How Do I Go Public on the OTC Pink? – Going Public Lawyer
Many private companies that go public are opting for the listing on the OTC Market’s OTC Pinks 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”).
This enables the company to be quoted on OTC Markets Pink Sheets quotation system. In order to go public in this manner, the private company must meet certain requirements discussed below. The Pink Sheets offers several listing options and provides a method for companies to comply with the adequate public information requirement of Rule 15c-211, without filing reports with the SEC. Providing the information required by Rule 15c-211 enables market makers to publish quotes in a company’s securities. Read More
How Does a Market Maker Get a Ticker? Going Public Lawyers
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 submit a Form 211 on the issuer’s behalf to FINRA. This last step is required of all companies including those filing Form S-1 registration statements with the SEC. Only a Market Maker can submit a Form 211 to obtain a ticker symbol assignment. An issuer cannot submit the form itself. As such, the sponsoring market maker plays an important role in the going public process.
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What Is a Reverse Merger Super 8-K? Going Public Lawyer
The Securities and Exchange Commission (“SEC”), Division of Corporate Finance frequently notes disclosure failures of reverse merger transactions in Form 8-K also known as “Super 8-K”. This blog post summarizes SEC staff comments in response to reports on Form 8-K reporting of reverse mergers with public shell companies and similar transactions that result in a public company no longer being designated as a shell company. These include that the issuer provide “Form 10 information” including audited financial statements in a Super 8-K.
Super 8-K’s disclosure requirements for reverse merger transactions are expansive and in most respects and comparable to the disclosures found in a registration statement under the Securities Act of 1833, as amended (the “Securities Act”). In addition to these requirements, issuers must comply with FINRA’s notice requirements under Rule 6490. Reverse merger issuers often find their securities subject to Depository Trust (“DTC”) scrutiny, DTC Chills and global locks because of the presumption of fraud associated with reverse mergers. Read More
And The Beat Goes On – Tennessee Adopts Crowdfunding
While the SEC (after 700 days) has not adopted its final equity crowdfunding regulations, Tennessee’s entrepreneurial efforts have moved forward. Tennessee’s new crowdfunding law known as “Invest Tennessee Exemption” became effective on January 1, 2015. The new law allows Tennessee-based companies to engage in intrastate crowdfunding. The Invest Tennessee Exemption requires that the offering comply with the federal intrastate offering exemption provided by Section 3(a)(11) of the Securities Act of 1933, as amended. Read More
What is a Form 144 Notice of Sales? Going Public Lawyer
Rule 144 requires that a “Notice of Sale” on Form 144 be filed by any person for whose account the securities are being sold if the person is an affiliate at the time of sale, or was an affiliate during the 90 days preceding the sale, and is selling more than 5,000 shares or the shares being sold have an aggregate sale price of more than $50,000.
Public Availability of the Rule 144 Notice Filing
Form 144 is publicly available upon filing through the SEC’s EDGAR database. Rule 144(h) states that Form 144 must be filed only by the person for whose account a sale is being made under the rule. Read More
Reverse Mergers & Form 10 Shells
Form 10 Shells are often sold for reverse merger transactions. A Form 10 shell is a company with no or nominal operational activity that are “Public Companies” meaning they are obligated to file reports with the Securities and Exchange Commission as a result of filing a Form 10 registration statement. Form 10 shells are rarely a good solution or cost effective method for a private company to obtain public company status. Form 10 Shells do not have a ticker symbol despite having costly SEC reporting obligations. Unlike Form S-1 registration statements, a Form 10 registration does not create “free trading” shares. Read More
Paying Consultants & Stock Promoters With Stock – Going Public Lawyers
It has become almost routine for OTC Markets listed issuers to pay for consulting services with their restricted shares of common stock. The tradability of shares that can be issued to consultants is impacted by whether the company issuing the shares is reporting with the Securities & Exchange Commission (“SEC”) and whether the issuer has ever been a shell company (“Shell Company”) as defined by Rule 405 of the Securities Act of 1933, as amended. Read More
Why Companies Need a Going Public Attorney
A Going public attorney can help ensure that a Company’s offer and sale of securities comply with both state and federal securities laws. Going public is an intricate process that can be structured a variety of ways. It is important to have an experienced going public attorney who will help you navigate through the process. 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.
