The Going Public Lawyer’s Dictionary

Going Public Dictionary

The Going Public Lawyer’s Dictionary was created to assist companies to become familiar with certain terms they will encounter during their going public transaction.  It is crucial that you understand and can speak the going public lingo!

52 Week Range
The highest and the lowest prices paid for a given security for the last 52 weeks.

Accredited Investor
An accredited investor is defined in Rule 501 of Regulation D.  An accredited investor is:

  • An individual who, alone or together with a spouse, owns financial assets worth more than $1 million before taxes but net of related liabilities;
  • An individual, who alone or together with a spouse, has net assets of at least $5,000,000.
  • An individual whose net income before taxes exceeded $200,000 in both of the last two years and who expects to maintain at least the same level of income this year;
  • An individual whose net income before taxes, combined with that of a spouse, exceeded $300,000 in both of the last two years and who expects to maintain at least the same level of income this year;
  • An individual who currently is, or once was, a registered adviser or dealer, other than a limited market dealer;
  • Financial institutions;
  • Governments and governmental agencies;
  • Insurance companies;
  • Pension funds;
  • Registered charities;
  • Certain mutual funds, pooled funds and managed accounts;
  • Companies with net assets of at least $5 million; or
  • persons or companies recognized as an accredited investor.

An acquisition is a transaction in which a company buys some or all of a target company’s ownership.

An affiliate of, or person affiliated with, a specified person shall mean a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.

American Depositary Receipts (ADRs)
Receipt for shares of foreign based companies that entitle the shareholder to all dividends and capital gains. ADRs allow Americans to buy shares of foreign based corporations’ securities at American exchanges instead of having to go to overseas exchanges.

Annual Meeting of Directors
A meeting held each year for the directors to vote on certain matters including the election of directors. The procedures for a corporation’s annual meeting of directors are found in its articles of incorporation or bylaws.

Annual Meeting of Shareholders
A meeting held each year so that shareholders can vote on certain matters including the election of its directors. The procedures for a corporation’s annual meeting of shareholders are found in its articles of incorporation or bylaws.

Annual Report (10K)
A report providing financial information required by the SEC for all U.S. public companies to be filed annually.

Arbitrage is the trading strategy that takes advantage of the price differential between two or more markets for the same underlying asset. Investors and traders profit from the price differential by buying at the cheaper price and selling at the higher price or vice versa. In liquid markets, arbitrage is a short-term strategy because traders quickly recognize the imbalance and correct their prices. The large number of American Depositary Receipts (ADRs) and Foreign Ordinaries that trade in the OTC market (e.g., Roche – OTCQX: RHHBY, adidas – OTCQX: ADDYY) make price imbalance a concern for OTC traders and investors. ADRs represent a set ratio of home market shares; thus, movement in the home market price and foreign exchange considerations will directly affect the price of the ADR.  Foreign Ordinaries should theoretically mirror home market trading once currency rates are considered. ADR and Foreign Ordinary investors should be aware of the home market symbol, venue, and trading patterns, as well as current foreign exchange considerations.

Articles of Incorporation
Articles of Incorporation also known as a Certificate of Incorporation or the Corporate Charter are the primary rules that govern the management and affairs of U.S. corporations.  Articles of Incorporation are filed with the state in which a corporation is formed.

Authorized Capital
The aggregate number of shares of stock a corporation may issue as set forth in its Articles of Incorporation or Corporate Charter.

Bear Hug
A Bear Hug is when a company offers to buy another company at a significant premium often in hostile takeovers. The motive is to make a high offer price to entice shareholders of the target company to vote in favor of a merger, and against its management.

Bear Market
A Bear Market means there is a general decline in the market. In a Bear Market investors fear and are pessimistic about investing in the capital markets.

Best Ask
The lowest price at which someone is willing to sell a security.

Best Bid
The highest price at which someone is willing to buy a security.

Beta Coefficient
A measure of the volatility of a stock relative to the overall market. Beta is calculated by applying linear regression, the security’s week-to-week percent price change to the correlating index’s week-to-week percent change for a given period of time. A beta value of 1.1 indicates a 1.10% movement for a 1% move in the index, regardless of direction.

