Brenda Hamilton

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    • Member Type(s): Expert
      Communications Professional
      Media - Freelancer
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    • Title:Attorney, Legal Writer
    • Organization:Hamilton and Associates Law Group
    • Area of Expertise:Securities Attorney, SEC Registration
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    What Are the SEC Reporting Requiements After My Form S-1 ls Effective?

    Tuesday, July 10, 2018, 10:46 AM [General]
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    www.securitieslawyer101.com/2018/form-s-...

    Once the SEC staff declares your company’s Securities Act registration statement on Form S-1 effective, the company becomes subject to the SEC’s reporting requirements under the Securities Exchange Act of 1934.  These rules require your company to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K with the SEC on an ongoing basis.

    If your company qualifies as a “smaller reporting company” or an “emerging growth company,” it will be eligible to follow scaled SEC reporting requirements for its reports.

    Once a company begins compliance with SEC reporting requirements, it will be required to continue reporting unless it satisfies one of the following “thresholds,” in which case its filing obligations are suspended:

    Form S-1 Filing Requirements, Filing Form S-1, S-1 Offering, S-1

    Tuesday, July 10, 2018, 10:45 AM [General]
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    Going public  using Form S-1 or Form 1-A allows issuers to chose from a variety of offering structures. Private companies seeking to raise capital often file a registration statement on SEC Form S-1 or Form 1-A of Regulation in connection with their going public transaction. Once a Form S-1 is effective, the company becomes subject to the SEC reporting requirements. The most commonly used registration statement form is Form S-1.

    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 in registration statements filed with the SEC prior to making the decision to go public.

    A Form S-1 registration statement on Form S-1 has two principal parts which require line item 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.

    Regulation A+ Is Amended – Securities & Going Public Attorneys

    Monday, July 9, 2018, 2:14 PM [General]
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    Three years after becoming effective, Regulation A+ is being expanded. Last month, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”) was signed into law and included notable legislation expanding Regulation A+. The Act directs the Securities and Exchange Commission (“SEC”) to amend Regulation A+ to allow companies subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 to use the exemption. The Act encourages capital formation by expanding the scope of eligible issuers who can use the Regulation A+ exemption from registration to fund their businesses.

    In addition, the Act also directs the SEC to deem that the periodic reports required under Section 13 for reporting companies satisfy the SEC reporting requirements for Tier 2 offerings under Regulation A+.

    FINRA Enforcement of Non-Members and Penny Stock Issuers

    Monday, July 9, 2018, 2:12 PM [General]
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    FINRA & Penny Stocks

    When the subject of penny stock enforcement actions arises, most people think first of the Securities and Exchange Commission (SEC), or erroneously, of OTC Markets Group(OTCM). The SEC has ultimate authority to deal with violations of the securities laws.  It has jurisdiction of penny stocks that are SEC registrants that trade over-the-counter, and of non-registrant Pinks and Greys as well.  It does not, however, subject non-registrants to any kind of reporting regime, and many abuses go unnoticed by it.  It’s empowered to impose 10 day trading suspensions to protect potential investors from falling for blatant scams.  Generally speaking, OTC issuers may be suspended for three reasons:  suspected fraud, shell status that makes them vulnerable to corporate hijackers, and delinquent filings.  Needless to say, only registrants can be suspended for delinquency; when they are, the regulator initiates a simultaneous action to revoke registration.  When registration is revoked, the stock’s ticker is killed, and the company effectively becomes a private entity.  If it wishes to trade again, it must file an initial registration statement to become a registrant once more, and in the future keep current with its required periodic filings.

    SEC ALJ Appointments Are Unconstitutional

    Monday, July 9, 2018, 2:10 PM [General]
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    www.securitieslawyer101.com/2018/sec-alj...

    On June 21, 2018 The Supreme Court handed down a ruling in Lucia et al. v. Securities and Exchange Commission; the Commission lost, 7-2.  At issue was whether the SEC’s method of appointing administrative law judges (ALJs) was unconstitutional because it was not consistent with the Appointments Clause of the Constitution.  Lucia and several other similar cases involving SEC ALJ’s have been making their way through the courts for the past five years or so.  In early 2017, we examined the situation as it stood at that time.

    Regulation A+ White Paper - 2018

    Saturday, July 7, 2018, 5:22 PM [General]
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    Overview of the Regulation A+ Exemption

    On March 25, 2015, the Securities and Exchange Commission (the “SEC”) adopted final rules to implement Section 401 of the Jumpstart Our Business Startups (JOBS) Act by expanding Regulation A into two tiers.

    Tier 1 of Regulation A+ provides an exemption for securities offerings of up to $20 million in a 12-month period while Tier 2 provides an exemption for securities offerings of up to $50 million in a 12-month period. An issuer of $20 million or less of securities in its offering can elect to proceed under either Tier 1 or Tier 2.

    Tier 1 and Tier 2 of Regulation A+ includes some of the existing provisions of Regulation A concerning issuer eligibility, offering circular disclosures, testing the waters, and “bad actor” disqualification. Regulation A+ modernizes and streamlines the Regulation A securities offering filing process. Regulation A+ includes some characteristics of registered offerings and provides flexibility for issuers in the going public and securities offering process. The exemption also provides for an ongoing reporting regime for certain issuers increasing transparency for investors.

    Under Regulation A+, Tier 2 issuers are required to include audited financial statements in their offering documents and to file annual, semiannual, and current reports with the SEC on an ongoing basis. With the exception of securities that will be listed on a national securities exchange upon qualification, purchasers in Tier 2 offerings must either be accredited investors, as defined in Rule 501(a) of Regulation D, or be subject to certain limitations on their investment. The requirements for Tier 1 and Tier 2 offerings are described more fully below.