Common matters for which a company and its management consult with their going public attorney include but are not limited to the following: Read More
When Is Form 10-K Due? Securities Lawyer 101
A public company must file an annual report on Form 10-K following the end of each of its fiscal year. The first Form 10-K deadline is 90 days after the end of the first fiscal year in which the issuer becomes subject to the periodic reporting requirements of the 1934 Act. After the first year the Form 10-K deadline depends upon whether the issuer is an acceleratged filer, large accelerated filer, non-accelerated filer or smaller reporting company. Each category is summarized below:
Accelerated Filer
An accelerated filer is an issuer that: Read More
DTC Conspiracy Theories Continue In 2015
We continue to receive inquiries from management and shareholders of public companies about the Depository Trust Company (“DTC”). Many of these people assert that there is a larger DTC conspiracy in the works. Frequently, companies engaging in certain types of reverse merger transactions find their securities without DTC eligibility. A closer review of these transactions reveals that in most instances the reverse mergers involved public shells that were illegally acquired by the shell purveyor. Read More
What Does a Going Public Lawyer Do Anyway?
The role of the Going Public Lawyer is one of the most important in the going public process. The Going Public Lawyers at Hamilton & Associates Law Group have provided private companies with their going public solutions for over ten years. A skilled Go Public Lawyer can design and implement the going public structure most beneficial to your company without the risks associated with reverse merger transactions. We have represented more than 300 market participants in securities law matters and going public transactions.
Our experience includes direct public offerings (“DPO”), slow public offerings (“Slow PO”), Initial Public Offerings (“IPO’s) and SEC registration statements. Private companies using an SEC registration statement have a variety of structures available to them when designing their going public transactions. A Going Public Lawyer should structure the most cost and time effective going public solution for your private company to become publicly traded.
Many private companies file a registration statement filing with the SEC in connection with their going public transaction. The most commonly used registration statement form is Form S-1. A going public lawyer can guide you through the S-1 registration statement process.
All companies qualify to register securities on a Form S-1 registration statement. Private companies going public should be aware of the expansive disclosure required by in registration statements filed with the SEC prior to making the decision to go public. A registration statement on Form S-1 has two principal parts which require expansive disclosures. Part I of the registration statement is the prospectus which requires that the company provide certain disclosures about its business operations, financial condition, and management. Part II contains information that doesn’t have to be delivered to investors. A skilled Going Public Lawyer can draft the disclosures for the Form S-1 and assist management in compiling information required for its auditor. Read More
Can Form S-1 Be Used To Go Public ? l Going Public Lawyers
Going Public Bootcamp – Securities Lawyer 101 Blog
Form S-1 is the basic registration statement form used to register securities. Form S-1 can be used to register securities for which no other form is authorized or prescribed, except securities of foreign governments or political sub-divisions thereof. Form S-1 is commonly the first form of SEC registration statement used by issuers during the going public process when a direct public offering (“Direct Public Offering” or “DPO”) is conducted. Unlike an Initial Public Offering (“IPO”), a Direct Public Offering allows an issuer to sell its shares directly to investors without the use of an underwriter as part of its going public transaction. If a Form S-1 is used in conjunction with a Direct Public Offering in a going public transaction, the issuer becomes an SEC reporting company with a ticker symbol.
This blog post discusses the use of Form S-1 in the going public process. Read More
Can I Go Public With an Exchange Act Registration Statement?
All public companies whose securities are registered on a national securities exchange, and generally issuers whose assets exceed $10,000,000 with a class of equity securities held by 500 or more persons, must register a class of their securities under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”). Companies can elect to become subject to the Exchange Act by filing an Exchange Act registration statement. An Exchange Act attorney can guide the issuer through the registration statement forms that will cause it to become subject to the reporting requirements of the Securities and Exchange Commission (the “SEC”). Many companies in going public transactions voluntarily register securities under the Exchange Act, so to provide transparency to investors and to have the prestige associated with SEC reporting. Read More
What is Stock Scalping ? Securities Lawyer 101
Stock promoters often engage in what is known as stock scalping. Stock scalping is the illegal and deceptive practice of recommending that others purchase a security while secretly selling the same security. In recent years, the SEC and Justice Department have brought an increasing number of cases alleging securities violations for stock scalping activity.
