Thursday, April 8, 2010

Advertising Securities

"Hi, I'm an investor looking for private funds. I offer 12% interest on a short-term loan of less than one year, secured by real estate." Is this simple statement made at a real estate association meeting a violation of SEC or state laws?

Investors offering equity opportunities must not advertise as follows, according to PART 230—GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933:

(c) Limitation on manner of offering. Except as provided in §230.504(b)(1), neither the issuer nor any person acting on its behalf shall offer or sell the securities by any form of general solicitation or general advertising, including, but not limited to, the following:

(1) Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; and

(2) Any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; Provided, however, that publication by an issuer of a notice in accordance with §230.135c or filing with the Commission by an issuer of a notice of sales on Form D (17 CFR 239.500) in which the issuer has made a good faith and reasonable attempt to comply with the requirements of such form, shall not be deemed to constitute general solicitation or general advertising for purposes of this section; Provided further, that, if the requirements of §230.135e are satisfied, providing any journalist with access to press conferences held outside of the United States....will not be deemed to constitute general solicitation or general advertising for purposes of this section.

§ 230.135c Notice of certain proposed unregistered offerings. (a) For the purposes only of section 5 of the Act, a notice given by an issuer required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 making or has made an offering of securities not registered or required to be registered under the Act shall not be deemed to offer any securities for sale if:

(1) Such notice is not used for the purpose of conditioning the market in the United States for any of the securities offered;

(2) Such notice states that the securities offered will not be or have not been registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements....

§ 230.135a Generic advertising. (a) For the purposes only of section 5 of the Act, a notice, circular, advertisement, letter, sign, or other communication, published or transmitted to any person which does not specifically refer by name to the securities of a particular investment company, to the investment company itself, or to any other securities not exempt under section 3(a) of the Act, will not be deemed to offer any security for sale, provided:

(1) Such communication is limited to any one or more of the following:

(i) Explanatory information relating to securities of investment companies generally or to the nature of investment companies, or to services offered in connection with the ownership of such securities,

(ii) The mention or explanation of investment companies of different generic types or having various investment objectives, such as balanced funds, growth funds, income funds, leveraged funds, specialty funds, variable annuities, bond funds, and no-load funds,

(iii) Offers, descriptions, and explanation of various products and services not constituting a security subject to registration under the Act: Provided, That such offers, descriptions, and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered investment company,

(iv) Invitation to inquire for further information, and

(2) Such communication contains the name and address of a registered broker or dealer or other person sponsoring the communication.

(b) If such communication contains a solicitation of inquiries and prospectuses for investment company securities are to be sent or delivered in response to such inquiries, the number of such investment companies and, if applicable, the fact that the sponsor of the communication is the principal underwriter or investment adviser in respect to such investment companies shall be stated.

(c) With respect to any communication describing any type of security, service, or product, the broker, dealer, or other person sponsoring such communication must offer for sale a security, service, or product of the type described in such communication....

§ 230.251 Scope of exemption. A public offer or sale of securities that meets the following terms and conditions shall be exempt under section 3(b) from the registration requirements of the Securities Act of 1933 (the “Securities Act”):

(a) Issuer. The issuer of the securities:
(1) Is an entity organized under the laws of the United States ... with its principal place of business in the United States or Canada;
(2) Is not subject to section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (15 U.S.C. 78a et seq. ) immediately before the offering....
(4) Is not an investment company registered or required to be registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq. );
(6) Is not disqualified because of §230.262.

(b) Aggregate offering price. The sum of all cash and other consideration to be received for the securities (“aggregate offering price”) shall not exceed $5,000,000....

What does this all mean? Can our hypothetical investor at the top of this blog advertise for private funds or not? Is his offering a security? For answers to these and other related securities registration questions, stay tuned to this blog!

No comments: