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| − | How Does A Company Go Public?. Going Public can involve a variety of structures depending upon each company's specific needs. Companies seeking to Go Public can involve an Initial Public Offering (IPO), Direct Public Offering (DPO), Form 10 transaction, Slow Public Offering and/or a Reverse Merger. It is critical that companies seeking public company status select the right going public attorneys for their transaction. A skilled going public attorney can assist issuers seeking to "Go Public" without an underwriter or reverse merger by using a Direct Public Offering and obtaining their own stock ticker symbol. This holds true for company seeking to Go Public on the NYSE, AMEX, NASDAQ, OTC Markets OTCQB, OTCQX or OTC Pink Sheets.
| + | SEC Subpoenas 101. Receiving a Securities and Exchange Commission ("SEC") subpoena is a new and uncomfortable experience for most market participants. An SEC subpoena is an indication that the Division of Enforcement is investigating potential violations of the federal securities laws. SEC subpoenas can be issued to a variety of persons many of which may not suspected as securities law violators. |
| − | Going Public Eligibility, Listing & Requirements
| + | Most market participants understand that the Securities and Exchange Commission (the "SEC") is a law enforcement agency. SEC Actions can involve a case in federal court or an administrative action. They can be informal or pursuant to an SEC formal order of investigation. SEC actions are common in the penny stock markets and the SEC frequently pursues shell packers, unregistered brokers stock promoters, investor relations firms, attorneys and auditors in connection with penny stock schemes. |
| | + | Any SEC subpoena should be taken seriously and not ignored. When a formal order of investigation is obtained, the SEC's Division of Enforcement can issue subpoenas and compel witnesses to testify and produce books and records. |
| | + | The SEC's Enforcement Division functions as the enforcement arm of the SEC. It is the Division of Enforcement that commences investigations of potential securities law violations, by recommending that the SEC bring SEC actions in federal court or before an administrative law judge, and by prosecuting the cases on the SEC's behalf. |
| | + | The SEC's Division of Enforcement investigates potential violations of the federal securities laws and collects evidence of securities law violations. Often times, the SEC makes referals to the Justice Department for criminal prosection. The SEC obtains evidence from a variety of sources including market surveillance activities, investors, whistleblowers, other Divisions and Offices of the SEC, self-regulatory organizations such as the Financial Industry Regulatory Authority ("FINRA"), other securities industry sources, and news and/or media reports. |
| | + | The SEC Division of Enforcement's information gathering process involves the use of informal inquiries, witness interviews, examination of brokerage, transfer agent and other records, reviewing trading data, and other sources. |
| | + | After an investigation, the Division of Enforcement's staff presents their investigative findings to the SEC for its review. |
| | + | Common SEC Violations that Lead to Investigations include: |
| | + | Securities fraud – Misrepresentation or omission of important information about a company or its securities |
| | + | Manipulative Trading – Manipulating the market prices of securities |
| | + | Conversion of customers' funds or securities |
| | + | Violating broker-dealers' responsibility to treat customers fairly |
| | + | Insider trading (violating a trust relationship by trading on material, non-public information about a security) |
| | + | Selling unregistered securities |
| | + | Whether the SEC brings a case in federal court or before an administrative law judge depends on various factors. When warranted, the SEC may bring both a civil and administrative proceeding. |
| | + | Potential defendants in SEC actions will receive a wells notice. A Wells Notice is sent to subjects of a SEC investigation when Enforcement staff has substantially completed its investigation and intends to recommend that an enforcement be pursued. Under SEC Rules, in response to such a notice, the recipient is entitled to make a Wells submission presenting facts and arguments intended to dissuade the staff from taking further action. If the staff goes forward with its recommendation the SEC will review the recommendation and the Wells submission and then decide whether to authorize an enforcement proceeding. |
| | + | SEC Civil Actions |
| | + | If it determines that violations of the securities laws has occurred, the SEC's Division of Enforcement files a complaint with a U.S. District Court and asks the court for a sanction or remedy. Often the SEC asks for an injunction that prohibits any further acts or practices that violate the securities laws. In addition, the SEC often seeks civil monetary penalties, or disgorgement. The court may also bar or suspend an individual from serving as a corporate officer or director. A person who violates the court's order may be found in contempt and be subject to additional fines or imprisonment. |
