go to trial, in order to save time and money, but those settlements, while they resulted in fines and penalties, invariably specified that the defendants “neither admit nor deny” the charges brought against them.

House Committee Passes Law Reducing Business-Broker Regulation

On November 14, 2013, the Financial Services Committee of the U.S. House of Representatives voted unanimously to report HR 2274, as amended, to the full House with a favorable recommendation.  HR 2274 is known as the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013, and its intention is to amend the Securities Exchange Act of 1934 (“Securities Act”) to provide for a notice-filing registration procedure for business brokers performing services in connection with the transfer of ownership of small privately held companies and to provide for regulation appropriate to the limited scope of their activities.

SEC Report Reveals $439,000,000 Remains For Bounties


The SEC’s 2013 Annual Report to congress on the Dodd-Frank whistleblower Program shows whistleblowers from 55 countries submitted tips to the SEC.
Under the SEC’s whistleblower program, if a whistle-blower’s information leads to an enforcement case where more than $1 million is collected, the whistleblower could receive 10 percent to 30 percent of the amount collected.  In 2013, the SEC awarded a notable $14 million bounty to an anonymous whistleblower.
The SEC’s study shows that residents of the U.K. submitted 66 tips, residents of China submitted 52 and Canadians submitted 62.
According to the report $439 million remains in the program’s fund for payments to whistleblowers. The report reveals that more than 3,238 tips were submitted to the SEC’s whistleblower program over the last year.  To date over $15,000,000 has been awarded under the program.
For more information on this blog please visit: http://www.securitieslawyer101.com

SEC Issues Compliance and Disclosure Interpretation of Rule 506(c)

On November 13, 2013, the Securities and Exchange Commission (the “SEC”) Division of Corporation Finance issued several useful Compliance and Disclosure Interpretations related to Rule 506(c).
The Rule 506(c) Compliance and Disclosure Interpretations are summarized below.
If, prior to the effective date of Rule 506(c), an issuer started its offering in reliance on what was formerly Rule 506 (now Rule 506(b)), and that issuer now wants to continue the same offering under Rule 506(c) then the issuer must file an amendment to its previously filed Form D and check the box indicating that is now relying on the exemption afforded by Rule 506(c).  It should be noted that where an issuer continues to rely on what was formerly Rule 506 now Rule 506(b it is not required to file an amended Form D.

Shell Traffickers Guilty in $137 Million Corporate Hijacking Scheme

On November 20, 2013, Lawrence S. Hartman, a Florida securities lawyer pled guilty to a charge of conspiracy to commit mail and wire fraud for his role in a corporate  hijacking and shell trafficking fraud scheme that swindled victims out of more than $137,000,000.
On November 20, 2013, Lawrence S. Hartman, a Florida securities lawyer, pled guilty to a charge of conspiracy to commit mail and wire fraud in connection with a corporate hijacking and shell trafficking fraud scheme whose victims were swindled out of more than $137,000,000.

SEC Charges Curt Kramer

On November 25, 2013, the Securities and Exchange Commission (the “SEC”) charged Curt Kramer with violating the federal securities laws when they purchased billions of shares in a pair of microcap companies and failed to register them before they were re-sold to investors for sizeable profits.

Securities Registration Statements in the Going Public Process

Many companies file a registration statement filing with the SEC in connection with their going public transaction.  The most commonly used registration statement form is Form S-1.
All companies may register securities on a Form S-1 registration statement. Private companies going public should be aware of the expansive disclosure required by the SEC in registration statements prior to making the decision to go public.

Due Diligence in the Form S-1 Registration Process

Private companies in going public transactions seeking to have their securties quoted on the OTCMarkets OTCQB must first become reporting with the Securities and Exchange Commission (the “SEC”).  This is typically accomplished by the private company registering a securities offering on a Form S-1 registration statement pursuant to the Securities Act of 1933, as amended (the “Securities Act”).

Responding To Form S-1 Registration Statement Comments

Securities offerings are regulated by the Securities Act of 1933, as amended, (the “Securities Act”).  Section 5 of the Securities Act requires that securities offerings be registered with the Securities and Exchange Commission (the “SEC”) or be exempt from the SEC’s registration requirements. Private companies seeking to go public are often unaware of the SEC comment process. The SEC comment process applies to registration statements filed by companies who go public using an initial public offering (“IPO”) as well as to companies conducting a direct public offering.

Going Public Using a Form S-1 Registration Statement

Form S-1  is the basic registration statement form.  Form S-1 can be used to register securities for which no other form is authorized or prescribed, except securities of foreign governments or political sub-divisions thereof.  Form S-1 is commonly the first form of SEC registration statement used by issuers during the going public process when a direct public offering (“Direct Public Offering”) is conducted.  Unlike an Initial Public Offering (“IPO”), a Direct Public Offering allows an issuer to sell its shares directly to investors without the use of an underwriter as part of its going public transaction.  If a Form S-1 is used in conjunction with a direct public offering in a going public transaction, the issuer becomes an SEC reporting company with a ticker symbol.  This blog post discusses the use of Form S-1 in the going public process.

Shelf Registration Statements in Going Public Transactions

A shelf registration statement allows an issuer to register a public offering even when there is no present intention to sell all the securities being registered. Shelf registrations are often used in going public transactions by issuers registering securities on Form S-1.
Private companies seeking public company status can use a Form S-1 shelf registration to register multiple securities offerings at the same time on a single registration statement. In going public transactions, often issuers sell shares in reliance upon Rule 506 of Regulation D to raise seed capital, and then register those shares by filing an S-1.

Form 10 Registration Statements and Alternative Going Public Structures

In going public transactions most issues file Form S-1 registration statements pursuant to the Securities Act of 1933, as amended.  In some circumstances, a Form 10 registration statement may be used. Form 10 is a Registration Statement used to register a class of securities pursuant to Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”).
This blog post addresses common questions we receive from clients about registration on Form 10 registration statements in going public transactions.
Q. Which companies can register a class of securities on Form 10?
A. All companies can register securities on Form 10 regardless of whether they are public or private.