What Is The Section 4(1) Exemption? Securities Lawyer 101
Rule 144 (“SEC Rule 144”) under the Securities Act of 1933 (“Securities Act”) provides a safe harbor from the registration provisions of the Securities Act for resales of restricted and control securities by persons other than the issuer if all conditions of the rule are complied with. Section 4(1) of the Securities Act provides an exemption for a transaction “by a person other than an issuer, underwriter, or dealer.”
If the requirements of Rule 144 are met, the seller will not be deemed an underwriter and will be entitled to rely upon the safe harbor of Rule 144 to resell their securities.
Section 4(1) is often referred to as the “ordinary trading” exemption. The main obstacle to the use of Section 4(1) is whether the seller is an underwriter under Section 2(11) of the Securities Act and whether the resale involves a distribution of securities.
Restricted Securities Read More
Filing and Amending Form D under Regulation D
Form D is used to file a notice of an exempt offering of securities with the Securities and Exchange Commission (“SEC”) for offerings made under Rule 504, 505 or 506 of Regulation D. Federal securities laws require that a Form D be filed with the SEC within 15 days after the first sale of securities in the offering. In addition to filing the Form D with the SEC, issuers must comply with state law filing requirements. Most states require issuers to file a Form D or comparable form with their state securities commission.
Form D and Form D amendments must be filed with the SEC online using EDGAR (electronic gathering, analysis and retrieval) system. In order to do so, the issuer must obtain its own filer identification number (called a “Central Index Key” or “CIK” number) and access codes. Read More
What is a Form S-8 Registration Statement?
Registration of securities on Form S-8 (“Form S-8”) is a short-form registration statement under the Securities Act of 1933, as amended (the “Securities Act”), providing significant benefits to small issuers. 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 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
How FINRA Rule 6490 Impacts Reverse Mergers
FINRA Rule 6490, recently enacted in September 2010, requires issuers of securities not listed on exchanges to provide timely notice to FINRA of certain corporate actions including reverse mergers. Rule 6490 corporate actions include name changes, forward stock splits, reverse stock splits, distributions of cash or securities such as dividends, stock splits and other actions, and rights and subscription offerings.
Rule 6490 codifies Rule 10b-17 of the Securities Exchange Act. The new rule will impact both SEC reporting and non-reporting issuers if they enact corporate changes including issuers who go public direct and conduct underwritten or direct public offerings and those who pursue reverse mergers with public shells. Complying with this criteria is often an unexpected legal and compliance cost for many issuers not familiar with the rule. This is particularly true for issuers who engage in reverse mergers with public shells. Read More