| | + | Administrative Actions |
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| − | The OTC Markets OTCQB, OTCQX and/or OTC Pink Sheets have NO asset and NO revenue requirements for going public. Numerous small businesses go public first on either the OTC Markets OTCQB or the OTC Pink Sheets, then uplist to higher market or exchange. Moving from private to public company status can be structured numerous ways and to determine which method is the best, a company must consider a variety of factors including the amount of capital needed, resources available, the number of shareholders it has, skills of its management and its financial condition. | + | The SEC can seek a variety of sanctions through the administrative proceeding process. Administrative proceedings differ from civil court actions in that they are heard by an administrative law judge, who is independent of the SEC. The administrative law judge presides over a hearing and considers the evidence presented by the Division staff, as well as any evidence submitted by the subject of the proceeding. Following the hearing the administrative law judge issues an initial decision that includes findings of fact and legal conclusions. The initial decision also contains a recommended sanction. Both the Division staff and the defendant may appeal all or any portion of the initial decision to the SEC. The SEC may affirm the decision of the administrative law judge, reverse the decision, or remand it for additional hearings. SEC administrative sanctions include cease and desist orders, suspension or revocation of broker-dealer and investment advisor registrations, censures, bars from association with the securities industry, civil monetary penalties, and disgorgement. |
| − | | + | Issuers and market participants should seek the advice of a qualified securities attorney prior to responding to an SEC subpoena to ensure compliance with applicable laws and preservation of all rights. |
| − | Some issuers interested in [https://www.securitieslawyer101.com/2015/roadmap-successful-direct-public-offering/ going public] conduct a Direct Public Offering so they can begin trading on the OTC Markets OTC Pink Sheets because of the cost and management time required for Securities and Exchange Commission (SEC) reporting. To list on the OTC Markets OTC Pink Sheets, there are NO audits or periodic SEC reports. For companies with the required shareholder base and unrestricted securities, an OTC Pink Sheet listing is a viable solution. A company can initially begin trading on the OTC Pink Sheets if they want to Go Public quickly and, if they choose, can trade on the OTCQB later at a later time if they qualify with minimal effort. The OTC Pink Sheets provides many companies with an effective going public strategy. A skilled Direct Public Offering [https://www.securitieslawyer101.com/going-public-attorneys/ attorney] can assist the company with a direct listing on the OTC Pink Sheets.
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| − | Going Public Structures
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| − | There are a variety of ways of Going Public each with its unique benefits and risks. One way for a company to Go Public is by conducting an Initial Public Offering with an underwriter. Companies can also go public using a [https://www.securitieslawyer101.com/2015/form-s1-direct-public-offering-going-public-lawyers/ direct public offering] without a underwriter. But these are only two common structures. There are many other methods including the Slow Public Offering and the Form 10 transactions. Both Slow Public Offering and [https://www.securitieslawyer101.com/2014/difference-form-10-form-s-1-registration-statements/ Form 10] transactions can be structured numerous ways. Only a skilled Going Public attorney can assist the company in determining the most time and cost effective method.
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| − | Regardless of the structure, Going Public assists companies in their raising capital endeavors. Many investors seek to become seed shareholders in Going Public transactions. Once public, the company can transition into larger securities offerings.
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| − | We assist companies in the transition from private to public company status and in structuring their subsequent [https://www.securitieslawyer101.com/2015/sec-integration-going-public-attorneys/ securities] offering.
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| − | Regardless of the structure chosen for the going public transaction, the company must meet the requirements of the Financial Industry Regulatory Authority as well as the Securities and Exchange Commission. While the [https://www.securitieslawyer101.com/2014/form-s-1-registration-statement-lawyer/ SEC] oversees the securities registration statement process and SEC reporting, it is FINRA that assigns ticker symbols.
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| − | Going Public on the OTC Markets is ideal for small companies that may not be large enough to attract an underwriter for their IPO and/or those that don't need to raise capital immediately, but instead chose to transition into public company reporting.
