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
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.
In order to register securities with the SEC, issuers must file a registration statement. The registration statement consists of two parts:
♦ A prospectus which is provided to potential investors; and
♦ Supplemental information not provided to investors but which is publicly available.
A prospectus contains financial and narrative disclosures about the issuer and the offering being registered. The prospectus is intended to provide disclosure of all relevant material information necessary for an investor to make an investment decision.
While some types of registration statements become effective upon filing such as a Form S-8 Registration Statement, most do not. The majority of the registration statements are subject to review by the SEC’s Division of Corporation Finance. The registration statement is reviewed by an SEC attorney and accountant to ensure that all required disclosures have been made by the issuer. The SEC does not determine the merits of the issuer or the offering being registered.
Approximately two weeks after the filing of a registration statement, the SEC delivers its comments to the issuer and/or its legal counsel. The issuer must then file an amendment to the previously filed registration statement along with a response letter to the SEC’s comments. After which, the SEC reviews the amended registration statement. The review process continues until the SEC staff is satisfied with the disclosure provided by the issuer. Once satisfied, the SEC will declare the registration statement effective.
The registration statement must be declared effective before any sales by the issuer can be made.
The Financial Industry Regulatory Authority (“FINRA”) is an industry organization that regulates broker-dealers. FINRA regulates trading in equities, corporate bonds, securities futures and options. FINRA registers firms and adopts rules to govern them, as well as examines the firms for compliance and may discipline registered representatives and member firms that fail to comply with federal securities laws and its rules and regulations.
FINRA also reviews underwriting arrangements and agreements in offerings registered with the SEC to determine if the underwriters’ compensation is fair and reasonable. FINRA must approve the foregoing in order for an underwritten registered offering to be declared effective by FINRA.
State Blue Sky Laws
State blue sky administrators cannot require registration under their blue sky laws of certain “covered securities”, which include nationally traded securities, securities listed or authorized for listing on the NYSE or NASDAQ, or securities sold under Rule 506 of the Securities Act.
The blue sky laws require registration of securities brokers and dealers. The National Securities Markets Improvement Act of 1996 (NSMIA) preempts state securities laws. As a result of NSMIA, many types of securities are exempt from registration under state securities laws. Despite the exemption, states may require an issuer to pay a fee and undertake a filing for offers and sales of securities in their state.
The principal stock exchanges in the U.S. are the NYSE and NASDAQ. The quantitative and qualitative standards for listing vary on each of the exchanges, but in order to be listed on any exchange in the U.S. the issuer must have filed a registration statement with the SEC either under the Securities Act or under the Securities Exchange Act of 1934.
Liability for Registration Statement Disclosures
The Securities Act holds individuals who help prepare a registration statement on behalf of an issuer responsible for any misrepresentations and omissions in the registration statement. Section 11(a) of the Securities Act, 15 U.S.C. § 77k(a) makes several categories of persons and entities responsible for material misstatements or omissions in a registration statement.
A majority of the issuer’s board of directors, as well as its principal executive officer or officers, principal financial officer, and its controller or principal accounting officer, must sign the registration statement. The issuer, as well as each signer is subject to potential civil liability under § 11(a) of the Securities Act for material misstatements or omissions in the registration statement. In addition, any person who controls the issuer or any other responsible party is subject to liability.
In addition to the issuer and its officers and directors, attorneys, accountants and underwriters are liable under Section 11(a) of the Securities Act.
If you are going to offer and sell securities, you will need the assistance of an experienced securities lawyer to guide you through the registration process and ensure all required disclosures are made.
For further information about this article, please visit www.gopublic101.com and www.securitieslawyer101.com or contact Brenda Hamilton, Securities Attorney, 101 Plaza Real South, Suite 201 S, Boca Raton, Florida 33432, at (561) 416-8956 or by email firstname.lastname@example.org. This information is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings, please contact Hamilton and Associates at (561) 416-8956 or email@example.com. Please note that the prior results discussed herein do not guarantee similar outcomes.