The Securities and Exchange Commission (the “SEC”) oversees the securities laws and is the key regulator of securities offerings and the registration statement process including:
♦ Securities exchanges;
♦ Securities brokers and dealers;
♦ Investment advisers;
♦ Mutual funds;
♦ Attorneys;
♦ Accountants; and
♦ Transfer agents.
The offer and sale of securities is regulated by the Securities Act of 1933, as amended (“1933 Act”). Section 5 of the 1933 Act requires any offering to 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, such as a Form S-8, become effective upon filing, most do not. The majority are subject to review by the SEC’s Division of Corporation Finance. The filing is reviewed by a Securities attorney and an 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 going public attorney. The issuer must then submit an amendment to the previously filed document, along with a response letter to the comments, after which the SEC reviews the amended registration statement. The review process continues until the 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.
FINRA
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. It registers firms and adopts rules to govern them; it also examines them for compliance and may discipline registered representatives and member broker-dealers who fail to comply with federal securities laws and FINRA’s own rules and regulations.
FINRA also reviews underwriting arrangements and agreements in offerings registered with the SEC to determine if the underwriter’s compensation is fair and reasonable. It must approve the foregoing in order for an underwritten registered offering to be deemed effective.
State Blue Sky Laws
State blue sky administrators cannot require registration 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. Because 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.
Securities Exchanges
The principal stock exchanges in the U.S. are the NYSE, the AMEX, 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 under the 1933 Act or under the Securities Exchange Act of 1934 (“1934 Act”). 1934 Act registration statements include the Form 10 and the Form 8-A.
Liability for Registration Statement Disclosures
The 1933 Act holds individuals who help prepare a registration statement on behalf of an issuer responsible for any misrepresentations or omissions in the statement. Section 11(a) of the Act, 15 U.S.C. § 77k(a), holds several categories of persons and entities responsible for such misrepresentations or omissions.
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 and signatories are subject to potential civil liability under § 11(a) of the 1933 Act for material misstatements or omissions. In addition, any control person of the issuer or any other responsible party is subject to liability.
Attorneys, accountants and underwriters are also 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 going public attorney to guide you through the registration process and ensure all required disclosures are made.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at info@securitieslawyer101.com or visit www.gopublic101.com. This securities law blog post 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 about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.GoPublic101.com
