Ask Securities Lawyer 101 l Form D Q & A
Form D Question & Answer
The most common exemptions used by companies to sell stock prior to going public are those found in Regulation D of the Securities Act. Many private companies going public do not realize that a filing with the SEC is required even for offerings to initial shareholders in private placements made under Regulation D. This blog post addresses common questions we receive about Form D’s requirements.
Q. What Is a Form D?
OTC Markets OTC Pink Market Lawyer Q & A
OTC Markets Pink Sheet
Q. What are the benefits of listing on the OTC Markets OTC Pink Sheets?
A. There are a couple of benefits for companies opting to list on the OTC Pink Sheets.
Pink Sheet listings are much less expensive and the disclosure requirements are less stringent than a listing on the OTC Markets OTCQB because audited financial statements are not required. Despite that audited financial statements are not required, issuers Read More
DTC Eligibility Question & Answer – Going Public Attorney
Q. What is The Depository Trust Company (DTC)?
A. DTC is the only stock depository in the United States.
Q. Why is DTC so important to public companies?
A. When DTC provides services as the depository for an issuer’s securities, its securities can trade electronically. Without DTC eligibility, it is almost impossible for an issuer to establish an active market in its stock.
Q. How do public companies obtain DTC eligibility?
A. Issuers must satisfy specific criteria to receive initial DTC eligibility, and to remain DTC eligible. In order to do so, the issuer must provide an opinion from its securities and/or going public attorney. Even after those securities become eligible, DTC may limit or terminate its services. Read More
SEC Issues Trading Suspensions of 61 Companies
In a follow-up to its mass trading suspension of 379 over-the-counter issues on May 14, 2012, the SEC today announced the second largest trading suspension in its history as it continues its “Operation Shell Expel” crackdown against the manipulation of microcap shell companies that are ripe for fraud as they lie dormant in the microcap market.
Dormant shells often become the victims of shell hijackers who fill fraudulent state court proceedings in order to obtain voting control of the entity. These proceedings most take the form of state receivership or custodianship actions. In addition to the use of fraudulent pleadings, the hijackers intentionally fail to provide the notices required by state law to the dormant company’s legitimate shareholders and management. Read More
Going Public Options for Foreign Companies
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”).
Under SEC rules, foreign companies that qualify as “foreign private issuers” have the option but not the obligation to use rules available to foreign companies going public in the U.S.
Foreign Private Issuer Qualification Read More
Bradley Holcom Indicted in $50 Million Securities Offering l Securities Attorney 101
On May 15, 2013, the U.S. District Court for the Southern District of California charged Bradley Holcom with eight counts of mail fraud, four counts of wire fraud, and one count of securities fraud in connection with a $50 million securities offering he conducted between 2004 and 2010, to 150 investors. Read More
SEC Charges Robert Vitale for Lying l Securities Lawyer 101
On May 30, 2013, the Securities and Exchange Commission (the “SEC”) announced Robert Vitale, the subject of an SEC enforcement inquiry plead guilty to criminal charges by the Justice Department for obstructing justice and lying to SEC attorneys investigating a real estate securities offerings to investors. Read More
Can Finders Raise Funds without Registration as a Securities Broker?
Companies seeking capital are frequently approached by finders who offer to find investors in exchange for a percentage of funds raised. Most finders are not registered as broker-dealers with the Securities and Exchange Commission (the “SEC”). The possibility of receiving money even through the efforts of a finder creates a tempting opportunity for issuers and a lucrative proposition for the finder. While it may seem harmless enough, the SEC does not think so, and in fact, the SEC frequently brings cases against unregistered finders and those who aid and abet them. Read More
Auditor Review of Form 10-Q l Securities Lawyer 101
Form 10-Q is used to file quarterly reports under Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”). Rules 13(a)-13 and 15(d)-13, which require that SEC reporting issuers file a Form 10-Q for each of the first three quarters of each fiscal year.
Rules 8-03 and 10-01(d) of Regulation S-X require that a company‘s interim financial statements contained within its Form 10-Q reports be reviewed by its independent auditors in accordance with the Statement on Auditing Standards (“SAS”) prior to the filing of its Form 10-Q with the SEC.
When a company completes its quarterly report on Form 10-Q but its auditor cannot or will not complete its review in a timely manner, the issuer is presented with a dilemma. Absent an auditor review, if it files its 10-Q with the SEC, the filing is considered incomplete and not timely filed.
