Section 3(a)(9) Exchanges Evaluated
Section 3(a)(9) of the Securities Act of 1933, provides an exemption from the registration requirements for “[E]xcept with respect to a security exchanged in a case under title 11 of the United States Code, any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.” Generally, in an exchange offer, the issuer offers to exchange new debt or equity securities for its outstanding debt or equity securities.
Since Section 3(a)(9) is a transactional exemption, the new securities issued are subject to the same restrictions on transferability, if any, of the old securities, and any subsequent transfer of the newly issued securities will require registration or another exemption from registration. However, since the new securities take on the character of the old securities, tacking of a holding period is generally permitted allowing for subsequent resales under Rule 144 (assuming all other conditions have
Transparency in the Financial Markets and the Materiality Standards
The disclosure requirements at the heart of the federal securities laws involve a delicate and complex balancing act. Too little information provides an inadequate basis for investment decisions; too much can muddle and diffuse disclosure and thereby lessen its usefulness. The legal concept of materiality provides the dividing line between what information companies must disclose, and must disclose correctly, and everything else. Materiality, however, is a highly judgmental standard, often colored by a variety of factual presumptions.
Transparency in Financial Markets
The guiding purpose of the many and complex disclosure provisions of the federal securities laws is to promote “transparency” in the financial markets. However, the task of winnowing out the irrelevant, redundant and trivial from the potentially meaningful material falls on corporate executives and their professional advisors in the creation of corporate disclosure, and on investment advisors, stock analysts and individual investors in its interpretation. The concept of materiality represents the dividing line between information reasonably likely to influence
SEC Rule 144: Current Public Information and Reporting Requirements
The current public information requirement is measured at the time of each sale of securities. That is, the Issuer, whether reporting or non-reporting, must satisfy the current public information requirements as set forth in Rule 144(c) at the time that each resale of securities is made in reliance on Rule 144. Most attorney opinion letters and Forms 144 cover a three month period and many Sellers sell securities over that three month period. However, the Seller (or person selling on behalf of Seller such as the broker dealer) is required to make a determination that current public information is available at the time of each sale.
Accordingly, if a reporting issuer does not file a required Q or K during this period, or 15c2-11 information lapses for a non-reporting issuer, sales must cease until the current public information requirement is again satisfied. Moreover, Sellers are taking a risk by selling during the 5-day or 15-day period following the filing of
