Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Tuesday, April 29, 2014

Securities Lawyers Gone Wild l Three-Time Felon & Lawyer Indicted

Securities Lawyer 101 Blog On April 6, 2014, Texas attorney Richard Plato was  indicted  for mail fraud and securities fraud. Plato is a disbarred attorney who has been convicted in three separate criminal cases, including money laundering and wire fraud in the collapse of a large Florida insurer.   The indictment of Plato by a Texas grand jury is for... Read More
http://www.securitieslawyer101.com/richard-plato/

International Businessman Pleads Guilty to Scamming Investors

Securities Lawyer 101 Blog On April 8, 2014, Sven Erik Ulsteen, a former executive and shareholder of a Channel Islands company named Anturion Limited, pled guilty to fraudulently using counterfeit and forged securities to take over $2 million from ...
http://www.securitieslawyer101.com/anturion-limited/

Securities Lawyers Gone Wild l Three-Time Felon & Lawyer Indicted In Scheme

Securities Lawyer 101 Blog On April 6, 2014, Texas attorney Richard Plato was  indicted  for mail fraud and securities fraud, Plato is a disbarred attorney who has been convicted in three separate criminal cases, including money laundering and wir...
http://www.securitieslawyer101.com/richard-plato/

Fund Manager Brian Callahan Pleads Guilty In $96 Million Ponzi Scheme

On April 29, 2014, Brian Callahan, 44, pleaded guilty to one count of securities fraud and one count of wire fraud for operating a $96 million Ponzi scheme through his various offshore investment funds. Pursuant to his plea agreement with the government, Callahan has agreed to the forfeiture of $67.4 million, which includes proceeds from the sale of his former... Read More
http://www.securitieslawyer101.com/brian-callahan/

Sunday, April 27, 2014

Pointers for Going Public With a Direct Public Offering

Securities Lawyer 101 Blog More and more issuers going public opt for a direct public offering. In a direct public offering management sells shares of the company s stock directly to investors, rather than through the efforts of an underwriter. A direct public offering eliminates costs and risks associated with reverse merger transactions. Companies using a direct public offering should consider... Read More
http://www.securitieslawyer101.com/direct-public-offering-2/

Thursday, April 24, 2014

Aqua Gardens Family Farm Announces Rule 506(c) Offering & Going Public Transaction

Aqua Gardens Family Farm, Inc. a developer of  a seed to market system of growing mixed bouquets of lettuce in five weeks announces offering using General Solicitation to seek Accredited Investors pursuant to Rule 506(c) and going public transaction.
Aqua Gardens Family Farm has successfully

Selling Shareholder Disclosures in Form S-1

Companies going public have a variety of structures for their transactions. Companies can sell shares in reliance upon Rule 506 of Regulation D and file a selling shareholder registration statement with the Securities and Exchange Commission (“SEC”) to register the resale of those shares on Form S-1.  selling shareholder registration statement can

SEC Charges Robert J. Vitale l Posted by Brenda Hamilton Attorney

On April 23, 2014, the Securities and Exchange Commission (the “SEC”) filed fraud charges against a former Florida-based stock promoter currently serving a two-year prison sentence for lying to SEC investigators.   The SEC’s complaint filed in U.S.

Wednesday, April 23, 2014

SEC Obtains Preliminary Injuntion Against John Babikian

Securities Lawyer 101 Blog On April 20, 2014, the Securities and Exchange Commission (the SEC ) was granted an injunction imposing an asset freeze against penny stock promoter, John Babikian.  Babikian is charged with securities fraud.  The Court stated, There is a high risk that, unless enjoined, Babikian may commit the alleged fraudulent acts again, given his control of penny stock... Read More
http://www.securitieslawyer101.com/sec-obtains-preliminary-injuntion-john-babikian/

SEC Charges Robert J. Vitale l Posted by Brenda Hamilton Attorney

Securities Lawyer 101 Blog On April 23, 2014, the Securities and Exchange Commission (the SEC ) filed fraud charges against a former Florida-based stock promoter currently serving a two-year prison sentence for lying to SEC investigators.   The SEC’s complaint filed in U.S. District Court in the Southern District of Florida alleges that Robert J. Vitale defrauded investors, sold unregistered securities, and acted as... Read More
http://www.securitieslawyer101.com/vitale/