Bid Whacking
Bid Whacking” or “whacking the bid” means selling at the bid price.

Blank Check Company
A blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person.

Blank Check Preferred Stock
Blank Check Preferred Stock is a class of securities in which a corporation’s board of directors has broad authority to determine voting, dividend, conversion, and other rights often without a vote of the corporation’s stockholders.

Board of Directors
A board of directors is a body of elected or appointed members of a corporation that oversee the corporation’s activities. The board of directors is elected by the corporation’s shareholders.

Bottom Fishing
Bottom Fishing is the practice of buying oversold stocks after a large sell-off or drop in the market.

Bull Market
A Bull market means there is investor confidence, and generally the markets reflect increasing stock prices.

Bylaws are written rules that govern corporations.  Bylaws generally provide the rules for meetings, elections of a board of directors and officers, filling vacancies, notices, types and duties of officers, committees, assessments and other routine corporate actions. Bylaws must be formally adopted and may be amended. When there is a conflict between a corporation’s Bylaws and its Articles of Incorporation, its Articles of Incorporation control.

Capital Stock
Capital Stock is the total amount of stock authorized for issue by a corporation, including common and preferred stock, according to its Articles of Incorporation.

Capital Structure
Capital structure is a combination of a corporation’s long-term debt, specific short-term debt, common equity, and preferred equity.

Caveat Emptor
Buyer Beware. There is a public interest concern associated with the company, which may include a spam campaign, questionable stock promotion, known investigation of fraudulent activity committed by the company or insiders, regulatory suspensions, or disruptive corporate actions.

Certificate of Good Standing
A document issued by the secretary of state of a corporation’s domicile that certifies that the corporation is validly existing and in compliance with all applicable state requirements.

Certificated Shares
Certificated Shares are a shares of a corporation that are represented by a stock certificate.

Change/Percent Change
Price change (net or percent wise) between the current price and the close from the previous trading day.

CIK Code
A unique identifier assigned by the SEC to all companies that file with the SEC.

Class Notes
Information about a particular class of a stock such as an IPO (initial public offering).

The price of the last sale for a security at the end of the trading day.

Closing Bell
When trading stops on the New York Stock Exchange and NASDAQ each day, a bell is rung to signal the event.

Common Stock
Shares of a corporation that provide the holder with ownership of a corporation.  Common Stock typically has voting rights.

Company Notes
Information about a company such as filing for bankruptcy, former name, etc.

Corporate Conversion
A Corporate Conversion is the change in the state of domicile of a corporation. In some jurisdictions, a Corporate Conversion is the change in the business form of an entity such as when a limited liability company converts its form to a corporation.

Conversion or Conversion Rights of Stock
Rights allowing the holder of shares of stock or other financial instrument to convert to other shares of stock.

Convertible Security or Convertible Instrument
Securities such as debentures, bonds or notes that can be exchanged for other securities of the corporation.

Corporate Governance
Corporate governance refers to the distribution of rights and responsibilities among different participants in a corporation (such as the board of directors, managers, shareholders, creditors, auditors and regulators) and includes the rules and procedures for making decisions about the corporation’s management and affairs.

Corporate Hijacking
Corporate Hijacking is a form of identity theft used to obtain control of a corporation.  The most common form of corporate hijacking involves the use of fraudulent custodianship or receivership proceedings.

A legal entity that is separate and distinct from its owners.  A corporation is the most common form of business organization chartered by a state and given legal rights as separate from its owners.

CUSIP stands for Committee on Uniform Securities Identification Procedures. A CUSIP number identifies most securities, including: stocks of all registered U.S. and Canadian companies, and U.S. government and municipal bonds. The CUSIP system—owned by the American Bankers Association and operated by Standard & Poor’s—facilitates the clearing and settlement process of securities.

CUSIP Number
A CUSIP number consists of nine characters (including letters and numbers) that uniquely identify a company or issuer and the type of security. A similar system is used to identify foreign securities (CUSIP International Numbering System).

