SEC and State Securities Law Filings
Companies in the United States can raise capital from investors to fund their operations by issuing stocks or bonds which are individually or collectively referred to as securities. Both stocks and bonds are financial instruments that can be issued and transacted by both private companies and publicly traded companies. Transactions involving financial instruments are governed by state and United States federal securities laws.
The issuer transactions are those transactions involving the sales of securities by the issuing company to investors. They are the means by which businesses raise capital to develop, to grow or simply to survive. Business growth can occur without the issuance of additional securities that would add new owners or bondholders with claims to the company’s assets beyond those of its founders, but, frequently, in order to grow a business must expand its ownership base. The sole proprietorship may take on a partner, the partnership may add partners, the close corporation may become publicly owned, and the public corporation may issue more stock or bonds to become an even larger company or to acquire another company.
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The most expedient form of issuer transaction is the private placement of securities. This entails the issuing company to sell securities to a select number of investors. On the small scale, a private placement includes a partnership or a closely held corporation adding new owners. Large corporations also engage in private placements when they raise large sums of capital. In either case, special exemptions exist under the securities laws that enable private placements to escape the rigors of regulation under the federal and state securities laws.
On the other hand, a business may not be able to raise all the capital it needs from a small number of investors and must make a public offering of securities to a large number of diverse investors. An offering on behalf of a company going public for the first time is known as an initial public offering.
The trading transactions are the purchasing and selling of outstanding securities among investors. Resales of securities may either be privately negotiated or occur through public markets. Those who hold securities in a small firm for which no public market exists generally can only dispose of their shares by privately negotiating with an interested buyer. Resales of outstanding securities are much more easily accomplished when there is a pre-existing public market for those securities.
The federal securities laws governing securities transactions in the United States include the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act of 2010 and Investment Company Act of 1940. The Securities Act of 1933 requires every offer and sale of securities to be registered with the U.S. Securities and Exchange Commission, unless an exemption from registration exists under the law. The Securities Exchange Act of 1934 governs the trading of securities between persons often unrelated to the issuer, frequently through brokers or dealers.
In addition, each every state has securities laws known as blue sky laws that regulate the offering of securities, require the company issuing new securities to register the offering along with providing applicable financial data, require the licensing of securities broker-dealers and investment advisers, impose civil liability for false and misleading information, and establish state agencies for administering these laws. In Florida, securities transactions are governed under Chapter 517 of the Florida Statues.
Contact us, your business attorney in Florida, to assist you in connection with the sale and issuance of private stocks and bonds, registration and reporting requirements for the SEC and FINRA, and compliance with Florida state securities laws.