SEC Charges Chris Choi & Poker Player Danny Kuo l Posted by Brenda Hamilton Attorney

On April 23, 2014, the Securities and Exchange Commission(the SEC ) filed insider trading charges against a former accounting manager at Nvidia Corp. who tipped a friend with confidential company information that set in motion a chain of tipping and illegal trading among a network of hedge fund traders who reaped millions of dollars in illicit gains.  The SEC alleges that Chris Choi... Read More
http://www.securitieslawyer101.com/danny-kuo/

Tuesday, April 22, 2014

SEC Charges Dr. Loretta Itri with Insider Trading of Gentri

On April 21, 2014, the Securities and Exchange Commission (the “SEC”) charged a former biopharmaceutical company executive and two others with insider trading on confidential information about the company’s key developmental drug.  The company’s stock price fell sharply when it announced clinical trial results for the drug.

Monday, April 21, 2014

SEC Issues Guidance on Rule 147 Intrastate Offerings & Crowdfunding l Brenda Hamilton Attorney

On April 10, 2014, the Securities and Exchange Commission (the “SEC”) issued a revised compliance and disclosure interpretation (“C&DIs”) and provided two new questions concerning  crowdfunding under the JOBS Act and the intrastate exemption provided by Rule 147 under the Securities Act of 1933, as amended (the “Securities Act”). Section 3(a)(11) of the Securities Act provides an exemption from the... Read More
http://www.securitieslawyer101.com/intrastate-offerings/

SEC Shuts Down 20 Bogus S-1 Filings After Promotion Stock Secrets Research Report

On February 3, 2014, the Securities and Exchange Commission (the “SEC”) announced the filing of stop order proceedings against 20 purported mining companies for providing false information in their registration statements. Of the 20 registration statements, 18 were opined upon by the same attorney, Diane Dalmy, who is the subject of a pending SEC  proceeding.
More than one year ago, Promotion Stock Secrets published a

Reverse Merger Bootcamp l Toxic Reverse Mergers

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

SEC Charges Telexfree in Pyramid Scheme Immigrants l By Brenda Hamilton Attorney

On April 17, 2014, the Securities and Exchange Commission (the “SEC”) announced it filed charges against the Massachusetts-based operators of a large pyramid scheme that mainly targeted Dominican and Brazilian immigrants in the U.S.  The charges were filed under seal, in connection with the Commission’s request for an immediate asset freeze.  That asset freeze secured millions of dollars of funds and prevented the potential dissipation of investor assets. 

SEC Brings Insider Trading Charges in Connection with Deepwater Horizon Oil Spill

On April 17, 2014, the Securities and Exchange Commission charged a former employee of BP p.l.c. and a senior responder during the 2010 Deepwater Horizon oil spill with insider trading in BP securities based on confidential information about the magnitude of the disaster.  The price of BP securities fell significantly after the April 20, 2010

Smaller Reporting Companies In Going Public Transactions

The Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), establish different levels of disclosure and reporting requirements based upon the size of the issuer.  Issuers who qualify as a smaller reporting

Sunday, April 20, 2014

The SEC’s Electronic Data Gathering and Retrieval System

Most documents filed with the Securities and Exchange Commission (the “SEC”), are required to be filed electronically using the SEC’s Electronic Data Gathering and Retrieval system (“EDGAR”). Additionally, public companies filing on EDGAR m...
http://www.securitieslawyer101.com/sec-edgar/

Form 3, 4 & 5 Filing Requirements l By: Brenda Hamilton Attorney

Securities Lawyer 101 Blog Upon completion of a going public transaction, officers, directors and certain shareholders have new rules and regulations they must comply with. These include the filing of beneficial ownership reports on Forms 3, 4 & 5. Each officer, director and 10% shareholder of a company with a class of securities registered under the Securities Act of 1934... Read More
http://www.securitieslawyer101.com/form-3/

