A “security” includes any investment of money in a common enterprise with an expectation of profits to be derived from the efforts of others. Common types of “securities” include shares of stock in a corporation, ownership interests in partnerships and limited liability companies, bonds, options, warrants, profit-sharing agreements, investment contracts and interests in oil and gas wells. There are only three types of securities offerings under the securities laws: (i) registered; (ii) exempt from registration; and (iii) illegal. Registered securities offerings include initial public offerings (IPO’s) in which in which the offering is registered with the Securities and Exchange Commission (the “SEC”) and subject to extensive regulation. An exempt offering is a private offering of securities that does not have to be registered with the SEC and that is also exempt from qualification requirements under State law. An illegal securities offering is any offering that is not registered and does not qualify for an exemption under applicable Federal and State securities laws. Any illegal offer or sale of securities subjects the issuer of those securities and any persons involved making the offer and completing the sale to potential significant civil and criminal liability. At a minimum, a person who purchases securities in an illegal offering is entitled to rescind the sale and recover the full purchase price from the seller.
Before offering or selling any securities through a private offering, one should consult an experienced securities law attorney to determine what available exemptions from registrations may be available. If the securities will be offered or sold in more than one State, the laws of multiple States will have to be considered. Available State and Federal securities laws exemptions have numerous precise requirements and exemptions will be lost if all the requirements are not met.
Securities laws issues also include such matters granting stock options to employees, private investments in public equity (PIPE transactions) registration requirements for public offerings (such a registering an initial public offering or a secondary offering) and reporting requirements for public companies (such as 10-K, 10-Q, 8-K and proxy statement filings).
Matt Sumrow has extensive experience representing public companies, private companies and investors in numerous public and private securities offerings, ranging from small private placements by start-up companies to public offerings of over three hundred million dollars. He has also represented companies on numerous matters related to issuing stock options and warrants, Rule 144 sales, securities related disclosure requirements and reporting requirements for public companies. Contact California corporate lawyer Matt Sumrow for further information.