Daily Range
The highest and the lowest prices paid for a given security in the last trading day.

Dead Stock Bounce
After a stock or even the entire market has declined dramatically, there is often a moderate bounce to the up side known as the Dead Cat Bounce.

Debt Private Placement
A debt private placement is an unregistered offering where by the company attempts to sell debt in the form of a note, debenture or bond rather than shares of the company.

Depository Trust & Clearing Corporation (DTCC)
The DTCC is a holding company consisting of 5 clearing corporations and 1 depository.  DTCC is the only stock depository in the United States.  DTCC clears and settles virtually all broker-to-broker equity, listed corporate and municipal bond and unit investment trust (UIT) transactions in the U.S. equities markets, advancing new initiatives and driving development of products and services that mitigate risk, reduce costs and enhance processing efficiencies for market participants.

The effect of reducing existing shareholders proportional interest in a corporation. Dilution results from the issuance of securities that reduce a holders proportional ownership.

Direct Public Offering or DPO
A direct public offering is an offering sold publicly or privately without the use of an underwriter.  Direct public offerings are typically part of a going public transaction and can involve both registered and unregistered securities.

Corporations are managed by a board of directors which must consist of at least one person.  Typically, directors are elected by the shareholders of the corporation annually.

The process of closing or terminating a corporation.  Corporations can be permanently dissolved by filing Articles of Dissolution or administratively dissolved if they fail to file an annual report with the relevant Secretary of State.

A portion of company’s quarterly profit paid to its shareholders in the form of cash or stock.

Dormant Issuer
A Dormant Issuer is a company that has become inactive with the Secretary of State where it is domiciled. Dormant issuers are often the victims in corporate hijacking schemes.

DTC Chill
A DTC Chill is a limitation of certain services available for a security on deposit at The Depository Trust Company (“DTC”).

DTC Global Lock
A DTC Global Lock is also referred to as a DTC Freeze.  A Global Lock is a complete restriction on all DTC services for a particular security on deposit at DTC.

DTC Participant
DTC participants are banks, broker-dealers and other firms that are approved by DTC to sponsor the DTC eligibility process for the security.

Dually Quoted Stocks (OTC Link and FINRA’s BB)
Stocks that are quoted on both OTC Link and FINRA’s BB.

Earnings Per Share or EPS
The portion of a company’s profit allocated to each outstanding share of common stock.

The Electronic Data Gathering and Retrieval System allows reporting companies to file reports and schedules with the SEC electronically.

Equity Financing
The sale of securities representing equity ownership of a corporation.

Equity Private Placement
An equity private placement is the raising of capital by a private placement rather than a public offering. The result is the sale of securities to a relatively small number of investors.

Estimated Market Cap (Market Capitalization)
Calculated by multiplying the number of shares outstanding times previous close price. This number reflects the total dollar value of the company’s outstanding shares.

Exchange Act Rule 15c2-11
SEC Rule 15c2-11 establishes requirements for the publication and submission of quotations for over-the-counter securities.

Fail to Deliver
A ‘fail to deliver’ is a transaction where one of the counterparties in the transaction fails to meet their respective obligations. For example, a broker/dealer does not deliver shares sold short.

Financial Industry Regulatory Authority
Financial Industry Regulatory Authority or FINRA is an independent self-regulatory organization that protects America’s investors by making sure the securities industry operates fairly and honestly.  FINRA writes and enforces rules governing the activities of more than 4,100 securities firms with approximately 640,425 brokers, examines broker-dealer firms for compliance with those rules; fosters market transparency; and educates investors.

FINRA operates an electronic bulletin board for OTC stocks.

Foreign Ordinary Shares
Foreign ordinary shares are equivalent to foreign common stock traded on U.S. markets.  Ordinary shares are stocks bought by U.S. investors representing shares in foreign companies that are traded on their home markets, as opposed to stocks that trade in the U.S.

Form D – Notice of Sales
A Form D Notice of Sales is a notice filing required by the SEC in connection with Regulation D offerings.

