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
Ross Mandell, Six Years Later – Part 2
Posted by Brenda Hamilton, Securities Lawyer
A few weeks ago, we wrote about U.S. v Ross Mandell, a complicated case involving securities fraud, conspiracy to commit securities fraud, wire fraud, and mail fraud. The action was tried in Federal Court in the Southern District of New York. It ended in May 2012, when final judgments of conviction were entered against Mandell and a co-defendant, Adam Harrington. Mandell and Harrington filed a brief with the Second Circuit Court of Appeals in September 2012.
The appellate panel delivered its decision on May 14, 2014 ruling against Mandell and Harrington and upholding the lower court’s decision. The pair, believing justice had not been served, made use of the only option left to them, filing a writ of certiorari with the Supreme Court. A writ of certiorari seeks judicial review of a case that has already been heard and, in this instance, already appealed. 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.
Michigan Embraces Crowdfunding
Posted by Brenda Hamilton, Securities and Going Public Lawyer
Michigan recently made a move to assist Michigan small businesses with their investment crowdfunding endeavors. Michigan became the first state to establish an intrastate market where broker-dealers can sell securities of Michigan-based companies using crowdfunding. The signing of House Bill 5273 by Michigan’s preexisting intrastate exemption from securities registration known as the Michigan Invests Locally Exemption (“MILE Act”), allows Michigan businesses to raise capital using the Internet and/or though general solicitation by selling the exempt securities within a newly-created alternative intrastate market. Read More
Broker Dealer Registration 101
Posted by Brenda Hamilton, Securities and Going Public Lawyer
Broker-dealers are subject to regulation by the SEC, FINRA and any other Self-Regulatory Organizations (“SRO”) such as stock exchanges, as well as the states in which they do business. The Securities Exchange Act of 1934 (“Exchange Act”) requires that any broker-dealer effecting securities transactions by means of interstate commerce be registered. State laws also regulate broker-dealer activity within their jurisdictions. Unless an exemption from registration is available, state laws require registration of any broker-dealer doing business from or with persons in their state, as well as the broker-dealer’s employees doing business within the state. Read More
Retweets, Social Media & Being Public – Going Public Lawyers
Posted by Brenda Hamilton, Securities and Going Public Lawyer
It has become almost routine for public companies to use social media to interact with their shareholders, and customers. The Securities and Exchange Commission (the “SEC”) has provided guidance in compliance and disclosure interpretations addressing the use of Twitter, Facebook, and other forms of social media. It is important that public companies and companies engaged in going public transactions familiarize themselves with the SEC’s rules concerning social media.
Active Hyperlinks & Disclosure Obligations
The SEC has stated that the use of social media and hyperlinks using social media platforms, such as Twitter, that limit the number of characters or amount of text that can be included in the communication, effectively making it impossible for firms to include the required legends and other disclosures. Read More
Going Public Strategies – Going Public Attorneys
Posted by Brenda Hamilton, Securities and Going Public Lawyer
Going Public can involve a variety of structures depending upon each company’s specific needs. Companies seeking to Go Public can involve an Initial Public Offering (IPO), Direct Public Offering (DPO), Form 10 transaction, Slow Public Offering and/or a Reverse Merger. It is critical that companies seeking public company status select the right going public attorneys for their transaction. A skilled going public attorney can assist issuers seeking to “Go Public” without an underwriter or reverse merger by using a Direct Public Offering and obtaining their own stock ticker symbol. This holds true for company seeking to Go Public on the NYSE, AMEX, NASDAQ, OTC Markets OTCQB, OTCQX or OTC Pink Sheets.
Read More
Short Swing Profits Q & A By: Brenda Hamilton Securities Lawyer
Posted by Brenda Hamilton, Securities and Going Public Lawyer
The “Short Swing Profit” rules were created to prevent insiders, who have greater access to material company information, from taking advantage of information for the purpose of making short-term profits from trading an issuer’s securities. This Securities Lawyer 101 Q & A addresses the most common questions we receive about Short Swing Profits. Read More
Caledonian Securities & Caledonian Bank Seized by Cayman Officials
Posted by Brenda Hamilton, Securities and Going Public Lawyer
Following an action by the Securities and Exchange Commission (SEC) last week and an asset freeze order, the Cayman Islands Monetary Authority has taken control of Caledonian Bank and Caledonian Securities. According to charges by the SEC on February 7, 2014, Caledonian, Clear Water Securities, Legacy Global Markets S.A., and Verdmont Capital S.A. functioned as affiliates, unregistered brokers, dealers, and underwriters, in connection with four penny stock issuers: Swingplane Ventures (SWVI), Goff Corp. (GOFF), Nostra Energy (NORX) and Xumanii Inc. (now Imerjn Inc., IMJN).
