Section 3(a)(10)

The 2017 SEC Government-Business Forum On Small Business Capital Formation Final Report

The SEC has published the final report and recommendations of the 2017 annual Government-Business Forum on Small Business Capital Formation (the “Forum”). As required by the Small Business Investment Incentive Act of 1980, each year the SEC holds a forum focused on small business capital formation. The goal of the forum is to develop recommendations for government and private action to eliminate or reduce impediments to small business capital formation. I previously summarized the opening remarks of the SEC Commissioners. See HERE.

The forum is taken seriously by the SEC and its participants, including the NASAA, and leading small business and professional organizations. Recommendations often gain traction. For example, the forum first recommended reducing the Rule 144 holding period for Exchange Act reporting companies to six months, a rule which was passed in 2008. In 2015 the forum recommended increasing the financial thresholds for the smaller reporting company definition, and the SEC did indeed propose a change

June 12, 2018

SEC Cracks Down On Failure To File 8-K For Financing Activities; An Overview Of Form 8-K

Introduction and Background

On September 26, 2016, and again on the 27th, the SEC brought enforcement actions against issuers for the failure to file 8-K’s associated with corporate finance transactions and in particular PIPE transactions involving the issuance of convertible debt, preferred equity, warrants and similar instruments. Prior to the release of these two actions, I have been hearing rumors in the industry that the SEC has issued “hundreds” of subpoenas (likely an exaggeration) to issuers related to PIPE transactions and in particular to determine 8-K filing deficiencies. Using this as a backdrop, this blog will also address Form 8-K filing requirements in general.

Back in August 2014, the SEC did a similar sweep related to 8-K filing failures associated with 3(a)(10) transactions. See my blog HERE for a discussion of those actions and 3(a)(10) proceedings in general. The 8-K filing deficiency actions were a precursor to a larger SEC investigation on 3(a)(10) transactions themselves which culminated in two well-known

December 13, 2016

What Is A Security? The Howey Test And Reves Test

ABA Journal’s 10th Annual Blawg 100

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Sometimes it’s good to go back to basics. In my blogs I often refer to the registration and exemption requirements in the Securities Act of 1933, as amended (“Securities Act”). Section 5 of the Securities Act makes it unlawful to offer or sell any security unless a registration statement is in effect as to that security or there is an available exemption from registration. Similarly, I often refer to the broker-dealer registration requirements. To be a “broker” or “dealer,” a person must be engaged in the business of effecting transactions in securities.

In today’s small cap world corporate finance transactions often take the form of a convertible note and/or options and warrants, the conversion of which relies on Section 3(a)(9) of the Securities Act. Section 3(a)(9) is an exemption available for the exchange of one security for another (such as a convertible note for common stock). Likewise, Rule 144(d)(3)(i) allows the tacking of

November 25, 2014

The Sale of Unregistered Securities Must Satisfy Form 8-K Filing Requirements In a 3(a)(10) Transaction

Introduction and Background

Recently the Securities and Exchange Commission (“SEC”) has been taking action against public reporting companies for the failure to file a Form 8-K upon the completion of a transaction exempt under Section 3(a)(10) of the Securities Act of 1933, as amended (“Securities Act”). The SEC has served a Wells notice on numerous companies for the failure to file such Form 8-K without any prior communication with such companies. Since enforcement actions for the failure to file a Form 8-K are very rare, it is my view that the SEC is concerned with the 3(a)(10) transaction itself.

A Wells notice, often referred to as a Wells letter, is a notice delivered by the SEC to persons and entities under investigation providing the opportunity to such persons and entities to present their position to the SEC prior to the commencement of an enforcement proceeding. A Wells letter gives notice of the SEC’s intended charges and enforcement recommendation and

August 5, 2014

Section 3(a)(10) Debt Conversions in a Shell Company Pre-Reverse Merger

Section 3(a) (10) of the Securities Act of 1933, as amended (“Securities Act”) is an exemption from the Securities Act registration requirements for the offers and sales of securities by Issuers. The exemption provides that “Except with respect to a security exchanged in a case under title 11 of the United States Code, any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such

July 2, 2013

The Securities & Exchange Commission (SEC) Provides Guidance Regarding Section 3(a)(10) of the Securities Act of 1933

Section 3(a)(10) of the Securities Act of 1933, as amended (“Securities Act”) is an exemption from the Securities Act registration requirements for the offers and sales of securities by Issuers. The exemption provides that “[E]xcept as hereinafter expressly provided, the provisions of this title [the Securities Act] shall not apply to any of the following classes of securities….(10) Except with respect to a security exchanged in a case under title 11 of the United States Code, any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United

October 21, 2009

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Section 3(a)(10)

The 2017 SEC Government-Business Forum On Small Business Capital Formation Final Report

What Is A Security? The Howey Test And Reves Test

The Sale of Unregistered Securities Must Satisfy Form 8-K Filing Requirements In a 3(a)(10) Transaction

Section 3(a)(10) Debt Conversions in a Shell Company Pre-Reverse Merger

The Securities & Exchange Commission (SEC) Provides Guidance Regarding Section 3(a)(10) of the Securities Act of 1933

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