Form S-1 Registration Statement
A Form S-1 Registration Statement is a general form used to register securities with the Securities and Exchange Commission pursuant to the Securities Act of 1933.  All companies qualify to register securities on Form S-1.

Form S-8 Registration Statement
Form S-8 is a form of registration statement used to register securities to be offered to employees under certain employee benefit plans.

Form F-1 Registration Statement
A Form F-1 Registration Statement is a general form used by foreign issuers to register securities with the Securities and Exchange Commission pursuant to the Securities Act of 1933.  Form F-1 provides foreign issuer with reduced disclosure obligations.

Form 8-K
Once an issuer’s going public transaction is complete, it must file periodic reports with the SEC including on Form 8-K.  A Form 8-K is the SEC form required to be filed by companies subject to the reporting requirements of the Securities Exchange Act of 1934.  Form 8-K must be filed upon the occurrence of certain material and line item events such as the entry into or termination of material contracts outside the ordinary course of business, change in officers or directors or the sale of unregistered securities.  The report must be filed within four days of the triggering event.

Form 10-K
Form 10-K is an annual report that must be filed by companies subject to the reporting requirements of the Securities Exchange Act of 1934.  Form 10-K must include line item disclosures including about the issuer’s business, operations, management, audited financial statements as well as a detailed management discussion regarding those financial statements and planned future operations.

Form 10-Q
Form 10-Q is a quarterly report that must be filed by companies subject to the reporting requirements of the Securities Exchange Act of 1934.  Form 10-Q must include unaudited (reviewed) financial statements and a management discussion and analysis.

Form 144 – Notice of Sales
Form 144 – Notice of Sales must be filed with the Securities and Exchange Commission when an executive officer, director, or affiliate of a company places a sell order.

Form 211 
Rule 15c-211 requires that a Form 211 be filed with FINRA on an issuer’s behalf prior to a sponsoring market maker initiating quotes of the issuer’s securities.

Forward Stock Split 
The dividing of a company’s existing stock into multiple shares.  In a 2-for-1 split, each stockholder receives an additional share for each share he or she holds.

Forward Triangular Merger
A type of merger that occurs when the subsidiary of the acquiring corporation merges with the target company.

Free-Trading or Unrestricted Stock
Free-Trading Stock or Unrestricted Stock are securities that can be resold publicly.  Typically, stock that has been registered with the Securities and Exchange Commission is free trading.

Generally Accepted Accounting Principles (GAAP) 
Generally Accepted Accounting Principles (GAAP) are the standard framework for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing financial transactions, and in the preparation of financial statements.

Going Public
Going Public is the process whereby a company’s shares become publicly traded.  Going Public can also refer to the process by which a company becomes an SEC reporting company.

Grey Market
“Grey Market”, “OTC” or “Other OTC” is a security that is not currently traded on the OTCQX, OTCQB or OTC Pink marketplaces.  Broker-dealers are not willing or able to publicly quote OTC securities because of a lack of investor interest, company information availability or regulatory compliance.

A temporary stop to trading, usually for 30 minutes, during the time when news from the issuing company is being disseminated over the news wires.  A trading halt gives investors an equal opportunity to evaluate news and make their buy, sell and hold decisions accordingly.  A trading halt may also be imposed for purely regulatory reasons, either by the NASDAQ Stock Market or an exchange.

Hitting the Bid
“Hitting the Bid” or “bid whacking” or “whacking the bid” means selling at the bid price.

Initial Public Offering or IPO
An Initial Public Offering or IPO is a company’s first sale of stock to the public.

An affiliate of, or person affiliated with, a specified person shall mean a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.

An issuer is a company that is making an offering or issue of its securities.

Last Sale
The price at which the last trade was executed in a security.

From a trading perspective, liquidity is the ability of a security to be bought or sold without causing a significant movement in the price of the security. Liquid securities may be bought and sold in large numbers without a dramatic movement in the price of the security. The opposite is true for illiquid securities. Liquidity depends on a number of forces including supply and demand, price transparency, trading history, market venue, market participants and freely tradable shares (public float).