Even though a company is not obliged to state that the timely interim auditor review was completed, the filing of the report implies that the requirements of Form 10-Q have been met, including the review. A company may decide to file its Form 10-Q by the original or extended filing date without its auditor’s review. In such circumstances, the company must explicitly disclose that the filing is incomplete because Form 10-Q’s required auditor SAS 100 review was not performed and/or completed. Additionally, the company should explain the reason the SAS 100 review was not performed and/or completed and offer an anticipated completion date.
Once the auditor’s SAS 100 review is ready, the company should file an amendment to its Form 10-Q, reflecting that fact. The issuer should include the report of the SAS 100 review in its amended 10-Q report.
For more information about Form 10-Q please see our blog post at:
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 [email protected] or visit www.securitieslawyer101.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 OTCBB 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 [email protected]. 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.SecuritiesLawyer101.com
SEC Charges NASDAQ for Facebook IPO l Securities Lawyer 101
On May 29, 2013, the SEC charged NASDAQ with violating the securities laws as a result of its poor systems and decision-making during the initial public offering (IPO) and secondary trading of Facebook’s common shares. NASDAQ has agreed to pay the largest settlement ever handed down against an exchange – $10 million. Read More
Going Public For a Smaller Reporting Company l Securities Lawyer 101
The federal securities laws establish different levels of disclosure and reporting requirements under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), depending upon the size of a company. There are many benefits to the status of smaller reporting companies in going public transactions, including reduced disclosure and reporting obligations in comparison to larger companies.A company that has Smaller Reporting Company status during its going public transaction may apply Smaller Reporting Company disclosure requirements to its registration statement, including two years of audited financial statements instead of the three years required for larger reporting companies.
If a company does not qualify as a Smaller Reporting Company at the time of its initial filing of a registration statement in connection with its going public transaction, it must provide three years of audited financial statements in its registration statement. Read More
SEC Settles Charges against RINO International
On May 15, 2013, Dejun “David” Zou and Jianping “Amy” Qiu settled the enforcement action brought by the Securities and Exchange Commission stemming from their alleged looting of Chinese reverse merger company, RINO International Corp. According to the SEC, Rino overstated its revenues by hundreds of millions of dollars. Zou and Qiu respectively the Read More
Investor Relations 101 l Securities Lawyer 101 Blog
Investor relations or stock promotion involves the dissemination of information about a public company to increase its stock price and trading Read More
Short Sales 101 – Going Public Attorneys
In recent years, the activities of short sellers have been the subject of considerable controversy. While the average investor profits if he invests in a stock whose price increases, a short seller profits when a stock’s price declines. While short selling is a simple process, it is widely misunderstood. Simply put, a short sale is the sale of a security that the seller does not own.
Short sales can only be made on margin, and all the rules applicable to margin trading are enforced. To sell short, a trader must borrow stock and then sell it into the market. The sale is not complete until the trader ensures delivery of the security to the new buyer. His or her brokerage firm arranges the loan. The stock may come from the firm’s own inventory, the accounts of other clients on margin, or from another lender. Read More
Rule 144 For OTC Pink Companies – Going Public Lawyers
Rules of the Road l Uplisting to the OTCMarkets OTC Pink Sheets
The OTCMarkets Group operates an electronic inter-dealer quotation system called OTC Link that broker-dealers use to trade securities not listed on a national securities-related exchange. OTCMarkets rank issuers in tiers; each issuer’s rank depends upon the amount of disclosure provided. Issuers using SEC Rule 15c2-11 qualify for the “OTC Pink Current Information” tier. Read More
15c2-11 Application Going Public Attorney
Many private companies that go public are opting for the listing on the OTCMarket’s Pink Sheets due to the increased costs and more stringent regulations associated with Securities and Exchange Commission (“SEC”) reporting. Rule 15c2-11 (“SEC Rule 15c2-11”) of the Securities Exchange Act of 1934 (the “Exchange Act”) can be used by a private company seeking to go public without an SEC registration statement by a sponsoring market maker submitting a Form 211 with the Financial Industry Regulatory Authority (“FINRA”). Read More
SEC Sues Daniel Peterson for Fraud
On April 25, 2013, the Securities and Exchange Commission Division of Enforcement (“SEC”) announced that it had charged Daniel Peterson of Spokane, Washington, and his company USA Real Estate Fund 1 with securities fraud. According to the SEC, Daniel Peterson misled investors with false claims of enormous potential returns that could be generated by the wonderful investment opportunity he touted. He told his victims that his securities offering would be in Read More
How Can I Register Shares On Form S-8 ?
