The Securities and Exchange Commission’s Division of Economic and Risk Analysis (DERA) has regularly updated its studies regarding the market for unregistered securities offerings. The most recent study provides data through the end of 2017. Over $3.0 trillion was raised in unregistered securities transactions in 2017. By contrast, registered offerings accounted for approximately $1.5 trillion. Approximately $1.8 trillion was raised in Regulation D offerings, which surpasses the amount of capital raised in public offerings. Of this amount, most was raised in Rule 506(b) offerings and pooled investment vehicles. Some “repeat” issuers have switched to Rule 506(c). Approximately 65% of the Regulation D offerings (by number) involve equity offerings. The data presented in the study is based on information contained in Form D filings and, as a result, may understate the actual level of activity.
July 19 – 20, 2018
PLI New York Center
1177 Avenue of the Americas
New York, NY 10036
This program will provide an overview and discussion of the basic aspects of the U.S. federal securities laws by leading in-house and law firm practitioners as well as SEC staff. Emphasis will be placed on the interplay among the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act, the Dodd-Frank Act, the JOBS Act, the securities related provisions of the FAST Act, related SEC regulations and significant legislative and regulatory changes and proposals.
Partner Anna Pinedo will lead a session titled “Securities Act Exemptions” on Day One of the program. Topics will include:
- Exempt securities versus exempt transactions;
- Private placements, including offerings under Rules 504 and 506 of Regulation D;
- Regulation A+ offerings;
- “Intrastate” offerings, including new Rule 147A;
- Employee equity awards;
- Rule 144A offerings;
- Regulation S offerings to “non-U.S. persons”; and
- Resales of restricted and controlled securities: Rule 144, Section 4(a)(7) and 4(a)(1½).
PLI will provide CLE credit.
For more information, or to register, please visit the event website.
In his article, author Merritt B. Fox considers the appropriate disclosure requirements in the context of public offerings, such as offerings made in reliance on Rule 506(c), Regulation A, and Regulation CF, undertaken by privately held companies as to which there is little or no previously available information, resulting in information asymmetries. He begins his analysis by going back to first principles. Information asymmetries may motivate potential investors to exact a significant discount from the issuer in connection with a financing. The asymmetries can be addressed in a variety of ways, including reliance on intermediation by a gatekeeper like an underwriter. Another, of course, is requiring disclosures to be made in connection with the proposed offering and/or following the completion of the offering. Imposing issuer liability and underwriter liability would accompany the mandatory disclosure framework in order to compel issuers and gatekeepers to undertake their disclosure obligations seriously. Having established these principles, Fox considers the current framework for each of the three offering exemptions. In a Rule 506(c) offering, there is no required disclosure, and no ongoing disclosure obligation following completion of the offering. An issuer is subject only to liability under Rule 10b-5 for material misstatements made in connection with the offering. There is no underwriter taking principal risk that would function in the role of a gatekeeper. There is no identified approach to addressing information asymmetries in Rule 506(c) offerings. In Regulation A offerings, there is a mandatory disclosure requirement at the time of the offering and a periodic disclosure requirement following completion of the offering. The issuer is subject to liability subject to a due diligence defense. An underwriter participating in a Regulation A offering also is subject to liability. Regulation CF also requires that certain information be disclosed at the time of the offering, and in certain instances requires ongoing disclosures post offering. The issuer also faces strict liability subject to a due diligence defense. There is no “firm commitment” underwriter in a crowdfunded offering. The article asks whether the reduced disclosure requirements are sensible when one considers the burdens that may be placed on smaller issuers, on the one hand, and the information asymmetries and possibility of adverse selection that are associated with the offering of new securities into the market.