The acceptance of a security for trading on a national securities exchange.

Listed Security
Securities that have been accepted for trading purposes by a recognized and regulated national securities exchange.

Listing Requirements
The requirements imposed on companies by national securities exchanges that the companies must meet in order for their securities to be traded on the particular venue. Listing requirements include minimum share price, asset and requirements and minimum shareholder requirements that vary between the various exchanges.

Market or Trading Market
Market or Trading Market refers to the equity market where stocks are listed or quoted.

Market Maker
A “market maker” is a broker-dealer registered with the Securities and Exchange Commission and FINRA stands ready to buy and sell a particular stock on a regular and continuous basis at a published price.

Generally, a merger is the combining of two or more companies into one, with one company surviving the transaction.

Micro-Cap Stock
Micro Cap Stock refers to a company with a market capitalization of between $50 million to $300 million or a penny stock.

Misery Index
The Misery Index is a term that refers to the Unemployment Rate and the Inflation Rate added together.

The NASDAQ was the world’s first electronic stock market. The NASDAQ is a computerized system that facilitates trading and provides price quotations on some 5,000 of the more actively traded over-the-counter stocks.

NASDAQ Listing
The process of having a company’s securities trading on NASDAQ, a computerized system that facilitates trading and provides price quotations on some 5,000 of the more actively traded over-the-counter stocks.

NASDAQ Public Shell
A public corporation that is called a “shell” since all that exists of the original company is its corporate shell structure and shareholders.  It has no business operation or significant assets.

Net Dividend Yield
The value of the annual dividend payments after the deduction of taxes and expenses divided by the last sale of the security.

New Issue
The event of a security being sold to the public for the first time.

No Par Value Shares
No Par Value Shares are shares that do not have designated par value.

Non-Reporting Shell Company
A public shell company that is not subject to the reporting requirements of the Securities Exchange Act 1934.

Non-Trading Shell
A public shell company that is not actively traded or is thinly traded. These vehicles are often known as “Form 10 Shells”.

New York Stock Exchange.

NYSE AMEX Equities
Formerly known as the American Stock Exchange (AMEX).

Opening Bell
When trading starts on the New York Stock Exchange and NASDAQ, the opening bell is rung to signal the event.

Opening Price
Price for a given stock at the beginning of the trading day.

OTC Best Bid and Offer (Ask) is calculated using all bid and offer quotes in OTC Link and the FINRA BB.

OTC Bulletin Board
The OTC Bulletin Board is an electronic trading service controlled by the Financial Industry Regulatory Authority (“FINRA”) that published real-time quotes, last-sale prices, and volume information for over-the-counter (“OTC”) equity securities.  In 2014, the FINRA announced that the OTC Bulletin Board would be discontinued.

OTC Link
OTC Link is an electronic inter-dealer quotation system that displays quotes from broker-dealers for many over-the-counter (OTC) securities.  “Market makers” and other broker-dealers who buy and sell OTC securities can use OTC Link to publish their bid and ask quotation prices.  OTC Link is registered with the SEC as a broker-dealer and as an alternative trading system, and is a member of FINRA.

OTC Markets
OTC Markets operates an interdealer quotation system.

OTC Markets OTC Pink
OTC Pink is operated by the OTC Markets.  The OTC Pink includes the securities of some companies that are current in their reporting to the SEC or a U.S. bank, thrift or insurance regulator if they do not pay listing fees to the OTC Markets or meet the listing criteria for the OTC Markets OTCQB. OTC Pink also includes companies that do not file reports with the SEC has no financial standards or reporting requirements.  The OTC Pink includes OTC Pink Current, OTC Pink Yield, OTC Pink No Information, and Caveat Emptor tiers.

The OTCQB is a listing tier of the OTC Markets.  The OTCQB includes, among other things, issuers subject to the SEC reporting requirements and remain current in their reporting obligations that meet minimum bid requirements and pay listing fees to the OTC Markets.

