Tuesday, April 19, 2011

Securities Law FAIL

Longtime viewers of this blog will recall that one of my favorite memes is -- "Try Not to Violate Securities Laws."  It never ceases to amaze me how easily and often folks violate securities laws.  It is a war of information, people, and we need to spread the truth.

Here is a sign that my good friend, Fred Bryant (@WealthForgeFred), found on Church Hill in Richmond, VA a little while ago:

Now, while I'm sure that the fine gentleman (gentlewoman?) that posted this advert is an exceptional snow blower, the problem is that this is what we lawyers call a "general solicitation."  And that is a no-no.

Once you have made a general solicitation, you have disqualified yourself from most "private placement" exemptions under state and federal securities laws.  And, without an exemption, pretty much the only way you can do an offering is through a registered IPO.  Moreover, get this, since you made a general solicitation before you had your IPO registration statement on file with the SEC, it will at least delay, if not put an end to, your IPO.

While there has been some recent speculation that the SEC may ease up on the general solicitation prohibition, this is a long way off and the prohibition still stands.  So, please people, Try Not to Violate Securities Laws.

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Dividends and Preferences by Hank Heyming is licensed under a Creative Commons Attribution 3.0 United States License.