Corporate Finance & Securities

Securities Registration and Private Placement Exemptions

Last week we talked about the securities registration requirements for public offerings. This week we’re taking a look at the registration exemptions.

Some Background on Securities Registration Exemptions Under the Securities Act of 1933 (the ’33 Act), a private securities offering is exempt from the registration statement and prospectus requirements of public securities offerings. Section 4(2) of the ’33 Act provides that the registration requirements “shall not apply to transactions by an issuer not involving any public offering.” Shockingly (if you’re not familiar with federal regulations), the terms “public” and “private” are not defined in the ’33 Act.

In general, an offering is considered to be private when the number of offerees and ultimate purchasers is relatively small, the investment is prudent in the...

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Corporate Finance & Securities

A Basic Overview of Stock Registration Requirements

In a reaction to the stock market crash of the late 1920’s Congress enacted the Securities Act of 1933. The primary goal of the ’33 Act was to ensure that investors received complete and accurate information about companies issuing securities. Before Congress enacted the ’33 Act, there was no overarching federal scheme for regulating securities; states were the primary source of securities regulation. The general rule under the ’33 Act is that interstate public securities offerings cannot be made in the United States unless a registration statement has been filed with the Securities and Exchange Commission (the “SEC”). There are a number of important exemptions to these requirements that enable companies to raise money through what are commonly called “private placements.”


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Business Startup

Entrepreneur Access To Capital Act Passes House

On November 3rd, the House passed the Entrepreneur Access to Capital Act with overwhelming approval: 407-17. This Act would enable businesses to raise capital through crowd funding. Crowd funding is the contribution of small equity investments from many individuals.

Currently, federal and state laws governing the sales of securities restrict public solicitation of investors and limit fund-raising to sophisticated investors, or require a registration process that is cost-prohibitive for many entrepreneurs.

The Act restricts individual investments to $10,000 or ten percent of their annual income, whichever is lower. Businesses can raise up to $1 million dollars using this method without registering their securities unless they provide audited financial statements, in which case they can raise up to $2 million.

The Act includes a...

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