Thursday, April 17, 2014

OTCQX Proposes Amendments to its OTCQX Rules

On February 13, 2014, the OTC Markets proposed amendments to its OTCQX rules. The will impact US and international companies seeking listings on the OTCQX. The OTC Markets OTCQX is the premier market tier of the OTC Markets.
These proposals include changes to the rules governing OTCQX market professionals, initial eligibility standards and issuer requirements.The

SEC Suspends Trilliant Exploration

On February 28, 2014, the Securities and Exchange Commission (“Commission”) ordered the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Trilliant Exploration Corp. (“Trilliant”) of New York, New York

Keeping Draft Registration Statements Confidential

The Jumpstart Our Business Startups Act (the “JOBS Act”) allows an “emerging growth company” to submit a draft of its registration statement and exhibits to the Securities and Exchange Commission (the “SEC”) on a confidential basis.This is particularly useful to companies in going public transactions who are

The SEC Issues Statement on the Registration Statement Process

The Securities and Exchange Commission recently announced the issuance of Commissioner Elisse B. Walter’s statement, ”The Commission’s Registration Process: How to Better Administer an Ounce of Prevention”.  The release is a reminder of the importance of preventive action by the SEC and the securities industry at the registration statement stage to nip securities violations in the bud. This release applies to the

Investment Adviser’s Use of Testimonials From Social Media l By: Brenda Hamilton Attorney


http://www.securitieslawyer101.com/investment-adviser/

Wednesday, April 16, 2014

EB-5 Source of Funds Requirement

The EB-5 visa program grants foreign investors a green card for themselves and their immediate family in exchange for a capital investment of at least $500,000 in a qualified U.S. business enterprise.  To qualify under the EB-5 program, a foreign investor has two options.

Naked Shorts 101

The Short Seller Scape Goat
In recent years, the activities of short sellers have been the subject of controversy. While short selling is a simple process it is widely misunderstood.While the average investor profits when he invests in a stock whose price goes up, a short seller profits when it invests in a stock whose price goes down. Simply put, a short sale is the sale of a security that the seller does not own. The trader borrows stock, sells it into

Monk Ordered to Pay Over $9,600,000 l Securities Lawyer 101

On February 12, 2014, the Securities and Exchange Commission (the “SEC”) announced that a Connecticut federal court entered judgments against a former Connecticut-based stock promoter, Jerry S. Williams, and two companies that he controlled, Monk’s Den, LLC and First In Awareness, LLC.
The SEC filed an enforcement action filed in 2012

DTC Chills & Global Lock Solutions l Securities Lawyer 101

The Depository Trust and Clear Corporation (“DTCC”), through its subsidiaries, provides clearing, settlement and information services for securities. DTCC’s subsidiary, the Depository Trust Company (“DTC”) was created to improve efficiencies and reduce risk in the clearance and settlement of securities transactions.   Not all securities are eligible to be settled through DTC.
Issuers must satisfy the criteria set by DTCC to be settled through

Reporting After a Form 10 Registration Statement

If a company files a registration statement such as on Form 10 under Section 12 of the Exchange Act, it becomes an SEC reporting company and the company becomes subject to the same annual, quarterly, and current reporting obligations that result from Securities Act registration.
Additionally, the company’s shareholders and management become subject to various requirements discussed below upon effectiveness of

The Intrastate Exemption l Section 3(a)(11)

Section 3(a)(11) of the Securities Act is generally known as the “intrastate offering exemption.”  The exemption is sometimes used by small issuers in going public transactions prior to filing a registration statement on Form S-1. 
The intrastate exemption facilitates the financing of local business operations if certain requirements are met.
To qualify for the intrastate offering exemption, the company must be organized in the state where it is

Form 10-K Attorneys l Securities Lawyer 101

It is that time of year and SEC reporting companies with a December 31 year end must file their annual reports on Form 10-K this month.  Any Form 10-K attorney will tell you that the report is the most comprehensive of the year.   This is because Form 10-k contains the issuer’s audited financial

Bangers, Bashers & Short Sellers l Securities Lawyer 101

When a manipulated stock’s price declines, it has become common practice for penny stock issuers and their disciples to scream foul play and claim their