    Since its effectiveness, Regulation A+ has gained notable market acceptance. Companies using the Regulation A+ exemption have listed on the New York Stock Exchange (NYSE) and NASDAQ stock markets as well as the OTC Markets.

    2. Eligible Issuers and Securities Under Regulation A+

    Regulation A+ is available only to companies organized in and with their principal place of business in the United States or Canada. Regulation A+ is not available to:

    • companies subject to the ongoing reporting requirements of Section 13 or 15(d) of the Exchange Act;
    • companies registered or required to be registered under the Investment Company Act of 1940 and BDCs;
    • development stage companies that have no specific business plan or purpose or have indicated that their business plan is to engage in a merger or acquisition with an unidentified company or companies (often referred to as, “blank check companies”);
    • issuers of fractional undivided interests in oil or gas rights, or similar interests in other mineral rights;
    • issuers that are required to, but that have not, filed with the SEC the ongoing reports required by the rules under Regulation A during the two years immediately preceding the filing of a new offering statement (or for such shorter period that the issuer was required to file such reports);
    • issuers that are or have been subject to an order by the SEC denying, suspending, or revoking the registration of a class of securities pursuant to Section 12(j) of the Exchange Act that was entered within five years before the filing of the offering statement; and
    • issuers subject to “bad actor” disqualification under Rule 262.

    Regulation A+ limits the type of securities that can be issued to the specifically enumerated list in Section 3(b)(3) of the Securities Act, which includes warrants and convertible equity and debt securities, among other equity and debt securities.  Asset-backed securities are ineligible under Regulation A+.

    3. Offering Limitations and Secondary Sales Under Regulation A+

    Issuers can conduct a Regulation A+ offering using either Tier 1 or Tier 2. Tier 1 is available for offerings of up to $20 million in a 12-month period, including no more than $6 million on behalf of selling securityholders that are affiliates of the issuer.

    Tier 2 is available for offerings of up to $50 million in a 12-month period, including no more than $15 million on behalf of selling securityholders that are affiliates of the issuer. Additionally, sales by all selling securityholders in a Regulation A+ offering are limited to no more than 30% of the aggregate offering price in an issuer’s first Regulation A+ offering and any subsequent Regulation A+ offerings in the following 12-month period.

    4. Investment Limitations

    Regulation A+ limits the amount of securities that an investor who is not an accredited investor under Rule 501(a) of Regulation D can purchase in a Tier 2 offering to no more than: (a) 10% of the greater of annual income or net worth (for natural persons); or (b) 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). This limit does not, however, apply to purchases of securities that will be listed on a national securities exchange upon qualification of the Regulation A+ Offering.

    5. Integration and Regulation A+ Offerings

    The integration doctrine provides an analytical framework for determining whether multiple securities offerings should be treated as the same offering. This helps to determine whether registration under Section 5 of the Securities Act is required or an exemption is available for the entire offering.

    Generally, the determination as to whether particular securities offerings should be integrated into a single offering is based upon the specific facts and circumstances.

    Regulation A+ provides that offerings conducted pursuant to Regulation A+ will not be integrated with:

    • prior offers or sales of securities; or
    • subsequent offers or sales of securities that are:
      • registered under the Securities Act, except as provided in Rule 255(c);
      • made pursuant to Rule 701 under the Securities Act;
      • made pursuant to an employee benefit plan;
      • made pursuant to Regulation S;
      • made pursuant to Section 4(a)(6) of the Securities Act; or
      • made more than six months after completion of the Regulation A+ offering.

    6. Treatment of Regulation A+ under Section 12(g)

    Section 12(g) of the Securities Exchange Act of 1934 requires, among other things, that an issuer with total assets exceeding $10,000,000 and a class of equity securities held of record by either 2,000 persons, or 500 persons who are not accredited investors, register such class of securities with the SEC. Regulation A+, however, conditionally exempts securities issued in a Tier 2 offering from the mandatory registration provisions of Section 12(g) for so long as the issuer remains subject to and is current in (as of its fiscal year end), its Regulation A+ periodic reporting obligations.

    In order for the conditional exemption to apply, issuers in Tier 2 offerings are required to engage the services of a transfer agent registered with the SEC pursuant to Section 17A of the Exchange Act. The final rules also provide that the conditional exemption from Section 12(g) is only available to companies that meet size-based requirements similar to those contained in the “smaller reporting company” definition under Securities Act and Exchange Act rules. An issuer that exceeds the size-based requirements is granted a two-year transition period before it would be required to register its class of securities pursuant to Section 12(g), provided it timely files all ongoing reports due during such period.

    7. The Form 1-A Regulation A+ Offering Statement

    All issuers that conduct offerings pursuant to Regulation A+ must electronically file an offering statement on Form 1-A on the SEC’s Electronic Data Gathering, Analysis and Retrieval system (EDGAR).

    The Form 1-A Offering Statement consists of three parts:

    • Part I: an eXtensible Markup Language (XML) based fillable form;
    • Part II: a text file attachment containing the body of the disclosure document and financial statements; and
    • Part III: text file attachments, containing the signatures, exhibits index, and the exhibits to the offering statement.