Registration of securities on Form S-8 (“Form S-8”) is a short-form registration statement under the Securities Act of 1933, as amended (“Securities Act”). Form S-8 is available to register securities offered to employees and consultants under benefit plans under limited circumstances. Because a registration statement on Form S-8 is effective upon filing it offers benefits to Securities and Exchange Commission (“SEC”) reporting companies, most significantly that an S-8 registration statement becomes effective upon filing and the shares registered may be issued without a restrictive legend. Read More
Market Makers in Going Public Matters l Securities Lawyer 101
The last step in going public transactions is most often obtaining a stock trading or ticker symbol from the Financial Industry Regulatory Authority (“FINRA”). For a company to obtain a ticker, a market maker must file a Form 211 with the Finance Industry Regulatory Authority (“FINRA”). Only a Market Maker can file a Form 211 to obtain a ticker symbol assignment.
What is a Market Maker?
A market maker is a FINRA registered broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Broker-dealers must register with the Financial Industry Regulatory Authority (“FINRA“) to act as a market maker of a security. Read More
Informational Requirements of Rule 144 – Rule 144 Legal Opinion Requirements
Rule 144(c) of the Securities Act of 1933, as amended (the “Securities Act”) requires that stockholders of public companies relying upon Rule 144 satisfy its adequate current public information requirement. The requirements depend upon whether the issuer is a reporting or non-reporting company.
SEC Reporting Companies l Adequate Current Public Information
Rule 504 l OTC Pink 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.
Maximum Offering Amounts l Rule 504 Offerings
The aggregate amount raised for an offering of securities under Rule 504 cannot exceed $1,000,000, less the aggregate offering price for all securities sold within the twelve months before the start of and during the offering of securities under this Rule 504, in reliance on any exemption under section 3(b), or in violation of section 5(a) of the Securities Act. Read More
Form 10-Q Requirements l Securities Lawyer 101 Blog
Public companies with a class of securities registered under Section 12 or subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are subject to the periodic and current reporting requirements of Section 13 or 15(d) of the Securities Exchange Act. The Exchange Act contains ongoing disclosure requirements that provide investors with current information on an ongoing basis. These include an obligation to file periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K with the Securities and Exchange Commission (the “SEC”). Read More
Rule 504 l OTC Markets OTC Pink Market Checklist
Rule 504 of Regulation D is a transactional exemption from the registration statement 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.
Why Both Private and Public Companies Need a Securities Attorney
Every offer and sale of securities is regulated by both state and federal securities laws. Generally, all securities offerings must be registered or exempt from federal and state securities registration laws. Failure to comply with these laws can have significant consequences that include rescission to investors, and enforcement actions by the Justice Department or Securities and Exchange Commission.
Taking a company public is an intricate process, and it is important to have an experienced securities lawyer who will help you navigate through the process.
Common matters for which companies and their management consult with securities lawyers include but are not limited to the following: Read More
Brenda Hamilton, Securities Attorney, In Linkedin’s Top 1 %
Brenda Hamilton, a securities attorney and founder of Hamilton & Associates Securities Lawyers has been honored as a Top 1 Percent LinkedIn Subscriber. LinkedIn.com reports that Ms. Hamilton’s profile was in the top 1 percent of all profiles for 2012. Ms. Hamilton attributes the rating to the law firm’s leading role in representing microcap issuers in SEC investigations and DTC matters, and for its securities-related blog www.Securitieslawyer101.com, which focuses on securities law and issues affecting the microcap securities markets. Read More
Securities Lawyers Gone Wild l Carrillo Huettel
On March 15, 2013, the Securities and Exchange Commission (the “SEC”) charged securities law firm Carrillo Huettel and others in an alleged international “pump-and-dump” scheme involving two publicly traded U.S. companies, Pacific Blue Energy Corporation and Tradeshow Marketing Company Ltd.
According to the SEC’s complaint, Canadians John Kirk, Benjamin Kirk, Dylan Boyle, and James Hinton ran false and misleading promotions to pump the stock of Pacific Blue and Tradeshow so they could dump their shares. Read More
FINRA Bars Jeffrey Rubin for Transactions Involving 31 NFL Players
On March 7, 2013, the Financial Industry Regulatory Authority (“FINRA”) barred Jeffrey Rubin of Lighthouse Point, Florida, from the securities industry. Rubin was sanctioned for making unsuitable recommendations to an NFL player, advising him to invest in high-risk securities offered in a now-bankrupt casino project in Alabama. According to FINRA, the NFL player lost his investment of approximately $3,000,000. Thirty other players acting on Rubin’s advice invested funds in the same casino project. They lost approximately $40 million. Read More