Albert Reda Sentenced to 26 Months

Albert Reda, the former treasurer and chairman of the board of directors of First Global Financial Corporation, was sentenced for his role in a fraudulent kickback scheme.  After a six-day trial, Reda was convicted of wire fraud and mail fraud.
Reda was sentenced to 26 months in prison, one year of supervised release, a fine, and forfeiture of his illegal earnings. In November 2013, following a six-day trial, a jury convicted Reda of wire fraud and mail fraud.
According to the FBI release, Reda was involved in a scheme to pay

SEC Suspends Petrotech Oil & Gas l Securities Lawyer 101

On March 14, 2014, the Securities and Exchange Commission +SEC”)  announced the temporary suspension,  pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”)of trading of the securities of Petrotech Oil and Gas, Inc (PTOG).  The SEC temporarily suspended trading in the securities of PTOG because of questions that have been raised about the accuracy and adequacy of publicly disseminated information

Regulation A l The Colossal Exemption l Securities Lawyer 101

On December 18, 2013, the Securities and Exchange Commission (the “SEC”) voted to propose rules intended to increase access to capital for smaller companies.
The SEC’s proposals are based upon Regulation A of the Securities Act of 1933, as amended. Regulation A is an existing exemption fromregistration for small offerings of securities up to $5 million within a 12-month period. As proposed, Regulation would enable companies to offer and sell up to $50 million of securities within a 12-month period without filing a registration statement.

Selling Shareholder Disclosures in Form S-1

Companies going public have a variety of structures for their transactions. Companies can sell shares in reliance upon Rule 506 of Regulation D and file a selling shareholder registration statement with the Securities and Exchange Commission (“SEC”) to register the resale of those shares on Form S-1.  A

Spamming 101 l Brenda Hamilton l Securities Lawyer 101

According to a recent McAfee report, email stock spamming is back in high gear. The latest McAfee Threats Report confirms a steep rise in spam email linked to bogus pump-and-dump stock schemes. In 2014, there will undoubtedly be a surge in spam email campaigns of pot stocks. For years, fraudsters have used spam to entice investors into investment scams. Many of these emails tout microcap companies through false and misleading statements to the marketplace. These bogus claims

Tuesday, April 15, 2014

OTCQB Adopts Listing Fees & Listing Requirements

OTC Markets Group has announced it is making significant changes to its OTCQB.  Companies seeking to be quoted on the OTCQB will be required to meet eligibility standards and pay an initial listing fee of $2,500 to the OTC Markets if not listed on t...
http://www.securitieslawyer101.com/otcqb/

Monday, April 14, 2014

The Curious Case of Irwin Boock l Corporate Hijackings 101

The Irwin Boock corporate hijacking case is a gift that keeps on giving.  The Securities and Exchange Commission (“SEC”)  brought its original action against Boock and his associates in September 2009; since then several parallel actions have been filed.  On September 27, 2013, the SEC announced that Nicolette Loisel, a Houston-area attorney, had agreed to settle.  Loisel had been charged with hijacking 22 dormant public companies (along with the other original defendants) and with writing 28 legal opinion letters falsely stating that offerings of approximately 223 million shares were exempt from the registration requirements of the federal securities laws.
 
She agreed to accept a permanent injunction from violating

SEC Suspends Grow Life l PHOT l Securities Lawyer 101Blog

On April 10, 2014, the U.S. Securities and Exchange Commission (the “SEC”) announced the trading suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading of the securities of GrowLife, Inc. (“PHOT”) of Woodland Hills, California.
 