    A. Part I of Form 1-A

    Part I of Form 1-A requires certain basic information about the issuer and the proposed offering. The notification in Part I of Form 1-A requires the following:

    • Item 1. Issuer Information. Item 1 requires information about the issuer’s identity, industry, number of employees, financial statements and capital structure, as well as contact information.
    • Item 2. Issuer Eligibility. Item 2 requires the issuer to certify that it meets various issuer eligibility criteria.
    • Item 3. Application of Rule 262. Item 3 requires the issuer to certify that no disqualifying events have occurred and to indicate whether related disclosure will be included in the offering circular.
    • Item 4. Summary Information Regarding the Offering and other Current or Proposed Offerings. Item 4 contains indicator boxes or buttons and text boxes eliciting information about the offering.
    • Item 5. Jurisdictions in Which Securities are to be Offered. Item 5 requires information about the jurisdiction in which the securities will be offered.
    • Item 6. Unregistered Securities Issued or Sold Within One Year. Item 6 requires disclosure about unregistered issuances or sales of securities within the last year.

    B. Part II of Form 1-A

    Part II of Form 1-A contains the disclosure document that the issuer will provide in connection with its Regulation A+ offering. This section is also referred to as the “offering circular.” Issuers are required to provide financial disclosure in Part II that follows the requirements of Part F/S of Form 1-A, while they have the option to prepare narrative disclosure that follows one of two different formats.

    i. Offering Circular Format in Regulation A+ Offerings

    The Offering Circular requires scaled down disclosure in comparison to that required by issuers in registered offerings such as Form S-1. The Offering Circular format is meant to simplify the process by which an issuer prepares its narrative disclosure by limiting the need for issuers to look outside the form for disclosure guidance.

    ii. Part I of Form S-11 Formats in Regulation A+ Offerings

    Part I of Form S-1 and Part I of Form S-11 contain the narrative disclosure requirements for registration statements filed by issuers in registered offerings. In addition to the Offering Circular format, issuers may provide narrative disclosure in Part II of Form 1-A that follows the requirements of Part I of Form S-1 or, in certain circumstances, Part I of Form S-11. While Form S-1 is generally available for all types of issuers and transactions, Form S-11 is only available for offerings of securities issued by (i) real estate investment trusts, or (ii) issuers whose business is primarily that of acquiring and holding for investment real estate or interests in real estate or interests in other issuers whose business is primarily that of acquiring and holding real estate or interest in real estate for investment. Part I of both Form S-1 and Form S-11 generally describes narrative disclosure requirements by cross-reference to the item requirements of Regulation S-K.

    iii. Financial Statements in Regulation A+ Offerings

    Part II of Form 1-A requires issuers to provide financial statements that comply with the requirements of Part F/S. Part F/S requires issuers in both Tier 1 and Tier 2 offerings to file balance sheets and related financial statements for the two previous fiscal year ends (or for such shorter time that they have been in existence). For Tier 1 offerings, issuers are not required to provide audited financial statements unless the issuer has already prepared them for other purposes. Issuers in Tier 2 offerings are required to include financial statements in their offering circulars that are audited in accordance with either the auditing standards of the American Institute of Certified Public Accountants (AICPA) (referred to as U.S. Generally Accepted Auditing Standards or GAAS) or the standards of the Public Company Accounting Oversight Board (PCAOB). Part F/S requires issuers in both Tier 1 and Tier 2 offerings to include financial statements in Form 1-A that are dated not more than nine months before the date of non-public submission, filing, or qualification, with the most recent annual or interim balance sheet not older than nine months. If interim financial statements are required, they must cover a period of at least six months.

    C. Part III of Regulation A+ Form 1-A

    Part III of Form 1-A requires issuers to file certain documents as exhibits to the offering statement. Issuers are required to file certain exhibits with the offering statement including its underwriting agreement; charter and by-laws; instrument defining the rights of securityholders; subscription agreement; voting trust agreement; material contracts; plan of acquisition, reorganization, arrangement, liquidation, or succession; escrow

    agreements; consents; opinion regarding legality; “testing the waters” materials; appointment of agent for service of process; materials related to non-public submissions; and any additional exhibits the issuer may wish to file.

    D. Non-Public Submission of Draft Offering Statements in Regulation A+ Offerings

    Issuers whose securities have not been previously sold pursuant to a qualified offering statement under Regulation A+ or an effective registration statement under the Securities Act such as Form S-1 may submit a draft offering statement for non-public review by the SEC.

    Consistent with the treatment of draft registration statements in registered offerings, a non-publicly submitted offering statement must be substantially complete upon submission in order for staff of the SEC’s Division of Corporation Finance to begin its review. All non-public submissions of draft offering statements must be submitted electronically via EDGAR, and the initial non-public submission, all non-public amendments thereto, and correspondence submitted by or on behalf of the issuer to the SEC staff regarding such submissions must be publicly filed and available on EDGAR not less than 21 calendar days before qualification of the offering statement.

    E. Qualification of Regulation A+ Offerings

    Issuers may commence selling securities pursuant to Regulation A+ once the offering statement has been qualified by the SEC.  The SEC’s Division of Corporation Finance has delegated authority to declare offering statements qualified by a “notice of qualification,” which is analogous to a notice of effectiveness in registered offerings on Form S-1.

    8. Solicitation of Interest Materials in Regulation A+ Offerings

    Issuers are permitted to “test the waters” with, or solicit interest in a potential Regulation A+ offering from, the general public either before or after the filing of the offering statement, provided that all solicitation materials include the legends required by the final rules and, after publicly filing the offering statement, are preceded or accompanied by a preliminary offering circular or contain a notice informing potential investors where and how the most current preliminary offering circular can be obtained.