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| − | Going Public To Status to Raise Capital
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| − | Public companies offer investors something very few private companies can offer – an exit strategy. Investors in companies seeking to [https://www.securitieslawyer101.com/2015/considerations-foreign-companies-going-public/ go public] have an exit strategy through the public markets upon completion of the company's going public transaction. Private companies may seek to go public because of the many benefits of public company status, such as increased valuation, using public stock as currency to acquire other companies and assets, liquidity, and to reduce the need for expensive venture capital and other financing terms available to private companies.
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| − | There is no question, it is easier to raise capital. Once you become public it gives a company credibility and a trading price to serve as a benchmark to raise capital.
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| − | The securities of public companies are typically valued much higher than their private counterparts. So, what many sophisticated CEO's and CFO's do is Go Public without simultaneously raising capital and thus receive a higher valuation and benchmark stock trading price. Then, as a public company, the company conducts an offering providing their old and new investors with an exit strategy. | + | |
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| − | The Truth about Reverse Mergers and Public Shells
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| − | Private companies are sometimes advised to Go Public using a Reverse Merger with a Public Shell. A Reverse Merger with a Public Shell is risky, costly and more often than not is not an effective means of obtaining legitimate public company status. The most important reason for avoiding a Reverse Merger with a Public Shell is that Public Shell companies are more often than not vehicles for fraud and legitimate investors avoid Reverse Merger issuers like the plague. Despite what shell purveyors may tell you, Public Shell companies do not speed up the process of Going Public. In fact, hundreds of individuals associated with Public Shells and reverse mergers have been the subject of criminal and civil charges, including many lawyers.
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| − | Yes, Your Company Can Go Public
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| − | Many of our clients ask the question, "does my company qualify to go public?" Any company, including foreign companies, can Go Public in the U.S. and access the capital markets. If structured properly, companies do not have to meet asset or income requirements to Go Public. Any company will qualify for public company status if they have the right Going Public team.
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| − | Once deciding to Go Public, companies should select their target going public venue such as on a stock exchange, Over-the-Counter Bulletin Board (OTCBB), OTC Markets OTCQB, OTCQX, OTC Pinks and NASDAQ. Regardless of where you chose to list your company, we can assist with listing.
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| − | Learn More about Becoming a Public Company
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| − | We have published numerous reports, Q & A's and newsletters addressing such topics as the going public process & taking a company public, private placements, accredited crowdfunding, intrastate crowdfunding, public shell company rule changes, investment banking, public shell corporations, corporate finance, corporate hijackings, going public methods after the JOBS Act, stock exchanges listings and reverse mergers and acquisitions.
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| − | Experience & Skill Matters
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| − | When Going Public, you want the confidence of a firm founded by an experienced Securities Attorney with over 15 years of securities law and Going Public transactions.
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| − | We will assist your company in [https://www.securitieslawyer101.com/2015/roadmap-successful-direct-public-offering/ going public] on the NASDAQ, OTC Markets OTCQX, OTCQB, or OTC Pink Sheets. A publicly traded company is a valuable and prestigious entity that comes with benefits as well as responsibilities. We are a leading provider of Going Public services for small and midsized companies. If you would like to learn more about how to Go Public, please contact us at info@securitieslawyer101.com and tell us about your company and its needs.
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| − | Our founder is frequently engaged as counsel to other lawyers for [https://www.securitieslawyer101.com/2015/sec-integration-going-public-attorneys/ securities] law matters including to assist them with clients wishing to go public. Our founder has testified as a witness for the Securities & Exchange Commission and is frequently consulted as an expert by local and national media about going public and securities law.
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| − | For further information, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton, Florida, (561) 416-8956, or by email at info@securitieslawyer101.com. This [https://www.securitieslawyer101.com/2015/sec-integration-going-public-attorneys/ securities] law Q&A is provided as a general informational service to clients and friends of Hamilton & Associates Law Group, P.A. and should not be construed as, and does not constitute legal advice on any specific matter, nor does this create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar results.
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