Securities Law and Going Public Blog

Form D – Notice of Sales – Going Public Lawyers

Posted By Brenda Hamilton, Securities Lawyer

Companies may use an exemption under Regulation D to offer and sell securities without having to register the offering with the Securities and Exchange Commission (“SEC”). When relying on such an exemption, companies must file what’s known as a “Form D” after they first sell their securities. Form D is a brief notice that includes basic information about the company and the offering, such as the names and addresses of the company’s executive officers, the size of the offering and the date of first sale. Read More

What Documents Do Going Public Attorneys Review?

Proper disclosure is critical during the going public process. SEC disclosures are most often prepared by the company’s going public attorney. The securities laws require that companies provide expansive disclosures in registration statements filed with the Securities and Exchange Commission (SEC). Regardless of the venue for listing or trading, the securities laws require accurate and complete disclosure. A going public attorney assists the issuer in determining whether it should conduct an initial public offering or a Direct Public Offering as well as whether it qualifies for a national stock exchange and/or the most appropriate tier of the OTC Markets.

An issuer must generally disclose information about its business, operations, financial condition, risks, management, litigation and shareholders, in addition to how many shares it will offer and the share price. In addition, if Form S-1 is used, the company’s going public attorney must render a legal opinion as to certain corporate matters. Providing the required disclosures will help assure there are no future problems with DTC eligibility. Read More

SEC Charges HD Vest Investment Securities

On March 4, 2015, the Securities and Exchange Commission (SEC) announced it had charged HD Vest Investment Securities with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds.

HD Vest Investment Securities agreed to settle the charges by paying a financial penalty and retaining an independent compliance consultant to improve its supervisory controls.

According to the SEC’s order instituting a settled administrative proceeding, HD Vest has more than 4,500 registered representatives typically working as independent contractors who also operate tax businesses outside of their securities businesses. HD Vest failed to have proper policies and procedures in place to monitor its representatives’ outside business activities, and as a result some representatives used their outside businesses to defraud brokerage customers in such ways as transferring or depositing customer brokerage funds into their outside business accounts. Read More

SEC Adds Additional Defendant In Shaw Insider Trading Case

Posted by Brenda Hamilton Securities Lawyer

On March 6, 2014, the Securities and Exchange Commission (SEC) announced it had added Billy Joe Adcox, Jr. of Ruston, Louisiana to a civil injunctive action in the United States District Court for the Western District of Louisiana, alleging that Adcox, Scott Zeringue and Jesse Roberts, III engaged in insider trading in the securities of The Shaw Group, Inc. (“Shaw”) ahead of a public announcement that Shaw was going to be acquired by Chicago Bridge & Iron Company N.V. (“CBI”).

The SEC alleges that Adcox was tipped by his long-time friend, Jesse Roberts, III, also of Ruston, Louisiana. According to the SEC’s insider trading complaint, Adcox knew Roberts got the confidential information about the impending merger from Roberts’ brother-in-law, Zeringue, a Shaw insider. Adcox and his relative allegedly bought Shaw stock based on the tip and, about two weeks later, sold the stock for a profit of over $111,000. Adcox’s relative also tipped a third unnamed individual, who made about $43,000. Read More

FINRA Fines LaSalle Securities For Private Placements

The Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission require that broker-dealers perform adequate due diligence before letting a registered representative recommend private placements made pursuant to Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). FINRA listed due diligence of private placements as a concern in its 2015 Regulatory and Examination Priorities). FINRA’s recent case against LaSalle St. Securities LLC (“LaSalle”) demonstrates that this due diligence obligation is mandatory even for private placement offerings made to accredited investors.

FINRA found certain deficiencies that occurred at various times during a four-year period in connection with the offerings of four issuers. The findings stated that with respect to private placement offerings, LaSalle Securities failed to exercise adequate due diligence before allowing a registered representative to recommend the offering to four accredited investors and distributed a private-placement memorandum to potential investors that did not include certain material facts and relied on a flawed methodology for projecting return on investment. Read More

SEC Periodic Reporting – SEC Reporting Requirements – Going Public Lawyers

Companies become subject to the SEC’s periodic reporting requirements a number of ways including by filing a registration under the Securities Act of 1933, as amended or pursuant to the Securities Exchange Act of 1934. The SEC periodic reporting rules require that publicly traded companies disclose a wealth of information to the public. Periodic reporting also requires that these reports be written in plain English. Understanding these reports helps investors make informed decisions regarding whether to buy, sell or hold a company’s securities.

Periodic reports provide issuers with the opportunity to provide shareholders with transparency by telling their story. Companies that provide materially false or misleading statements, or omit material information that is necessary to render a report not misleading in their periodic reports are subject to liabilities arising under federal and state securities laws. Investors can obtain a company’s Form 10-K, Form 10-Q and Form 8-K filings on the SEC’s EDGAR database. Read More

What is Form 13F? Going Public Attorneys

Institutional Investment Managers that exercise investment discretion of $100 million or more in Section 13(f) securities holdings, which include holdings in exchange-traded securities, shares of closed–end investment companies and certain convertible debt securities, must publicly disclose their holdings on Form 13F each quarter.