    9.  Ongoing Reporting in Regulation A+ Offerings

    An Issuer in a Tier 1 offering must provide information about sales in its offering and to update certain issuer information by electronically filing a Form 1-Z exit report with the SEC no later than 30 calendar days after termination or completion of the offering. An Issuer in a Tier 2 offering must electronically file annual and semiannual reports, as well as current reports and, in certain circumstances, an exit report on Form 1-Z, on EDGAR.

    A. Annual Report on Form 1-K (Tier 2 Issuers in Regulation A+ Offerings Only)

    Issuers in Tier 2 offerings are required to electronically file annual reports with the SEC on the EDGAR database on Form 1-K within 120 calendar days after the issuer’s fiscal year end.

    Regulation A+ Form 1-K requires issuers to update certain information previously filed with the SEC pursuant to Part I of Form 1-A, as well as to provide disclosure relating to the issuer’s business operations for the preceding three fiscal years (or, if in existence for less than three years, since inception), related party transactions, beneficial ownership of the issuer’s securities, executive officers and directors, including certain executive compensation information, management’s discussion and analysis (MD&A) of the issuer’s liquidity, capital resources, and results of operations, and two years of audited financial statements.

    B. Semiannual Report on Form 1-SA (Tier 2 Issuers in Regulation A+ Offerings Only)

    Issuers in Tier 2 offerings are required to electronically file semiannual reports with the SEC on EDGAR on Form 1-SA within 90 calendar days after the end of the first six months of the issuer’s fiscal year. Form 1-SA requires issuers to provide disclosure primarily relating to the issuer’s interim financial statements and MD&A.

    C. Current Report on Form 1-U (Tier 2 Regulation A+ Issuers Only)

    Issuers in Tier 2 offerings are required to electronically file current reports with the SEC on EDGAR on Form 1-U within four business days of the occurrence of one (or more) of the following events:

    • Fundamental changes;
    • Bankruptcy or receivership;
    • Material modification to the rights of securityholders;
    • Changes in the issuer’s certifying accountant;
    • Non-reliance on previous financial statements or a related audit report or completed interim review;
    • Changes in control of the issuer;
    • Departure of the principal executive officer, principal financial officer, or principal accounting officer; and
    • Unregistered sales of 10% or more of outstanding equity securities.

    D. Exit Report on Form 1-Z (Tier 1 and Tier 2 Regulation A+ Issuers)

    Issuers in Tier 1 offerings are required to electronically file with the SEC on EDGAR certain summary information on terminated or completed Regulation A+ offerings in an exit report on Part I of Form 1-Z not later than 30 calendar days after termination or completion of an offering. Issuers conducting Tier 2 offerings are required to provide this information in Part I of Form 1-Z, if such information was not previously provided on Form 1-K as part of their annual report, at the time of filing information in response to Part II of Form 1-Z.

    Issuers in Tier 2 offerings that have filed all ongoing reports required by Regulation A+ for the shorter of (1) the period since the issuer became subject to such reporting obligation or (2) its most recent three fiscal years and the portion of the current year preceding the date of filing Form 1-Z may immediately suspend their ongoing reporting obligations under Regulation A+ at any time after completing reporting for the fiscal year in which the offering statement was qualified, if the securities of each class to which the offering statement relates are held of record by fewer than 300 persons and offers or sales made in reliance on a qualified Tier 2 offering statement are not ongoing.

    In these circumstances, an issuer’s obligation to continue to file ongoing reports in a Tier 2 offering under Regulation A+ would be suspended immediately upon the electronic filing of a notice with the SEC on Part II of Form 1-Z.

    10. Bad Actor Disqualification in Regulation A+ Offerings

    The “bad actor” disqualification provisions contained in Rule 262 of Regulation A+ disqualify securities offerings from reliance on Regulation A+ if the issuer or other relevant persons (such as underwriters, placement agents, and the directors, officers and significant shareholders of the issuer) (collectively, “covered persons”) have experienced a disqualifying event, such as being convicted of, or subject to court or administrative sanctions for, securities fraud or other violations of specified laws.

    A. Covered Persons – Disqualification in Regulation A+ Offerings

    Understanding the categories of persons that are covered by Rule 262 is important because issuers are required to conduct a factual inquiry to determine whether any covered person has had a disqualifying event, and the existence of such an event will generally disqualify the offering from reliance on Regulation A+.

    “Covered persons” include:

    • the issuer, including its predecessors and affiliated issuers
    • directors, general partners, and managing members of the issuer
    • executive officers of the issuer, and other officers of the issuers that participate in the offering
    • 20 percent beneficial owners of the issuer, calculated on the basis of voting power
    • promoters connected with the issuer in any capacity
    • persons compensated for soliciting investors, including their directors, executive officers or other officers participating in the offerings, general partners and managing members

    B. Disqualifying Events in Regulation A+ Offerings

    Under the final rule, disqualifying events include:

    • Certain criminal convictions
    • Certain court injunctions and restraining orders
    • Certain final orders of certain state and federal regulators
    • Certain SEC disciplinary orders
    • Certain SEC cease-and-desist orders
    • Suspension or expulsion from membership in a self-regulatory organization (SRO), such as FINRA, or from association with an SRO member
    • SEC stop orders and orders suspending the Regulation A+ exemption
    • S. Postal Service false representation orders

    Many disqualifying events include a look-back period (for example, a court injunction that was issued within the last five years or a regulatory order that was issued within the last ten years). The look-back period is measured from the date of the disqualifying event—for example, the issuance of the injunction or regulatory order and not the date of the underlying conduct that led to the disqualifying event—to the date of the filing of an offering statement.

