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SEC Rule Permits Public Offerings of Private Placements.
New Rule Effective on September 23, 2013
On July 10, 2013, the Securities and Exchange Commission adopted amendments to Rule 506 of Regulation D as required by the JOBS Act, which permit sissuers to advertise their private offerings of securities to the public, provided that all purchasers of the securities are accredited investors.
The new regulations became effective on September 23, 2013.
In essence, issuers will be able to make public offerings of its securities without filing any registration statement with the SEC and without any prohibition by any state.
By permitting general advertising, there should be a surge in capital formation for companies which are not in a position to conduct a traditional public offering. Securities issued in these "public offerings of private placements" shall be restricted from transfer in any public market, if one were to develop, until the Rule 144 holding period is met, which generally, is six months.
For a complete copy of the Securities and Exchange Commission Release, go to: https://www.federalregister.gov/articles/2013/07/24/2013-16883/eliminating-the-prohibition-against-general-solicitation-and-general-advertising-in-rule-506-and?utm_content=previous&utm_medium=PrevNext&utm_source=Article
RELATED NEWS:
JOBS ACT Signed Into Law
See the Comment made by Eric I. Michelman, Esq. to the Securities and Exchange Commission regarding the proposed revisions to Rule 506 creating "Public" Private Offerings.
Click Here for all Public Comments
Direct Link to Comment of Eric I. Michelman, Esq.:
Sep. 27, 2012 | Eric I. Michelman, Esq., Law Offices of Eric I. Michelman, Irvine, California |
On April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law. The Act requires the SEC to write rules and issue studies on capital formation, disclosure and registration requirements.
Washington, D.C., Nov. 9, 2011 — The Securities and Exchange Commission today announced that the agency filed a record 735 enforcement actions in the fiscal year that ended September 30. This record number includes many cases involving highly complex products, transactions, and market practices, including those related to the financial crisis as well as insider trading by market professionals.
“We continue to build an unmatched record of holding wrongdoers accountable and returning money to harmed investors,” said SEC Chairman Mary L. Schapiro. “I am proud of our Enforcement Division’s many talented professionals and their efforts that resulted in a broad array of significant enforcement actions, including those related to the financial crisis and its aftermath.”
In 2009 and 2010, the SEC’s Enforcement Division underwent its most significant reorganization since it was established in the early 1970s. In an effort that greatly strengthened its enforcement capacity, the Division flattened its management structure, revamped the way it handles tips and complaints, facilitated the swift prosecution of wrongdoers through a formal program that encourages cooperation from individuals and companies in SEC investigations, and created national specialized units in five priority areas involving complex and higher risk areas of potential securities laws violations, among other things.
In the first complete fiscal year (FY) since these and other reforms took place, markets and investors alike benefited substantially. This is evidenced by the filing of more enforcement actions in FY 2011 than ever filed in a single year in SEC history, and more than $2.8 billion in penalties and disgorgement ordered in FY 2011 SEC enforcement actions.
“The Enforcement Division responded to Chairman Schapiro’s leadership with a record-breaking performance during a period of resource constraints,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This remarkable accomplishment has its roots in the talent, grit, and determination of the staff, as well as their creativity and willingness to consider new tools and approaches to stopping and deterring fraud and misconduct.”
Washington, D.C., Nov. 9, 2011 — The Securities and Exchange Commission today approved new rules of the three major U.S. listing markets that toughen the standards that companies going public through a reverse merger must meet to become listed on those exchanges.
Currently, reverse merger companies like other operating companies can pay to be listed on an exchange, where investors can purchase and sell shares of the company. In some cases, regulators and auditors have greater difficulty obtaining reliable information from reverse merger companies, particularly those based overseas. Reverse mergers permit private companies, including those located outside the U.S., to access U.S. investors and markets by merging with an existing public shell company.
In summer 2010, the SEC launched an initiative to determine whether certain companies with foreign operations – including those that were the product of reverse mergers – were accurately reporting their financial results, and to assess the quality of the audits being done by the auditors of these companies. The SEC and U.S. exchanges have in recent months suspended or halted trading in more than 35 companies based overseas citing a lack of current and accurate information about the firms and their finances. These included a number of companies that were formed by reverse mergers. In June, the SEC issued an investor bulletin warning investors about companies that engage in reverse mergers.
“Placing heightened requirements on reverse merger companies before they can become listed on an exchange will provide greater protections for investors,” said SEC Chairman Mary L. Schapiro.
Under the new rules, Nasdaq, NYSE, and NYSE Amex will impose more stringent listing requirements for companies that become public through a reverse merger. Specifically, the new rules would prohibit a reverse merger company from applying to list until:
Under the rules, the reverse merger company generally would be exempt from these special requirements if it is listing in connection with a substantial firm commitment underwritten public offering, or the reverse merger occurred long ago so that at least four annual reports with audited financial information have been filed with the SEC.