The suspension commenced at 9:30 a.m. EDT on

U.S. Indicts Carribbean Money Laundering Operators

Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, were indicted for conspiracy to launder monetary instruments, the Department of Justice and Internal Revenue Service (IRS) announced on March 24, 2014.  The indictment alleges that Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud.  The

Using Form S-1 To Go Public l Brenda Hamilton Attorney

Form S-1 is the basic registration statement form used to register securities. 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

Sunday, April 13, 2014

Forms 10-K Deadlines l Securities Lawyer 101

Securities Lawyer 101 Blog A public company must file an annual report on Form 10-K following the end of each of its fiscal year. The first Form 10-K deadline is 90 days after the end of the first fiscal year in which the issuer becomes subject to the periodic reporting requirements of the 1934 Act. After the first year the Form 10-K deadline depends... Read More
http://www.securitieslawyer101.com/form-10-k-deadlines/

Saturday, April 12, 2014

Using Form S-1 To Go Public l Brenda Hamilton Attorney

Securities Lawyer 101 Blog Form S-1 is the basic registration statement form used to register securities. 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... Read More
http://www.securitieslawyer101.com/form-s1/

U.S. Indicts Carribbean Money Laundering Operators

Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, were indicted for conspiracy to launder monetary instruments, the Department of Justice and Internal Revenue Service (IRS) announced on March 24, 2014.  The indict...
http://www.securitieslawyer101.com/money-laundering/

U.S. Indicts Carribbean Money Laundering Operators

Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, were indicted for conspiracy to launder monetary instruments, the Department of Justice and Internal Revenue Service (IRS) announced on March 24, 2014.  The indict...
http://www.securitieslawyer101.com/money-laundering/

Thursday, April 10, 2014

The Securities Act of 1933

The Securities Exchange Act of 1933, as amended (the “1933 Act”) is often referred to as the “truth in securities” law. The 1933 Act requires disclosure of financial and other material information about securities that are being offered for sale to the public. The Act also prohibits deceit, misrepresentation, and other types of fraud in connection with the offer and sale of securities.

All securities sold in the U.S. must be registered with the SEC or be exempt from registration. The disclosures required by the 1933 Act are most often provided in a

Rule 504 l OTC Pink Sheet Offerings

Rule 504 of Regulation D is a transactional exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) for non-reporting companies when they offer and sell securities. OTC Pink Sheet issuers often rely upon Rule 504 to offer and sell their securities.

Wednesday, April 9, 2014

The Curious Case of Irwin Boock l Corporate Hijackings 101

Securities Lawyer 101 Blog The Irwin Boock corporate hijacking case is a gift that keeps on giving.  The Securities and Exchange Commission (“SEC”)  brought its original action against Boock and his associates in September 2009; since then several parallel actions have been filed.  On September 27, 2013, the SEC announced that Nicolette Loisel, a Houston-area attorney, had agreed to settle.  Loisel... Read More
http://www.securitieslawyer101.com/irwin-boock/

Beware of False Claims of SEC Registration Statements l Securities Lawyer 101

Securities Lawyer 101 Blog The SEC issued a recent investor alert  to warn the public about potentially fraudulent investment schemes that involve individuals or firms misrepresenting that they have filed registration statements with the SEC. Investors should be careful to check the background, including license and registration statement status, of any person who tries to sell them an investment product... Read More
http://www.securitieslawyer101.com/registration-statements-2/

SEC Charges Two With Insider Trading l Securities Lawyer 101 Blog



On March 31, 2014, the Securities and Exchange Commission (the “SEC”) announced two separate cases against men who profited by insider trading on confidential information they learned from their wives about Silicon Valley-based tech companies.
 
“Spouses and other family members may gain access to highly confidential information about public companies as part of their relationship of trust,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office.  “In those circumstances, family members have a duty to protect and safeguard that information, not to trade on it.”
 
The SEC alleges that Tyrone Hawk of Los Gatos,

SEC Charges Two Friends With Insider Trading of Chicago Bridge & Iron l Securities Lawyer 101 Blog

On April 4, 2014, the Securities and Exchange Commission charged two friends with insider trading on confidential information from an investment banker about an impending transaction between engineering and construction companies.
 
The SEC alleges that Walter D. Wagner of Rockville, Md., and Alexander J. Osborn of Alexandria, Va., illicitly profited by nearly

SEC Rewards Whistle-blower l Securities Lawyer 101

On April 4, 2014, the Securities and Exchange Commission announced that the whistleblower who received the first award under the agency’s new whistleblower program will receive an additional $150,000 payout after the SEC collected additional funds in the case.
The whistleblower, who the SEC did not identify in order to protect confidentiality, has now been awarded a

SEC Charges Firm with Spoofing & Layering

On April 4, 2014, the Securities and Exchange Commission charged the owner of a Holmdel, N.J.-based brokerage firm with manipulative trading of publicly traded stocks through an illegal practice known as “layering” or “spoofing.”
 
