Whether you run a small company or a large corporation, you will likely need a securities lawyer to advise you on private and public securities regulations. Securities law is governed by the Securities Act of 1933 and the Exchange Act of 1934, as well as the accompanying rules and interpretations. The primary regulatory agency that oversees stock and securities offerings is the Securities and Exchange Commission (SEC). Basically, anytime you are conducting an offering--whether private or public, to one investor or many, a small amount or a large one--you’ll need a securities lawyer to advise you on the appropriate documentation or filings. Failure to comply with SEC regulatory requirements can trigger an enforcement action, resulting in civil liability and even criminal prosecution.
Securities law compliance is crucially important for your business -- but difficult to achieve without the assistance of an experienced securities lawyer. Your business must understand complex federal and state securities regulations in order to effectively and accurately complete required documentation.
Priori’s curated legal marketplace makes it easy to find an excellent securities lawyer to help navigate this complex area of law.
Working with a securities lawyer is essential for successfully financing your business through complex offerings:
IPOs (Initial Public Offerings)
If your company is ready to raise funds by selling equity or debt to the general public, you will need to register with the SEC before conducting your IPO. After a successful equity IPO, a company’s shares are listed on a stock exchange and are traded on the secondary market. One of the main advantages of an equity IPO is that a company can sell its shares to almost anyone. A company can also sell debentures or bonds to the public with a promise to repay the purchase price, plus interest on a certain date. However, SEC registration can cost hundreds of thousands of dollars and require the preparation of thousands of pages of documentation. If you would like to proceed with an IPO, it is imperative to work with a securities lawyer to ensure you are fulfilling all SEC requirements.
Regulation D Offerings
Rules 504, 505, and 506 of Regulation D describe one commonly used exemption from the Securities Act of 1933, which allows a company to avoid registration with the SEC on the condition that it sells its equity or debt only to a limited number of “accredited investors.” Accredited investors are companies and individuals that meet certain SEC requirements, indicating that they are financially sophisticated. An individual can typically be accredited, for example, if he or she has a net worth of at least $1 million or income of at least $200,000 in each of the past two years.
If your company is offering securities, you must however create an accurate and objective prospectus for the investor (known as a “Private Placement Memorandum” or PPM) that provides comprehensive information related to your company’s financial position and investment risk factors. After selling equity or debt to accredited investors, your company must file SEC Form D. A skilled securities lawyer can help you each step of the way to ensure that your Regulation D Offering is compliant with SEC regulations.
Filing and Documentation
A skilled securities lawyer can assist you with preparing and filing registration statements, proxy statements, annual, quarterly and current reports and other SEC filings to keep your business in compliance. State laws also regulate securities offerings through “blue sky” laws requiring registration of securities offerings. For this reason, both the state of the offering and the state of the investor are important.
A securities attorney can also help your company with other day-to-day SEC compliance such as corporate governance, meeting reporting requirements, issuing stock and secondary offerings and satisfying exchange rules. An attorney can furthermore prove invaluable in more complex situations such as mergers & acquisitions and takeover defense.
Your financing decisions not only impact your immediate ability to get up and running, but also your ability to scale and grow as you begin to experience success. An experienced securities lawyer will not only be able to prepare the legal documents necessary for financing your business, but also identify appropriate financing sources, assist with introductions to those financing sources and advise you through the process to avoid common pitfalls.
Depending on the complexity of your offering, the cost of conducting an offering or having a placement memorandum drafted can vary significantly. When you hire a lawyer in the Priori network, conducting a Regulation A Offering can cost $25,000 and up while the private placement of securities may cost more than $10,000. Drafting a private placement memorandum, for example for a Regulation D offering, may cost from $550 for simple offerings to $7,500 for more complex matters. Hourly rates for Priori securities lawyers range from $225 to $450 per hour. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.
What are some other exemptions to SEC registration?
There are several exemptions to SEC registration. Rule 144A provides an exemption from SEC registration for the private resale of at least $500,000 in equity or debt, primarily to large institutional investors with at least $100 million in assets. Regulation S is another exemption that is similar to Rule 144A, except that it applies to offerings made in foreign countries. A company can also take advantage of other private placement exemptions under Section 4(a)(2); all of these exemptions, however, forbid general solicitation to the public. It is always best to consult with a securities lawyer to ensure you are in compliance with SEC regulations and that a given exemption applies to your company’s circumstance.