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http://www.sec.gov/news/press/2011/2011-235.htm
On August 12, 2011, the United States Securities and Exchange Commission enacted Regulation 21F under Section 21F of the Securities Exchange Act of 1934, entitled “Securities Whistleblower Incentives and Protection.” Section 21F directs that the Commission pay awards, subject to certain limitations and conditions, to whistleblowers who voluntarily provide the Commission with original information about a violation of the securities laws that leads to the successful enforcement of an action brought by the Commission that results in monetary sanctions exceeding $1,000,000.
December 6, 2007
In the pursuit of making restricted securities more liquid, and reducing the cost of raising capital without compromising investor protection, the U.S. Securities and Exchange adopted amendments to Rule 144 to reduce the holding period of restricted securities of reporting companies held by non-affiliates from 1 year to 6 months.
January 15, 2008
The United States Supreme Court ruled today in a high profile opinion that victims of securities fraud may not bring a lawsuit against alleged perpetrators of the fraud who may have assisted in the fraud but who did not make statements or representations upon which the investors relied. These types of alleged perpetrators are considered secondary actors who aid and abet. While the Securities and Exchange Commission or other governmental agencies may pursue remedies or sanctions against these secondary actors, the Court ruled that private litigants can not. The ruling allows non-issuers and non-participants in securities related activities to be insulated from exposure, although assisting perpetrators in wrongdoing.
REVISIONS TO RULES 144 AND 145
On December 6, 2007, the SEC adopted amendments to Rules 144, 145, 190, 701, and 903 of the Securities Act of 1933 as well as Form 144. Rule 144 creates a safe harbor for the sale of securities under the exemption set forth in Section 4(1) of the Securities Act. The SEC is shortening the holding period requirement under Rule 144 for "restricted securities" of issuers that are subject to the reporting requirements of the Securities Exchange Act of 1934 to six months. Restricted securities of issuers that are not subject to the Exchange Act reporting requirements will continue to be subject to a one-year holding period prior to any public resale. The amendments also substantially reduce the restrictions applicable to the resale of securities by non-affiliates. In addition, the amendments simplify the Preliminary Note to Rule 144, amend the manner of sale requirements and eliminate them with respect to debt securities, amend the volume limitations for debt securities, increase the Form 144 filing thresholds, and codify several staff interpretive positions that relate to Rule 144. Finally, the SEC eliminated the presumptive underwriter provision in Securities Act Rule 145, except for transactions involving a shell company, and revised the resale requirements in Rule 145(d). It is the SEC’s intent that the amendments will increase the liquidity of privately sold securities and decrease the cost of capital for all issuers without compromising investor protection.
Release No. 33-8869; December 6, 2007. Effective Date: February 15, 2008. The revised holding periods and other amendments that the SEC adopted are applicable to securities acquired before or after February 15, 2008.
EXEMPTION OF COMPENSATORY EMPLOYEE STOCK OPTIONS FROM REGISTRATION UNDER SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
On December 3, 2007, the SEC adopted a final rule that provides two exemptions from the registration requirements of Exchange Act Section 12(g) for compensatory employee stock options. The first exemption will be available to issuers that are not required to file periodic reports under the Exchange Act. The second exemption will be available to issuers that are required to file those reports because they have registered under Exchange Act Section 12 a class of security or are required to file reports pursuant to Exchange Act Section 15(d). The exemptions will apply only to the issuer’s compensatory employee stock options and will not extend to the class of securities underlying these options.
Release No. 34-56887; International Series Release No. 1305; December 3, 2007. Effective Date: December 7, 2007
SHAREHOLDER PROPOSALS RELATING TO THE ELECTION OF DIRECTORS
On December 6, 2007, the SEC adopted final rules to codify the meaning of Rule 14a-8(i)(8) under the Securities Exchange Act of 1934. Rule 14a-8 provides shareholders with an opportunity to place certain proposals in a company’s proxy materials for a vote at an annual or special meeting of shareholders. Subsection (i)(8) of the rule permits exclusion of certain shareholder proposals related to the election of directors. The SEC adopted the amendment to Rule 14a-8(i)(8) to provide certainty regarding the meaning of this provision in response to the court decision in AFSCME v. AIG, No. 05-2825-cv (2d Cir., Sept. 5, 2006).
Release No. 34-56914; IC-28075; December 6, 2007; Effective Date: January 10, 2008.
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Law Office of Eric I. Michelman
2301 Dupont Dr.
Suite 530
Irvine, CA 92612
ph: 949-553-1800
fax: 949-553-1880
ericmich