DTC Eligibility Explained By The Going Public Attorneys
Posted by Brenda Hamilton, Securities and Going Public Lawyer
Q. What is The Depository Trust Company (“DTC”)?
A. DTC is the only stock depository in the United States.
Q. How do public companies obtain a DTC eligibility?
A. Issuers must satisfy specific criteria to receive an initial DTC eligibility, and to remain DTC eligible. Even after those securities become eligible, DTC may limit or terminate its services. Read More
Does FINRA Approve Going Public Transactions? Going Public Attorneys
By The Going Public Attorneys – The Financial Institution Regulatory Authority (FINRA) plays an important role in going public transactions. While filing a registration statement on Form S-1 will make a company reporting with the Securities and Exchange Commission, it will not cause the company’s stock to trade and it will not result in a ticker symbol. Only FINRA can assign a stock ticker symbol. FINRA is the largest non-governmental regulator of broker-dealers in the U.S. FINRA oversees nearly several thousand brokerage firms, hundreds of thousands of their branch offices as well as their registered securities representatives.
FINRA is dedicated to investor protection and market integrity through effective and efficient regulation of the securities markets
FINRA is an independent, not-for-profit organization authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly.
FINRA does this by: Read More
Penny Stock Lawyers, Auditors & Nominees Charged by SEC
On January 15, 2015, the Securities and Exchange Commission (SEC) announced charges against penny stock lawyers, auditors, and others allegedly involved in a microcap scheme involving bogus Form S-1 registration statements filed with the SEC. According to the SEC, John Briner, a Canadian Attorney and stock promoter caused the companies to file 20 bogus Form S-1 registration statements with phony cookie cutter business plans. According to the SEC, because John Briner had been suspended from practicing law before the Commission, he recruited clients and associates to become nominees while he secretly controlled the companies from behind the scenes. The registration statements falsely stated that each CEO was solely running the company when in fact Briner was making all material decisions. Read More
SEC Suspends Modern PVC -MPVC- Securities Lawyer 101
On February 6, 2015, the U.S. 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 Med Pro Venture Capital, Inc., f/k/a Modern PVC, Inc. (“MPVC”), at 9:30 a.m. EST on February 6, 2015, and terminating at 11:59 p.m. EST on February 20, 2015. Read More
SEC Charges Oppenheimer For Penny Stock Sales
Last week, the Securities and Exchange Commission (“SEC”) announced charges against Oppenheimer & Co. for violations of federal securities laws for improperly selling penny stocks in unregistered offerings on behalf of customers. Oppenheimer agreed to admit wrongdoing and pay $10 million to settle the SEC’s charges. Oppenheimer will pay an additional $10 million to settle a parallel action by the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). Read More
SEC Issues Investor Alert on Cybersecurity
On February 3, 2015, the Securities and Exchange Commission (“SEC”) addressed cybersecurity at brokerage and advisory firms and provided suggestions to investors on ways to protect their online investment accounts. “Cybersecurity threats know no boundaries. That’s why assessing the readiness of market participants and providing investors with information on how to better protect their online investment accounts from cyber threats has been and will continue to be an important focus of the SEC,” said SEC Chair Mary Jo White. “Through our engagement with other government agencies as well as with the industry and educating the investing public, we can all work together to reduce the risk of cyber attacks.” Read More
Can I Afford To Go Public on the OTCQB? – Going Public Lawyer
Going public requirements vary for companies seeking to go public on the OTC Markets, OTC Pink, and OTCQB marketplace. The biggest difference is that most of the time (but not always) companies who go public on the OTCQB provide more transparency to investors than OTC Pink Sheet companies because they file reports with the Securities and Exchange Commission (the “SEC”).
As of May 2014, the OTC Markets imposed new requirements for OTCQB companies who must now pay initial and continuous listing fees and maintain a bid price above $0.01 per share. Not every company can afford the expense of being a SEC reporting company. To be quoted on the OTCQB, the company must be reporting with the SEC and pay an initial and annual listing fees to the OTC Markets. Reporting Companies not paying the listing fee to the OTC Markets will be quoted with an OTC Pink tier. Thus, OTC Pink companies are both reporting and non-reporting issuers. Read More
Roadmap For a Successful Direct Public Offering
Preparing for a direct public offering or an initial public offering (“IPO”) or takes both a commitment of time and money. Unlike an Initial Public Offering, a direct public offering does not involve an underwriter. While it often takes a year or longer to plan for and complete an IPO, a direct public offering can be completed in as little as 90 days, using Form S-1. Unlike a Form 10 registration statement, Form S-1 will create unrestricted securities.