    C. Reasonable Care Exception to Regulation A+ Disqualification Rules

    Regulation A+ provides an exception from disqualification when the issuer is able to demonstrate that it did not know and, in the exercise of reasonable care, could not have known that a covered person with a disqualifying event participated in the offering.

    The steps an issuer should take to exercise reasonable care will vary according to particular facts and circumstances. A note to the rule states that an issuer will not be able to establish that it has exercised reasonable care unless it has made, in light of the circumstances, factual inquiry into whether any disqualification exists.

    D. Other Exceptions to Regulation A+ Disqualification

    Disqualification will not arise if, before the filing of the offering statement, the court or regulatory authority that entered the relevant order, judgment or decree advises in writing—whether in the relevant judgment, order or decree or separately to the SEC or its staff—that disqualification under Regulation A+ should not arise as a consequence of such order, judgment or decree.

    E. Waivers for Regulation A+ Disqualification

    i. Waiver for good cause shown

    The final rule provides for the ability to seek waivers from disqualification by the SEC upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied. The SEC has identified several circumstances that could, depending upon the specific facts, be relevant to the evaluation of a waiver request for good cause shown. These can be viewed at:

    www.sec.gov/divisions/corpfin/guidance/d....

    11. State Securities Laws & Regulation A+ Offerings A. Regulation A+ Tier 1 Offerings

    In addition to qualifying a Regulation A+ offering with the SEC, issuers in Tier 1 offerings must register or qualify their offering in any state in which they seek to offer or sell securities pursuant to Regulation A+.

    Issuers wishing to obtain information on state-specific registration requirements should contact state securities regulators in the states in which they intend to offer or sell securities for further guidance on compliance with state law requirements. Issuers may also obtain useful information on state securities law registration and qualification requirements, including the option to have Tier 1 offerings that will be conducted in multiple states reviewed pursuant to a coordinated state review program, by visiting the website of the North American Securities Administrators Association (NASAA) at www.nasaa.org .

    B. Regulation A+ Tier 2 Offerings

    While issuers in Tier 2 offerings are required to qualify offerings with the SEC before sales can be made pursuant to Regulation A+, they are not required to register or qualify their offerings with state securities regulators, Tier 2 offerings by such issuers, however, remain subject to state law enforcement and antifraud authority.

    Issuers in Regulation A+ Tier 2 offerings may be subject to filing fees in the states in which they intend to offer or sell securities and be required to file with such states any materials that the issuer has filed with the SEC as part of the offering.

    The failure to file, or pay filing fees regarding, any such materials may cause state securities regulators to suspend the offer or sale of securities within their jurisdiction. Issuers should contact state securities regulators in the states in which they intend to offer or sell securities for further guidance on compliance with state law requirements.

    For more information about going public and Regulation A+, securities law or our other services please contact Hamilton & Associates Law Group, P.A. 01 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 or by email at info@securitieslawyer101.com. &... This securities law blog post 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. Please note that the prior results discussed herein do not guarantee similar outcomes. Hamilton & Associates Law Group, P.A provides ongoing corporate and securities counsel to private companies and public companies listed and publicly traded on the NASDAQ Stock Market, the NYSE MKT or over-the-counter market, such as the OTC Pink, OTCQB and OTCQX. For two decades the Firm has served private and public companies and other market participants in corporate law matters, securities law and going public matters. The firm’s practice areas include, but are not limited to, forensic law and investigations, SEC investigations and SEC defense, corporate law matters, compliance with the Securities Act of 1933 securities offer and sale and registration statement requirements, including Regulation ARegulation A+ , private placement offerings under Regulation D including Rule 504 and Rule 506 and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, Form F-1,  Form S-8 and Form S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including Form 8-A and Form 10 registration statements,  reporting on Forms 10-QForm 10-K and Form 8-KForm 6-K and SEC Schedule 14CInformation and SEC Schedule 14A Proxy Statements; Regulation A / Regulation A+ offerings; all forms of going public transactions; mergers and acquisitions; applications to and compliance with the corporate governance requirements of national securities exchanges including NASDAQ and the New York Stock Exchange (NYSE) and foreign listings; crowdfunding; corporate; and general contract and business transactions. The firm provides preparation of corporate documents and other transaction documents such as share purchase and exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The firm prepares the necessary documentation and assists in completing the requirements of federal and state securities laws such as SEC, FINRA and DTC for Rule 15c2-11.

     

    What is a NYSE Designated Market Maker?

    Wednesday, April 26, 2017, 4:21 PM [General]
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    One of the most important decisions for a company going public is to choose the right market for listing the company’s shares. This is true for initial public and direct public offerings. The New York Stock Exchange (“NYSE”) provides the opportunity to maximize liquidity, encourage market activity, and trade securities efficiently.

    The NYSE and NYSE MKT offer innovative, high-speed technology enhanced by the commitment of capital from traders who are accountable to the company. This market structure provides price discovery at the open, the close, and during periods of volatility, including periods of market dislocation. For NYSE companies, Designated Market Makers (“DMMs”) add significant liquidity to the market, which is further enhanced by supplemental liquidity providers (“SLPs”) and floor brokers equipped with new, algorithmic trading tools. The judgement of the DMM and commitment of capital at the point of sale distinguishes the NYSE from other markets.

