User:Wayneww

Jump to: navigation, search
Line 1: Line 1:
−
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.
+
Using Regulation A When Going Public. On March 25, 2015, the Securities and Exchange Commission (the "SEC") adopted amendments to [https://www.securitieslawyer101.com/2015/regulation-a-going-public-attorneys/ Regulation A] pursuant to the mandate of Section 401(a) of the JOBS Act.  The amended rules known as Amended A+ were adopted to facilitate [https://www.securitieslawyer101.com/jobs-act-attorneys/ capital]-raising by smaller companies. Both public and private companies can use Regulation A+ but the exemption cannot be used by companies that are subject to the SEC's reporting requirements. Regulation A+ may prove to be a popular exemption for private companies in going public transactions where the issuer seeks to ease into the public company reporting process. Issuers should also remember that Regulation A+ imposes a ban against certain "bad actors" and expanded Regulation D's disqualification criteria.
−
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
+
  
−
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.
+
Regulation A+ provides a middle ground between private and public company status by allowing companies to transition between being private and going public. Regulation A+ created two disting offering exemptions, Tier 1 and Tier 2.
−
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.
+
 
 +
Tier 1 offerings allow issuers to raise up to $20 million in a rolling 12-month period, of which no more than $6 million may be sold by affiliated shareholders.
 +
 
 +
Tier 2 offerings allow issuers to raise up to $50 million in a rolling 12-month period, of which no more than $15 million may be sold by affiliated shareholders.
 +
 
 +
One of the most significant changes from Regulation A+ for going public transactions is that issuers can use Regulation A+'s short form registration statement, to register shares on behalf of selling shareholders. This allows the issuer to more easily locate a sponsoring [https://www.securitieslawyer101.com/2014/what-is-sponsoring-market-maker/ market maker] to file its Form 211 and meet FINRA's shareholder requirements for a ticker symbol assignment.  Regulation A+ offering may become a popular way of conducting a direct public offering.
 +
 
 +
In regulation A+ offerings, selling stockholders can register to register up to 30% of the particular offering. After this 12-month period, secondary sales by non-affiliates are not limited except by the relevant Tier's offering cap.
 +
 
 +
An issuer in a Regulation A+ Tier 2 offering may also take advantage of reduced thresholds for the registration statement requirements of Section 12(g) of the Securities Exchange Act, if it engages an SEC registered transfer agent, remains subject to and current in its Tier 2 periodic reporting requirements with the SEC, and has a public float of less than $75 million as of its most recent semiannual period. For an issuer without a public float, the thresholds are reduced to annual revenues of less than $50 million as of its most recent fiscal year.
 +
 
 +
Issuers that exceed Regulation A+'s public float or revenue thresholds and Section 12(g)'s 500 holders threshold are allowed a two-year transition period before they are required to register a class of securities under Section 12(g).  These increased thresholds provide more flexibility for some issuers in going public transactions allowing them to register a class of securities on [https://www.securitieslawyer101.com/2014/form-8-a-registration-statements/ Form 8-A] after their transaction is complete.
 +
 
 +
Issuers using Regulation A+ for a Tier 2 offering may become fully reporting with the SEC by filing the short [https://www.securitieslawyer101.com/2014/form-8-a-registration-statements/ Form 8-A] registration statement simultaneously with the clearance of its [https://www.securitieslawyer101.com/2015/regulation-a-going-public-attorneys/ Regulation A] offering statement so long as it includes disclosures comparable to  Part 1 of [https://www.securitieslawyer101.com/forms-1 Form S-1] and includes selected financial information requirements statements that are audited in accordance with an accounting firm that is registered with, the PCAOB. Thereafter, the issuer will be subject to the SEC's Exchange Act reporting obligations.
 +
 
 +
Companies not opting to become [https://www.securitieslawyer101.com/2015/sec-periodic-reporting-going-public-lawyers/ SEC reporting] companies will be subject to the SEC's ongoing disclosure requirements, including filing annual, semiannual and current reports with the SEC through the EDGAR system.  Regulation A+'s ongoing reporting requirements are not as comprehensive as those imposed on [https://www.securitieslawyer101.com/2015/sec-periodic-reporting-going-public-lawyers/ SEC reporting] companies.  One primary benefit of Tier 2 offerings is that they are preempted from state Blue Sky requirements.
 +
 
 +
Although Tier 1 of Regulation A+ significantly increased the offering cap from $5 million to $20 million, the exemption has significant limitations.  The most significant being that state "Blue Sky" laws are not preempted for Tier 1 offerings. As such, Tier 1 offerings will be subject to both federal and state securities registration and qualification requirements. While companies conducting Tier 1 offerings are save costs by not being required to provide audited financial statements, Tier 1 issuers will incur the cost of state blue sky compliance.
 +
 
 +
This securities law blog 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.  For more information about direct public offerings and going public with Regulation A+, please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Revision as of 06:39, 13 April 2015

Retrieved from "https://www.crankshaftcoalition.com/wiki/index.php?title=User:Wayneww&oldid=835361"
Personal tools
Namespaces
Variants
Actions
Navigation
Categories
Toolbox
 
Terms of Use
Copyright
Privacy Policy