The Role of the Stock Promoter in Stock Scalping Schemes
Stock Promotion entails the dissemination of information about a publicly traded company intended to increase its stock price and trading volume. The person who publishes this information is called a “promoter” or a “stock tout.” Read More
Tips for Going Public With a Direct Public Offering
Direct Public Offering Lawyer – Securities Law Blog
More and more issuers going public opt for a direct public offering. In a direct public offering management sells shares of the company’s stock directly to investors, rather than through the efforts of an underwriter. Going public with a direct public offering eliminates costs and risks associated with a reverse merger transaction. Private companies conducting a direct public offering should consider the pointers below to ensure a successful and cost-effective going public transaction.
The direct public offering process provides options for multiple structures, each with its own unique benefits and requirements. The decision about the appropriate going public structure often involves complex legal issues that vary depending upon the needs of the particular company involved.
Direct public offerings involve complex disclosures and legal issues, including those required by the Form S-1 registration statement. Forms S-1 are reviewed by the Corporation Finance Division of the Securities and Exchange Commission (“SEC”). Each of the multiple reviews prompts comments to which the company must respond with the help of its securities attorney. The attorney will draft these responses and file amendments to the registration statement. When the SEC examiners feel the Form S-1 has satisfied all requirements, the registration statement will be deemed effective. Read More
Public Company Disclosure Controls and Procedures
To back up the officer and director certifications in periodic reports, issuers must establish and maintain a system of disclosure controls and procedures designed to ensure that the company records, processes, summarizes and discloses on a timely basis information required to be disclosed in 1934 Act filings. Issuers must evaluate on a quarterly basis the effectiveness of their disclosure controls and procedures. The requirement that an issuer have disclosure controls and procedures extends beyond financial matters and includes all controls and procedures relating to required SEC disclosures, including interactive data. Read More
Form 8-K Disclosure of Shareholder Meetings
Companies with a class of securities registered under the Securities Exchange Act of 1934, as amended are required to file periodic reports with the Securities and Exchange Commission (“SEC”). These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q and current information reports on Form 8-K. Under Item 5.07 of Form 8-K, issuers must disclose the results of a shareholder vote within four business days after the meeting at which the vote was held or the action was taken by written consent. Read More
Crowdfunding Platforms to Watch in 2015
It has been more than a year and the SEC has not finalized its rules with respect to equity crowdfunding under the Title III of the JOBS Act, which would allow an issuer to raise up to $1 million from the sale of securities from non-accredited investors through online funding portals.
Despite this equity and intrastate crowdfunding have progressively marched forward with four viable crowdfunding platforms including the intrastate crowdfunding platform, partnership or fund model, broker-dealer and lending platforms.
E-Cigarette Scams – American Heritage International
Last week, the Financial Industry Regulatory Agency (“FINRA”) issued an investor alert concerning companies touting new technology for electronic cigarettes, often called e-cigarettes. The SEC recently announced a trading suspension of American Heritage International (AHII), a company that purports to make disposable electronic cigarettes, because of concerns about manipulative activity related to its common shares. E-cigs have been around for ten years or more. At its website, American Heritage boasts that it makes “America’s original premium electronic cigarette.” Read More
What is a Sponsoring Market Maker?
The last step in a going public transaction is for the company to receive a stock trading or ticker symbol from the Financial Industry Regulatory Authority (“FINRA”). For a company to obtain its ticker symbol, a sponsoring market maker (“Sponsoring Market Maker”) must sponsor the company’s application and submit a Form 211 to FINRA on the issuer’s behalf. Sponsoring Markets Makers have become one of the most important participants in the going public process because they are the only ones who can apply for a ticker symbol.
NASAA Announces Form D Electronic Filing Portal
The North American Securities Administrators Association (“NASAA”) has launched its Electronic Filing Depository (“EFD”) for Rule 506 Form D filings. NASAA’s EFD was created to allow companies to post Form D’s for Rule 506 offerings online through NAASA’s EFD website. Rule 506 of Regulation D is a “safe harbor” for private offerings under Section 4(a)(2) of the Securities Act. Issuers relying on the Rule 506 do not have to register their securities offering with the Securities and Exchange Commission (the “SEC”) or state securities regulators. Read More
SEC Proposes Exchange Act Registration Thresholds
On December 18, 2014, the SEC issued proposals required by the JOBS Act intended to permit non-reporting issuers to delay or avoid becoming SEC reporting companies. To accomplish this, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) was amended to increase the threshold number of record holders that triggering an issuer’s obligation to file a registration statement covering a class of equity securities under Section 12 of the Exchange Act, and to exclude certain records holders entirely from the calculation. Form 10 and Form 8-A are Exchange Act registration statements. Read More
SEC Charges Staten Island Company in Boiler Room Scam
On December 18, 2014, the Securities and Exchange Commission (“SEC”) charged a Staten Island company called Premier Links Inc. and its former president and two sales representative, Dwayne Malloy, Chris Damon, and Theirry Ruffin, with running a boiler room scheme that targeted seniors. The SEC has warned of the vulnerability of the elderly and others to cold-calling campaigns in an investor alert.