    Designated market Makers – DMMs

    Designated Market Makers are at the core of the NYSE and NYSE MKT markets. They act as a buffer against market volatility, increase liquidity, and fulfill an obligation to maintain a fair and orderly market. The NYSE provides both a physical auction convened by DMMs and a completely automated auction. NYSE automated auction includes algorithmic quotes from Designated Market Makers and other market makers.

    DMMs are among the most involved trading firms on the NYSE. The Designated Market Makers adhere to strict requirements to maintain an orderly market, quote at the National Best Bid and Offer (“NBBO”) and facilitate price discovery during openings, closings, and imbalances.

    For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 or by email at info@securitieslawyer101.com. This securities law blog post 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. Please note that the prior results discussed herein do not guarantee similar outcomes.

    Hamilton & Associates | Securities Lawyers
    Brenda Hamilton, Securities Attorney
    101 Plaza Real South, Suite 202 North
    Boca Raton, Florida 33432
    Telephone: (561) 416-8956
    Facsimile: (561) 416-2855
    www.SecuritiesLawyer101.com

    The Role of The Going Public Attorney – Securities Lawyer

    Thursday, December 8, 2016, 2:13 PM [General]
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    The role of the going public attorney is one of the most important in the going public process.  The going public attorneys at Hamilton & Associates Law Group have provided private companies with their going public solutions for over 15 years.

    A skilled OTC Markets going public attorney 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 as going public attorneys 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.  Hiring the right going public attorney is critical to ensure the most cost and time effective going public solution for your private company to become publicly traded and ensure DTC eligiblity.

    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.

    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.  The issuers going public attorney and auditor play significant roles in drafting these disclosures.  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 attorney can draft the disclosures for the Form S-1 and assist management in compiling information required for its auditor.

    Financial Statement Requirements l Going Public Attorneys

    Financial statements included in a registration statement must be audited by a firm that is a member of the Public Company Accounting Oversight Board (“PCAOB”).  SEC rules allow smaller reporting companies to provide less financial information than larger reporting issuers.

    Rule 405 defines a smaller reporting company as a company that: (i) had a public float of less than $75 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate number of shares of its common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in its principal market; (ii) in the case of an initial registration statement under the Securities Act or Exchange Act for shares of its common equity, had a public float of less than $75 million as of a date within 30 days of the date of the filing, computed by multiplying the aggregate number of such shares held by non-affiliates before filing plus the number of such shares included in the registration statement by the public offering price of the shares; or (iii) if the public float as calculated under paragraph (1) or (2) above is zero, had annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available.

    The financial statements required for a company that does not qualify as a smaller reporting company are:

    ♦ Audited balance sheets (consolidated if you have subsidiaries) as of the end of each of the two most recent fiscal years or if your company been in existence for less than one fiscal year, an audited balance sheet as of a date within 135 days of the date of filing the registration statement.

    ♦ Audited statements of income and cash flows for each of the three fiscal years preceding the date of the most recent audited balance sheet being filed or such shorter period as the issuer has been in existence.

    ♦ Interim reviewed financial statements for the current period if the filing is more than 135 days after the end of the issuer’s fiscal year end.

    ♦ Date of financial statements: Each amendment must include updated interim or audited financial statements if the financial statements in the prior filing are more than 135 days old.

    Smaller Reporting Company Disclosures in Registration Statements | Going Public Attorneys

    Smaller reporting companies and their going public attorneys may elect to provide the following disclosures in their registration statement:

    ♦ Audited balance sheet as of the end of each of the most recent two fiscal years, or as of a date within 135 days if the issuer has existed for a period of less than one fiscal year.

    ♦ Audited statements of income, cash flows and changes in stockholders’ equity for each of the two fiscal years preceding the date of the most recent audited balance sheet (or such shorter period that the issuer has been in business).

    ♦ Interim reviewed financial statements for the current period if the filing is more than 135 days after the end of your fiscal year.

    ♦ Date of financial statements: Each amendment must include updated interim or audited financial statements if the financial statements in the prior filing are more than 135 days old.

    Business Related Disclosures in Registration Statements | Going Public Transactions

    This business section of the registration statement describes the general character of the issuer’s business and includes a brief description of the organizational history of the company, its principal products and services, potential markets and customers, methods for distributing products and services, availability of raw materials, intellectual property, competitive conditions, research and development expenses, costs associated with complying with regulations, and the number of full and part time employees.

    Risk Factor Disclosures in Registration Statements | Going Public Attorneys

    The risk factor section of a registration statement describes the risks and uncertainties of investing in the issuer.  This may include limited financial resources, a limited operating history, adverse economic conditions in a particular industry, lack of a market for the securities offered, industry competition, government regulation, and/or reliance on key personnel or on a limited number of suppliers, distributors, or customers.

    Other Required Disclosures in Registration Statements | Going Public  Attorneys

    This registration statement requires that the issuer identify its officers and directors and provide information on the issuer’s compensation and benefits plan, material transactions between the issuer and its officers and directors, as well as material legal proceedings involving the issuer or its officers and directors.

    This section of the registration statement describes the distribution plan for the securities being registered in the going public transaction including the offering size.

    This section sets forth the planned uses of the proceeds from the sale of the securities being registered in the registration statement.

    Misstatements in Registration Statements used in Going Public Transactions

    Each company going public requires a skilled going public attorney to assist them in making required SEC disclosures.  If the registration statement, at the time it becomes effective, contains an untrue statement of a material fact or omits to state a material fact necessary to make other statements not misleading, Section 11 of the Securities Exchange Act of 1933 imposes liability on the issuer and its management as well as other third parties.

