What Laws Apply to a Direct Public Offering?
Direct Public Offering Blog Series
An issuer conducting a registered direct public offering is subject to three federal securities laws, each with its own unique requirements. These are the Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934 (the “Exchange Act”) and the Sarbanes-Oxley Act of 2002 (”Sarbanes-Oxley”). In addition to these laws, state laws apply to direct public offerings. These include state securities and corporate laws.
Federal Laws Applicable To Direct Public Offerings
The Securities Act regulates the offer and sale of securities by both private and public companies. Its requirements apply to both private offerings under Regulation D and registered direct public offerings on Form S-1.
Upon completion of a registered direct public offering, the Exchange Act imposes periodic reporting obligations. These obligations include the filing of Form 10-K, 10-Q and 8-K.
For issuers who register a class of securities under the Exchange Act, additional reporting obligations apply. These include the SEC’s proxy rules that require disclosures be made on Schedules 14A or 14C and certain procedures for the solicitation of shareholder votes. Additionally, shareholders and management must file beneficial ownership reports of their trading activities in the company’s securities.
In addition to imposing, disclosure obligations, the Exchange Act Rule 15c2-11 requires that public companies provide certain public information before a market maker may enter quotations of the issuer’s securities. Rule 15c2-11 disclosures enable market makers to publish quotations in a company’s securities in the secondary market after a direct public offering has been registered and/or completed.
The Sarbanes-Oxley Act of 2002 establishes corporate governance, corporate accountability and accounting oversight provisions that apply to SEC reporting companies.
State Laws Applicable To Direct Public Offerings
At all times during the registered direct public offering process, the issuer is subject to the corporate laws where it is domiciled. State corporate laws regulate the creation, organization and dissolution of corporate entities. State corporate laws require articles of incorporation to document the company’s creation and to provide provisions regarding the management of the corporate entity. Most state corporate laws require the company to adopt bylaws to define the rights and obligations of officers, shareholders, voting groups and other matters.
The state securities laws of the individual states also regulate private and public securities offerings unless the offering is preempted under federal law. Even where offerings are preempted under federal law, states may impose filing fees and notice filing requirements. These filing and notice requirements are imposed by most states for Regulation D offerings.
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. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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