The SEC also charged the owner and others for registration violations.  Two firms and five individuals agreed to pay a combined total of nearly $3 million to settle the case.
 
In layering, the trader places orders with no intention of having them executed but rather to trick others into buying or selling a stock at an artificial price driven by the orders that the trader later cancels.  An SEC investigation found

SEC Charges Transamerica Financial Advisors

On April 4, 2014, the Securities and Exchange Commission announced charges against a St. Petersburg, Fla.-based financial services firm for improperly calculating advisory fees and overcharging clients.
 
SEC examinations and a subsequent investigation found that Transamerica Financial Advisors offered breakpoint discounts designed to reduce the fees

SEC Settles Fictitious Offering Case l Securities Lawyer 101

The Securities and Exchange Commission announced that on March 4, 2014, Judge Rosemary Collyer entered a final judgment against relief defendant Mia Baldassari. The Commission’s complaint alleged that Baldassari received $24,500 in investor funds to which she had no lawful claim.

Without admitting or denying the allegations of the complaint, Baldassari

Criminal Prosectution in Corporate Hijackings

The Justice Department is aggressively pursing criminal charges against corporate hijackers and their conspirators for illegal takeovers of publicly traded shell companies. In  many instances, a securities attorney or transfer agent have been charged in connection with the schemes.  Recent examples include the criminal convictions of Irwin Brook and Lawrence S. Hartman.  Broock  a Florida securities lawyer.
 

Tuesday, April 8, 2014

SEC Charges Ponzi Scheme Operator Using YouTube l Securities Lawyer 101

Securities Lawyer 101 Blog On April 8, 2014, the Securities and Exchange Commission announced fraud charges and an asset freeze against the operators of a South Florida-based Ponzi scheme targeting investors through YouTube videos and selling them investments in a product called virtual concierge machines (VCMs) that would purportedly generate guaranteed returns of 300 to 500 percent in four years.  In a... Read More
http://www.securitieslawyer101.com/joseph-signore/

Monday, April 7, 2014

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”). 

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.
On June 29, 2005, the SEC adopted modifications to the

Prospectus Delivery In Going Public Transactions

Under the Securities Act of 1933 as amended (the “Securities 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 Form 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.
Part 1 of the Registration Statement

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.
Q. When does an emerging growth company have to file its  registration statement if I want it to be a confidential submission?
A. The JOBS Act requires that emerging growth companies who want to file a confidential submission of theirregistration statement do so within 21 days prior to the registration

Canadian Multijurisdictional Disclosures In Going Public Transactions

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 in their going public transactions.
In many going public transactions, Canadian issuers can register their securities offerings in the U.S. using a Canadian prospectus, in accordance with Canadian disclosure requirements.   Further, unlike registration statements on Form S-1, the registration statement will be declared by the SEC upon receipt of notification of clearance from the principal Canadian securities regulator.

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.
Any private company seeking to go public needs a securities

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,

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.
This is an “and” test, not an “or” test.  Thus, if the Company has more than no or nominal operations, it is not a shell company, regardless of whether or not it has any assets.  Additionally, the determination of whether a company is a shell company is not based upon revenues but upon

Sponsoring Market Makers In Going Public Transactions

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.
Market Maker Registration
market maker is a FINRA registered broker-dealer firm that accepts the risk of holding a

Form 10-K For Smaller Reporting Issuers

Upon completion of a going public transaction most issuers become subject to the SEC’s reporting requirements. As a result, the issuer must file quarterly and annual reports with the SEC.  Annual reports on filed on Form 10-K.
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 Form S-1 registration statement for an offering of securities filed under the Securities Act of 1933, as amended (the “Securities Act”).

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”.
Shareholder Requirements in Going Public Transactions