    The Securities Act holds individuals who help prepare a registration statement on behalf of an issuer responsible for any misrepresentations and omissions in the registration statement.  Section 11(a) of the Securities Act, 15 U.S.C. Section 77k(a), makes several categories of persons and entities responsible for material misstatements or omissions in a registration statement.

    A majority of the issuer’s board of directors, as well as its principal executive officer or officers, principal financial officer, and its controller or principal accounting officer, must sign the registration statement used in the going public transaction.  The issuer, as well as each signer is subject to potential civil liability under § 11(a) of the Securities Act for material misstatements or omissions in the registration statement.  In addition, any person who controls the issuer or any other responsible party is subject to liability.

    In addition to the issuer and its officers and directors, attorneys, accountants and underwriters are liable under Section 11(a) of the Securities Act.  The liabilities associated with drafting registration statement disclosures mandate that the issuer engage a skilled and experienced going public attorney.

    If you are going to offer and sell securities, or go public using an SEC registration statement you will need the assistance of an experienced securities lawyer to guide you through the registration process and ensure all required disclosures are made.

    This securities law blog post 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 advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

    The Regulation A+ Offering Process – Going Public Attorneys

    Wednesday, November 9, 2016, 2:16 PM [General]
    0 (0 Ratings)

    On June 19, 2015, Regulation A+ became effective. The new rules which were promulgated under the Jumpstart Our Business Startups Act (JOBS Act), create two Tiers of exempt offerings, both of which allow securities to be offered and sold to the general public.

    Tier 1 offerings allow the issuer to offer and sell up to $20 million in a 12-month period.  Additionally, Tier 1 offerings do not preempt state Blue Sky laws.  Issuers in Tier 2 offerings may raise up to $50 million in a 12-month period. A notable advantage of Tier 2 over Tier 1 offerings is preemption of state Blue Sky laws. As discussed below, Tier 2 offerings require the issuer to provide audited financial statements and comply with ongoing reporting obligations.

    What Is Testing The Waters?

    Companies may solicit investor interest for a potential offering, both before or after the filing of their Regulation A+ offering statement. Solicitation materials used after the offering statement is publicly filed, must be accompanied by a preliminary offering circular or provide a URL where the preliminary offering statement can be obtained. Additionally, materials used to solicit investors must be filed as exhibits to the Form 1-A offering statement.

    Confidential Submission Of The Form 1-A Offering Circular

    A Company may submit its Form 1-A Offering Circular to the Securities and Exchange Commission (SEC) on a confidential basis before it is filed publicly so long as the documents are publicly filed not later than 21 calendar days before qualification by the SEC.

    What Disclosures Are Required In Form 1-A Offering Circular?

    Companies conducting Regulation A+ offerings must file an offering statement on Form 1-A with the Securities & Exchange Commission. The form must be filed through the SEC’s EDGAR system. Form 1-A Offering Circulars have three parts:

    • Part I (Notification),
    • Part II (Offering Circular), and
    • Part III (Exhibits).

    The Offering Circular disclosure in Part II of Form 1-A is similar to what is required by a Form S-1 registration statement under the Securities Act. The disclosure requirements for Tier 1 and Tier 2 offerings vary slightly.

    The following disclosures are required:

    • Basic information about the company, the offering and underwriters, if any,
    • Underwriting discounts and commissions,
    • Summary of risk factors,
    • Material differences between the offering price and the amount paid for shares by insiders during the past year,
    • Plan of distribution,
    • Selling security-holders,
    • How offering proceeds will be spent,
    • Business operations for the prior three fiscal years or since inception, if less than three years,
    • Physical property/real estate,
    • Management’s discussion and analysis of the company’s liquidity and capital resources and results of operations,
    • Directors, executive officers and significant employees of the company,
    • Executive compensation,
    • Beneficial ownership by officers, directors and 10% owners,
    • Transactions with related parties, promoters and certain control persons, and
    • Material terms of the shares being offered.

    What Are The Financial Statement Requirements For Regulation A+?

    Tier 1 and Tier 2 offerings require the company to provide financial statements for the two most recent fiscal years. An important distinction between Tier 1 and Tier 2 offerings is that Tier 2 companies must provide audited financial statements, while Tier 1 companies may provide unaudited financial statements.

    U.S. based companies must prepare their financial statements in accordance with U.S. Generally Accepted Accounting Procedures (GAAP), while Canadian companies may prepare their financial statements in accordance with either US GAAP or International Financial Reporting Standards of the International Accounting Standards Board (IASB IFRS).

    When Is Delivery Of The Offering Circular Required?

    During the pre-qualification period of Regulation A+ offerings, companies must provide a preliminary offering circular to prospective investors at least 48 hours before the sale. When a company is subject to ongoing Tier 2 reporting obligations and current in its obligations, delivery of a preliminary offering circular is not required. Under these circumstances, the company and any intermediaries are subject to the general offering circular delivery requirements.

    Within two business days after each sale, companies and intermediaries must provide investors with a copy of the final offering circular or provide a notice identifying where investors may obtain the final offering circular on EDGAR and contact information for the company or intermediary.

    How Is The Regulation A+ Offering Statement Qualified?

    Offering statements must be qualified by the SEC before sales can occur. Once the SEC is satisfied with the disclosures that comply with Regulation A+,it will issue a notice of qualification. The notice of qualification is similar to the notice of effectiveness issued by the SEC for Form S-1 registration statements.

    What Continuous Or Delayed Offerings Are Allowed by Regulation A?