The OTC Markets, OTCQX tier is reserved for the securities of companies that are current in their reporting to the SEC or a U.S. bank, thrift or insurance regulator, or, in the case of companies that are not required to report to the SEC, meet and remain current in their reporting obligations to OTC Link under its proprietary Alternative Reporting Standard; meet certain eligibility requirements; have audited financial statements; and partner with a third-party securities attorney or investment bank that reviews disclosure and acts as a professional advisor.

OTC Pink Current Information

Companies that follow the International Reporting Standard or the Alternative Reporting Standard are designated as OTC Pink Current Information.

OTC Pink Limited Information
Companies that have posted limited financial information through the OTC Disclosure & News Service or are late in their filing obligations with the SEC are designated as OTC Pink Limited Information.

OTC Pink No Information
OTC Pink No Information companies are not able or willing to provide disclosure to the public markets – either to a regulator, an exchange or OTC Markets Group.

OTCQX30 Constituent
Security is a constituent of the OTCM QX ADR 30 Index (Ticker: OTCQX30).

Outstanding Shares 
The shares of a Corporation’s authorized securities that have been issued to shareholders.

P/E Ratio (Price/Earnings Ratio)
P/E Ratio is calculated by dividing stock’s market price by the company’s earnings per share.

Painting the Tape
When a group of investors illegally move a stock by trading it all at the same time.  This happens every day, just watch the tape or most active stocks, but don’t get sucked in.  Day trader newsletter emails can cause such moves.

Penny Stock
The term “penny stock” generally refers to a security issued by a very small company that trades at less than $5 per share. Penny stocks generally are quoted over-the-counter, such as on the OTC Bulletin Board (which is a facility of FINRA) or OTC Link LLC (which is owned by OTC Markets Group, Inc., formerly known as Pink OTC Markets Inc.); penny stocks may however, also trade on securities exchanges, including foreign securities exchanges. In addition, the definition of penny stock can include the securities of certain private companies with no active trading market.

Penny Stock Rules
Penny Stock Rule is designed to prevent deceptive or manipulative practices. It provides that a broker cannot sell a Penny Stock to any person unless it has approved that person’s account for penny stock transactions and the broker/dealer has received in writing from customer agreement to the transaction. Approving an account includes, among other things, reviewing the customer’s financial data and determining the customer’s suitability, including the capability to evaluate the risks of trading in penny stocks.  Some types of transactions in penny stocks are exempt from these rules. Exempt transactions include those with an established customer (a customer of more than one year or one who has made at least three separate penny stock purchases) and transactions in which the customer is an institutional investor.

Piggyback Registration
When an underwriter allows existing holdings of a corporation’s shares to be added to a registration statement for an offering of different shares being registered.

Piggy-Back Rule
A “piggyback qualified” security is one that meets the frequency-of-quotation requirement described in SEC Rule 15c2-11(f)(3). The frequency-of-quotation test or “piggyback” exception is based on whether a broker/dealer has itself published quotations in the security in the applicable interdealer quotation system on at least 12 business days during the preceding 30 calendar days, with not more than four consecutive business days without quotations.  Once this criteria has been satisfied, authorized participants may register on-line in a security.  As long as the security remains piggyback qualified, any participant may quote the security without a Form 211 submission.

Previous Close
The price of the last sale for a given security at the end of the previous trading day.

Primary Venue
The market exchange or quotation service where a given security is primarily quoted.

Private Placement
A Private Placement is a securities offering not registered on a registration statement filed with the Securities and Exchange Commission.

Public Company Accounting Oversight Board or PCAOB
A non-profit organization that regulates auditors of publicly traded companies.

Public Placement
An offering made pursuant to Rule 506(c) of Regulation D of the Securities Act of 1933, as amended made to accredited investors through the use of general solicitation and/or advertising.

Public Shell
A public corporation with no or minimal activity that has no business operation or nominal assets.

Quarterly Report (10Q)
A report providing unaudited financial information required by the SEC for all U.S. public companies to be filed quarterly.

The process of filing the registration statement with the Securities and Exchange Commission.

Registration Statement
A carefully prepared set of documents, including a prospectus, which is filed with the SEC prior to an initial public offering.