Money and time are not the only things required for a successful direct public offering. Having the right Going Public Attorney is critical to the direct public offering process. Some companies begin planning for their direct public offering months before the process begins. This allows the issuer to consider a variety of factors including confidential submission of the registration statement and other matters. During this time, the company prepares for the audit process, develops its plan of operations and obtains its shareholder base. Read More
Medbox & The License to Swindle – Peter Berney Shells
Down the Rabbit Hole We Go
We were recently asked to review a penny stock company called Medbox Inc. (MDBX). The Medbox story has been of considerable interest over the past two years, for the most part because of its colorful founder, P. Vincent Mehdizadeh, its involvement in the nascent medical marijuana industry, and its unusually high stock price. But for those willing to dig into the past, it also illustrates why receivership and custodianship shells are the greatest enforcement failure impacting the microcap markets in the last decade.
Corporate Law 101 – Securities Lawyer
Because only issuers can go public and have their securities publicly traded, it is necessary for many unincorporated businesses to set up corporate entities before beginning their going public transactions. Companies going public should have a basic understanding of corporate law and what it means to conduct business through a corporate entity. This blog post addresses the most common questions we receive from small businesses about setting up and operating a business as a corporate entity.
What Does It Mean To Be A Corporation?
A corporation is a distinct legal entity separate and apart from its shareholders or owners. Corporations are incorporated pursuant to the state law in which the Corporation is formed. Corporations can take various forms including C-Corporation, S-Corporation, Limited Liability Company, and Professional Corporation (also known as a Professional Association). A Corporation’s existence is perpetual, unless dissolved by its Board of Directors or the state where it is formed, as for failure to pay required annual fees and/or file annual reports. Read More
Foreign Issuers Going Public and How? Securities Attorney
Foreign issuers seeking to go public have several options for their transactions. Foreign issuers seeking to go public in the U.S. may complete an initial public offering or direct public offering by registering an offering of securities with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (“Securities Act”). Under SEC rules, foreign issuers that qualify as “foreign private issuers” have the option but not the obligation to use rules available to foreign issuers going public in the U.S.
Foreign Private Issuer Qualification
In order for a foreign company to qualify as a foreign private issuer under SEC rules, it must satisfy the definition contained in Securities Exchange Act Rule 3b-4(c) of the Exchange Act.
Rule 3b-4(c) provides that the following do not qualify as foreign private issuers:
♦ An issuer with more than 50% of its outstanding voting securities held by U.S. residents;
♦ An issuer with a majority of its executive officers or directors that are U.S. citizens or residents; Read More
Can I Put Graphics In My S-1? Going Public Lawyers
A common question we receive as going public lawyers is what graphics can be used in the issuer’s Form S-1 registration statement. Last week the Securities and Exchange Commission (“SEC”) addressed the use of graphics and/or images that are non-searchable in SEC reports and filings in Compliance & Disclosure Interpretation (C&D) 118.01 of Regulation S-T. The C&D provides that “a filer may present required information using graphics that are not text-searchable and still comply with Rule 304(e) if the filer also presents the same information as searchable text or in a searchable table within the filing.” Read More
Can I Amend My Form 10-K? Going Public Attorneys
A company may desire to change information presented in its Annual Report on Form 10-K for a number of reasons. Form 10-K amendments can be used to correct any material inaccuracies, misstatements or omissions that a company subsequently discovers. As such, the SEC allows a company to file an amendment to its Form 10-K. Read More
What Is a Consent of Auditor? Going Public Lawyers
Item 601 of Regulation S-K requires issuers to file a Consent of Auditor as an exhibit to certain forms and files with the SEC including registration statements under the Securities Act of 1933, as amended (“Securities Act”). A company’s Independent registered public accounting firm must provide a Consent of Auditor (an auditor’s consent and audit report) in the Securities Act registration statements and Annual Reports on Form 10-K. Read More
SEC Amends Related Party Disclosure Rules – Going Public Lawyers
Annual reports on Form 10-K are just around the corner for companies with a December 31, year-end. We have received several questions concerning recently adopted Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 18, Related Parties. The new rule applies to all issuers and SEC registered broker-dealers and become effective for audits of financial statements for fiscal years beginning on or after December 15, 2014. The new rules are designed to increase auditor identification and evaluation of companies’ significant unusual transactions and to enhance understanding of companies’ financial relationships and transactions with their executive officers. Read More
What Is The Section 1145 Exemption? Securities Lawyer 101
Securities law issues are an important consideration in structuring a Chapter 11 reorganization, particularly where the debtor is a public company. Section 1145 of the Securities Act of 1933, as amended (“Securities Act”) provides issuers in Chapter 11 reorganizations with an exemption from registration that eases some of the burdens of Chapter 11 reorganization. An important requirement of the Section 1145 exemption is not available to an underwriter. Read More