    Regulation A+ permits continuous or delayed offerings. Companies conducting continuous or delayed Tier 2 offerings must be current in their annual and semi-annual reporting obligations. A company can add additional securities to their Form 1-A Offering Statement by submitting a post-qualified amendment to its previously qualified offering statement.

    Regulation A+ allows continuous or delayed offerings as follows:

    • Securities offered or sold by or on behalf of a person other than the company, its subsidiary or a person of which the company is a subsidiary,
    • Securities offered and sold pursuant to a dividend or interest reinvestment plan or employee benefit plan,
    • Securities issued upon the exercise of outstanding options, warrants or rights,
    • Securities issued upon the conversion of outstanding securities,
    • Securities pledged as collateral for a loan or other obligation,
    • Securities that are part of an offering that begins within two days after the offering’s qualification date, will be offered on a continuous basis, may continue to be offered for a period in excess of 30 days after initial qualification, and will be offered in an amount that, at the time the offering statement is qualified, is reasonably expected to be offered and sold within two years after the initial offering qualification.

    For further information Regulation A+, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton, FL, (561) 416-8956, or by email at info@securitieslawyer101.com.... This securities law Q & A is provided as a general or 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 message create an attorney-client relationship.  Please note that prior results discussed herein do not guarantee similar outcomes.

    Regulation A+ Lawyers

    Friday, July 24, 2015, 3:20 PM [General]
    0 (0 Ratings)

    Regulation A+’s new rules provide investors with more investment choices and issuers with more capital raising options during their going public transactions. Some confusion has arisen about whether SEC qualification of a Regulation A+ offering will result in the assignment of a stock ticker or trading symbol.  Companies conducting Regulation A+ offerings must submit Form 1-A to the Securities and Exchange Commission (SEC). Form 1-A is subject to SEC review and the SEC may issue comments to the filing. Once the SEC is satisfied that the required disclosures comply with the securities laws, it will qualify the offering and the company can offer and sell the securities covered by the Form 1-A.       

    Regulation A+ offerings can be used in combination with direct public offerings and initial public offerings as part of a Going Public Transaction.  The exemption simplifies the process of obtaining the seed stockholders required by the Financial Industry Regulatory Authority (FINRA) while allowing the issuer to raise initial capital. Upon qualification of a Regulation A+ offering, companies seeking to obtain a stock trading symbol must locate a sponsoring market maker to file a Form 211 with FINRA. 

    Q. Can Sponsoring Market Makers Be Paid To Submit 211 Filings?

    A. No. Sponsoring Market Makers generally earn money by buying stock at a lower price than the price at which they sell it, or selling the stock at a higher price then they purchase it back. Despite the amount of work involved in the 211 process, FINRA prohibits market makers from charging issuers fees for filing a Form 211.

    Q. Do Sponsoring Market Makers have To Be Registered With FINRA?

    A. Yes. A Sponsoring Market Maker must be a FINRA registered broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security.  Broker-dealers must register with FINRA to act as a Market Maker of a security.

    Q. Who Regulates Sponsoring Market Makers?

    A. Sponsoring Market Maker activities are regulated by the Securities and Exchange Commission (“SEC”) as well as by FINRA. FINRA oversees registration, education and testing of market makers, broker-dealers and registered representatives.  FINRA rules governing Sponsoring Market Makers in going public transactions involve a variety of criteria.

     

    Q. What Is SEC Rule 15c2-11?

    A. SEC Rule 15c2-11 requires that current public information be made available to investors. This information is initially provided in going public transactions by the Sponsoring Market Maker when it submits a Form 211 and 15c2-11 application with FINRA for a ticker symbol assignment. FINRA and SEC Rule 15c2-11 require that the Sponsoring Market Maker have a reasonable basis for believing that the information provided by the company in its Form 211 is accurate and from reliable sources.  As such, the Sponsoring Market Maker’s preparation of proper disclosures is critical to the going public transaction.

    Q. Does FINRA Comment On Form 211’s If The Regulation A Offering is SEC Qualified?

    A. Yes. In a going public transaction, a Sponsoring Market Maker must submit a Form 211 application to FINRA to apply for the company’s trading symbol, and it must respond to FINRA’s comments to the application. Once FINRA is satisfied that the disclosures meet the requirements of SEC Rule 15c2-11, a trading symbol is assigned and the Sponsoring Market Maker can quote the company’s securities.

     

    Q. What Is The Form 211 Exclusivity Period For Sponsoring Market Makers?

    A. For the first 30 days after a ticker symbol assignment in a going public transaction, only the Sponsoring Market Maker who filed the Form 211 can publish quotes of the company’s securities.  Thereafter, other market makers can publish their own quotes.

     

    Q. Will The Sponsoring Market Maker Require A Company To Have A Certain Number Of Stockholders?

    A. In order to obtain FINRA approval of the Form 211, the Company going public must have enough shareholders for the sponsoring market maker to demonstrate that an active trading market can be established. This means that prior to filing a Form 211 the company should have at least 20 non-affiliate shareholders who paid cash consideration for their shares, and have owned those shares for at least 12 months.  The private company seeking to go public should have at least 1 million shares outstanding, of which at least 250,000 are free trading shares.

    Hamilton & Associates | Securities Lawyers
    Brenda Hamilton, Going Public &  Regulation A+ Lawyers
    101 Plaza Real South, Suite 202 North
    Boca Raton, Florida 33432
    Telephone: (561) 416-8956
    Facsimile: (561) 416-2855
    www.SecuritiesLawyer101.com


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