Regulation A
An SEC regulation that governs offerings of $5,000,000 or less, which qualify for simplified registration or an exemption.

Regulation D
Regulation D provides three exemptions from the SEC’s registration statement requirements. These are Rule 504, Rule 505 and Rule 506.

Reporting Public Shell
A public shell that is reporting with the SEC.

Reporting Requirements
Rules under the Exchange Act that require companies with a class of securities registered under the Exchange Act to file periodic reports and filings with the SEC.

Restricted Stock
Restricted Stock is stock that cannot be resold unless registered or exempt from registration.

Reverse Merger
The process by which a private company mergers into or acquires a publicly traded company so that its shares can become publicly traded.

Reverse Stock Split
A proportional reduction in the number of shares a corporation has outstanding.

Reverse Takeover 
The buying out of larger company by a smaller company, or the purchasing of a public company by a private company.

Reverse Triangular Merger
When the subsidiary of the acquiring corporation merges with the target company.

Rule 504
Rule 504 is a Regulation D exemption that allows issuers to raise up to $1,000,0000 in a twelve month period if certain conditions are met.

Rule 505
Rule 505 is a Regulation D exemption that allows issuers to raise up to $5,000,0000 in a twelve month period if certain conditions are met.

Rule 506
Rule 506 is a Regulation D exemption that allows issuers to raise an unlimited amount of capital if certain conditions are met.  Rule 506(c) allows the issuer to use general solicitation and advertising so long as sales are made only to purchasers that the issuer has used reasonable steps to verify are “accredited investors”.

Scalping is the illegal practice of secretly selling shares while telling investors to buy typically through investor relations activity.

Schedule 14-C
Schedule 14-C is an Information Statement that the issuer must mail to all shareholders notifying them that the issuer has taken certain actions by shareholder consent without holding a shareholder meeting.

Schedule 14-A
Schedule 14-A is a Proxy Statement that notifies shareholders of matters to be voted on at the upcoming shareholder meeting.

Schedule 14f-1
Schedule 14f-1 is an Information Statement which notifies shareholders that a Company has appointed new officers or directors, and provides background information about such persons.

Securities and Exchange Commission (SEC)
Primary federal regulatory agency responsible for administering federal securities laws, promoting full disclosure and protecting investors against fraudulent and manipulative practices in the securities markets.

SEC Filing
A document, usually containing a financing statement, filed with the SEC and made available to the public.

SEC Reporting Company
An SEC Reporting Company is an issuer with a class of securities registered under the Exchange Act.  Registration under the Exchange Act makes the issuer subject to the Securities and Exchange Commission’s periodic reporting requirements.

SEC Suspension
The SEC can suspend a stock from trading for up to ten trading days when it serves the public interest and will protect investors. The SEC will act when it believes public information about a company is not current, accurate, or adequate. For stocks that trade in the OTC or the over-the-counter market, quotation does not automatically resume when a suspension ends. (The OTC market includes OTC Link and the FINRA BB.) After a suspension, SEC regulations require a broker-dealer to review information about a company before publishing a proprietary quote. If a broker-dealer does not have confidence that a company’s financial statements are current and accurate, especially in light of the questions raised by the SEC, then a broker-dealer may not publish a proprietary quote for the company’s stock. However broker – dealers may publish quotes representing an unsolicited customer order.

Securities Exchange Act
Securities Exchange Act refers to the Securities Exchange Act of 1934, as amended. The Exchange Act requires SEC reporting companies to disclose information the public about their business, operations, financial condition, and management though the Edgar database.

Seed Stockholder
Seed Stockholders are the initial investors in a company. Often referred to as the “friends and family round”.

The Securities Act of 1933, as Amended
The Securities Act of 1933, as amended (the “Securities Act”) is also known as the truth in securities law.  The Securities Act generally requires companies to give investors “full disclosure” of all “material facts,” the facts investors would find important in making an investment decision.  This Act also requires companies to file a registration statement with the SEC that includes information for investors.  The SEC does not evaluate the merits of offerings, or determine if the securities offered are “good” investments.  The SEC staff reviews registration statements and declares them “effective” if companies satisfy our disclosure rules.