An “Institutional Investment Manager” is an entity that either invests in, or buys and sells, securities for its own account. As such, banks, insurance companies, and broker/dealers, corporations and pension funds that manage their own investment portfolios are subject to the rule if they invest in, or buy and sell securities for their own account. Read More

DTC Eligibility Q & A – Creating Liquidity with Electronic Trading

Posted By Brenda Hamilton, Securities Lawyer

The Depository Trust and Clearing 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. DTC Eligibility has become an often unexpected burden for companies in going public transactions.

Issuers must satisfy the criteria set by DTCC to be settled through DTC. All companies must satisfy this criteria in order to be DTC eligible, including both Securities and Exchange Commission (“SEC”) reporting and non-reporting issuers. This Securities Lawyer 101 Series discusses the most common questions we receive about DTC eligibility in going public transactions. Read More

How Does A Foreign Issuer Register Shares When Going Public?

A foreign issuer seeking to go public has several registration statement forms available for its going public transactions. Regardless of the registration statement form selected, all registration statements and other material filed with the Securities and Exchange Commission (“SEC”) must be submitted in electronic format on the SEC’s Electronic Data Gathering and Retrieval (“EDGAR”) system. All registration statements including those of foreign private issuers are subject to the SEC’s review and comment.

Some registration statement forms can be used exclusively by foreign private issuers under the Securities Act of 1933, as amended (“Securities Act”) and The Securities Exchange Act of 1934 (“Exchange Act”), depending upon the purpose for registration and whether the registration statement is used in connection with a going public transaction. Read More

Periodic Reporting for Foreign Issuers – Going Public Lawyers

A foreign private issuer seeking to go public in the U.S. can file a registration statement covering a public offering of securities under the Securities Act of 1933, as amended (“Securities Act”), register a class of equity securities under the Securities Exchange Act or it may do both. Foreign issuers can conduct direct public offerings or an initial public offering by filing a registration statement under the Securities Act. A Securities Act registration statement contains a prospectus, along with other information required by the securities laws. Under both the Securities Act and the Exchange Act, a registration statement filed by a foreign issuer must be declared effective by the SEC.

Foreign private issuers use the “F” series registration statements and Form 20-F and Form 6-K reports for their annual and current reports. The SEC disclosure forms available to foreign issuers are designed with reference to international disclosure standards, both in scope and timing requirements for filing. Read More

How Can a Foreign Issuer Use 12g3-2 To Go Public?

Under federal securities laws, a foreign company that meets the definition of the Securities and Exchange Commission (SEC) of a foreign private issuer must register an offering of its securities under the Securities Act of 1933, as amended (Securities Act) or a class of securities under the Securities Exchange Act of 1934 (the “Exchange Act”) or both, if:

The foreign private issuer conducts a public offering of its securities in the U.S.
The foreign private issuer seeks to list a class of its securities listed on a national securities exchange
The foreign private issuer’s size; or
The foreign private issuer has a certain number of shareholders.

Foreign Private Issuer Disclosure Obligations – Going Public Lawyers

Foreign issuers seeking to go public and access the U.S. capital markets must comply with the requirements of the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act). The Securities Act requires foreign issuers that offer and sell securities in the United States to file a registration statement with the SEC. The Exchange Act requires foreign issuers to register a class of equity securities in order to list their securities on a national securities exchange, or if certain asset and shareholder thresholds are met.

Once a foreign issuer completes a going public transaction, the Exchange Act requires it to provide certain information to the public in periodic reports published through its Electronic Data Gathering, Analysis, and Retrieval system also known as “EDGAR”. Read More

Considerations For Foreign Companies Going Public

The U.S. markets are a preferred venue for foreign companies seeking to raise capital and/or create liquidity for shareholders by going public. There are unique requirements under U.S. securities laws for foreign issuers seeking to go public in order to access the U.S. capital markets.

The most significant regulations applicable to foreign issuers going public in the U.S. are the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act). Generally, the Securities Act requires foreign issuers that offer and sell securities in the United States to file a registration statement with the SEC pursuant to the Securities Act’s registration requirements. The Exchange Act also applies to foreign issuers and requires them to register a class of equity securities in order to list their securities on a national securities exchange such as NASDAQ or the American Stock Exchange, or if certain asset and shareholder thresholds are met. Once a foreign issuer completes a going public transaction and registers with the SEC, the Exchange Act requires that the foreign company provide certain information to the general public in periodic reports published through its Electronic Data Gathering, Analysis, and Retrieval system also known as “EDGAR”. These periodic filings include reports on Form 10-K, 10-Q and Form 8-K. Read More

Can I Sell Shares Under Section 4(1)? Going Public Lawyers

Rule 144 (“SEC Rule 144”) under the Securities Act of 1933 (“Securities Act”) provides a safe harbor from the registration statement provisions of the Securities Act for resale of restricted and control securities by persons other than the issuer if all conditions of the rule are complied with.

Section 4(1) of the Securities Act provides an exemption for a transaction “by a person other than an issuer, underwriter, or dealer.” If the requirements of Rule 144 are met for securities not covered by a registration statement, the seller will not be deemed an underwriter and will be entitled to rely upon the safe harbor of Rule 144 to resell their restricted stock.