Between December 2005 and August 2012, Premier Links operated as an unregistered broker-dealer in Staten Island, New York. It was an old-fashioned boiler room that targeted elderly investors from all over the country. Its sales representatives, including Damon and Theirry, used high-pressure tactics to persuade their victims to invest in the unregistered securities of speculative startups, often telling them the companies would soon be conducting IPOs. Read More
Operator of a Ponzi Scheme Uses Proceeds to Cryogenically Freeze Wife
Ponzi schemes are nothing new, but unwary investors continue to fall for them, lured by the prospect of improbably large returns. Typically, the scammer who runs the ponzi scheme makes few actual investments in the markets; they simply keep the money they collect for themselves. Should an investor seek to withdraw all or some of the funds said to be in his account, he’ll be paid with money contributed by a new mark. The criminals behind the schemes are fast-talking and confident, and often seek to impress their victims with tall tales of their expertise and success. Read More
SEC Proposes Amendments to Implement JOBS Act
On December 19, 2014, the SEC approved the issuance of proposed amendments to revise the rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Securities Exchange Act. Registration under the Exchange Act is accomplished on Form 10 or Form 8-A.
The SEC voted on a proposal that would implement the mandate of the JOBS Act by: Read More
NASAA Launches Rule 506 Form D EFD
The North American Securities Administrators Association (“NASAA”) has launched its Electronic Filing Depository (“EFD”) for Rule 506 Form D filings. NASAA’s EFD was created to allow companies to post Form D’s for Rule 506 offerings online through NAASA’s EFD website. Rule 506 of Regulation D is a “safe harbor” for the private offering exemption of Section 4(a)(2) of the Securities Act. Issuers relying on the Rule 506 do not have to register their securities offering with the Securities and Exchange Commission (the “SEC”) or state securities regulators. Even though registration is not required, issuers must file a “Form D” with the SEC and state securities regulators after they first sell their securities. The Form D contains limited information about the securities being offered and the issuer offering those securities.
SEC Settles Charges Against Joseph Saranello
On December 17, 2014, the Securities and Exchange Commission (the “SEC”) announced settled charges against Joseph Saranello who participated in a pump-and-dump scheme involving the stock of Rudy Nutrition. The SEC previously charged thirteen other individuals in the District of Nevada for engaging in this scheme to manipulate the stock of Rudy Nutrition that netted over $11 million in illicit profits. Read More
Avon Products Charged with Foreign Corrupt Practices Act Violations
On December 17, 2014, the Securities and Exchange Commission (the “SEC”) charged Avon Products Inc. with violating the Foreign Corrupt Practices Act (FCPA) by failing to put controls in place to detect and prevent payments and gifts to Chinese government officials from employees and consultants at a subsidiary. Avon entities agreed to pay a total of $135 million to settle the SEC’s charges. The U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of New York announced parallel charges. Read More
Why The Rules That Apply To Transfer Agents Are Passé
On December 17, 2014, Luis A. Aguilar released a public statement about why the rules surrounding transfer agents should be updated and modernized. [1] Unfortunately, the rules governing transfer agents were adopted in the 70’s and 80’s and have not kept up with technological advances in the industry. In the informative release, Commissioner Aguilar explains the important role that transfer agents play in the public markets including as a gatekeeper to securities violations. Read More
CANN Settles Lawsuit Against Stephen Calandrella
On September 25, 2014, Advanced Cannabis Solutions, Inc. (“CANN”) sued Stephen G. Calandrella, one of the company’s biggest investors. Though that may seem paradoxical, CANN alleges in a lawsuit that Calandrella critically damaged the company. Last spring, on March 27, the Securities and Exchange Commission (“SEC”) suspended trading in CANN’s stock, citing “questions regarding whether certain undisclosed affiliates and shareholders of Advanced Cannabis common stock engaged in an unlawful public distribution of securities.”
