IPO’s have reached an all time high in the past several years. In 2014, 274 IPO’s were completed, 23% higher than 2013’s ending. IPO’s are a fantastic way to raise capital, and get excited about new companies. However, some misconceptions about private placement securities and IPO’s persist.
Myth #1 Just because you’ve offered your friends or a family securities doesn’t make you exempt from securities law. The SEC is cracking down on insider trading. In 2014 alone, the SEC charged 135 people with violations regarding failures to report. In fiscal year of 2014, the SEC also charged people for trading with insider information. There are plenty of exemptions, but your friends and family aren’t among them. However, if you have an exemption that applies to the offering, by all means pursue it, but you can’t avoid the application of private placement securities law. Skilled securities law firms can help determine what exemptions your offering may be eligible for.
Myth #2 You probably know private placement securities law only applies to public companies. You also probably already know the SEC regulates IPO’s and other public offerings. However, these laws apply to all securities offerings, which also includes private offers and sales. Getting an exemption will not necessarily make the process any easier, as exemptions come with their regulations.
Myth #3 Only the federal government regulates securities. Wrong. All 50 states have their rules and regulations regarding securities offerings. Often, if you meet the criteria for federal exemptions, you will probably qualify for state exemptions as well. Still, many states do require you to file notices and fee payments connected to private offerings. Form 10-K used to be filed with the SEC within 90 days after the end of the company’s fiscal year, although accelerated filers are an exception to that rule.
Obtaining private placement offerings can be a positive experience for all involved. Being aware of the law, and making sure you’re in compliance consolidates the process, and avoids any trouble with the SEC. Asking an IPO attorney or working with a reputable corporate securities law firm can certainly ease investors minds, and make the process even smoother.