Securities Attorney
An attorney specializing in the securities laws.

Securities Registration Statement
This is a form filed with the Securities and Exchange Commission to register securities for sale to the public.  Securities Registration Statement forms include Form S-1, Form S-3, Form S-4, Form S-8, Form S-1, Form 10 and other forms.

Any person, company, or other institution that owns at least one share in a company.  A shareholder may also be referred to as a stockholder.

Shelf Offering
An SEC provision allowing an issuer to register a new issue security without selling the entire issue at once.

Shelf Registration
A term used for the Securities Act Rule 415, which allows a corporation the ability to comply with registration requirements up to 2 years before doing a public offering. The corporation must still file the required annual and quarterly reports to the SEC.

Shelf Registration Statement
A shelf registration statement is a type of registration that allows companies to register a block of securities for future sale.

Shell Corporation
A corporation without active business operations or significant assets.

Short Selling
Short selling is a trading strategy where an investor, believing that a security is over-valued, borrows (from a broker-dealer or institutional investor) and sells a security and then repurchases and returns (to the broker-dealer or institutional investor) the security at a lower price. The difference between the sale price and the purchase price is the investor’s profit. Short selling is a valid trading strategy; however, there are two important points that investors must remember: – Short selling carries with it unlimited risk because the purchase price of a security can rise to any price point. Conversely, long investors (buyers) may only lose the amount invested – if, for example, the security price drops to zero; short sellers are subject to price manipulation schemes – or short squeezes. In a short squeeze, traders believing that there are a lot of short sellers begin buying shares to force the price and the short sellers losses higher. These traders hope that the short sellers will be forced to buy pushing the price even higher at which point they can sell their shares at a profit. Short squeezes are easier to execute in illiquid securities.

Slap That Ask
“Slap that Ask” is a slang trend-term used for saying that a stock is going to be bought up quickly, for the asking price.

The Spread is the difference between the bid and the ask.

Sponsoring Market Maker
A sponsoring 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 FINRA to act as a market maker of a security. Sponsoring market makers file a request on Form 211 to initiate trading of an issuer’s securities.

Stock Option
A privilege sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price during a certain period of time or on a specific date.

Stock Symbol
A unique symbol assigned to a security by the Financial Industry Regulatory Authority.  NYSE and AMEX listed stocks have symbols of three characters or less.  NASDAQ-listed securities have four or five characters.  If a fifth letter appears, it identifies the security as other than a single issue of common stock.  Stock symbols are also known as tickers or ticker symbols.

The change in price, either up or down.

Trading Ahead
Trading Ahead is an illegal practice where a specialist might buy a stock for themselves from one seller even though a better price is available from another public seller.  The specialist can view bid and ask prices and then manually mismatch them, or see ahead to a less favorable price.

Transfer Agent
Transfer Agents are the record keepers for stock ownership and transactions of an issuer.

An organization that raise investment capital from investors on behalf of entities seeking to sell securities (both equity and debt).

The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).

Uncertificated Shares of Stock
Shares of a company that are issued but not represented by a stock certificate.

Unified Registration Statement
This is a state level registration statement.  A Unified Registration Statement allows companies that are registering securities in multiple states, to file a single unified registration statement in such states.

Unsolicited Quote
An unsolicited quote is one which represents an “Unsolicited Customer Order”. Publishing unsolicited quotes allows a broker/dealer to meet an exception to Rule 15c2-11, which requires a broker to have in its possession current information, including financial information, about the issuer of the securities.  To avail itself of this exception to SEC Rule 15c2-11, a FINRA member firm must ensure that the quotation published or submitted: (1) is solely on behalf of a customer; (2) represents the customer’s indication of interest; and (3) does not involve the solicitation of the customer’s interest.

Vertical Merger
A merger between two companies producing different goods or services for a single specific product.

The total number of shares traded on a given day.

The annual rate of return on an investor’s capital investment, expressed as a percentage. For bonds, yield is the coupon rate of interest divided by the purchase price.

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   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
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855