Select Page

When thinking of securities, most people envision bonds or stocks. Apparently, any arrangements that are considered as investments such as certain types of promissory notes, participation in a pool of assets, partnership interests, agreements to invest, warrants, options, and partnership interests involve securities.

Any individuals who sell or offer any kind of security must comply with the securities regulations and laws of every authorized securities authority. Through the Securities & Exchange Commission or SEC, the federal government and other several states have each circulated securities regulations and laws. Compliance to one law of securities does not necessarily relate to compliance to the law of the other.

Sellers of securities should comply with at least two separate sets of laws, which are the law of the state and the federal law. However, once a broker-dealer firms come entered into the picture of selling with effort, the National Association of Securities Dealers will be involved as well. Once an offering securities is made, the seller should register it with the applicable securities authorities. If this is not done, an exemption will be found on the offering. An entrepreneur who decides to sell his or her securities must check first the structure of securities offering. Compliance to the particular form of registration is important because this will satisfy the requirements of the exemption.

For numerous reasons on legal, economic, and other practical areas, many entrepreneurs are likely to offer their securities on an exempt or discharge basis. The most common exemption from a federal perspective is the one for non-public offerings to limited quantity of sophisticated individuals who have prior business relationships with the one privately negotiating their securities purchases. Another common exemption is the regulatory safe harbor, which involves securities offerings with specific limitations on the quantity of non-accredited investors.

Whether as a condition to establish exemption or registering an offering, the seller of securities is always required to prepare and deliver certain admissions to prospective investors. It is also required that these admissions should be made available to investors as well. The content of these admissions vary depending on the particular requirements for exemption or registration imposed by the appropriate securities authority.

In addition, sellers of securities will always be subject under the antifraud provisions of the designated securities authorities. Under these provisions, the offering should be either exempted or registered. The general rule of these provisions is providing a full disclosure of the securities to investors. Although most sellers of securities follow this rule, it is rare for them to experience difficulties in identifying matters that should be disclosed or not disclosed.

A seller of securities should also be very cautious in making an offering. This is important because implications for compliance failure in accordance to securities laws are severe. Non-compliance on the laws may lead to imposition of penalties, criminal charges, and civil charges against the seller of securities. It may also lead to civil lawsuits especially if the investor is seeking for a return on his or her invested money.