SEC Compliance

SEC Compliance

Compliance Isn’t An Option

No matter what business your startup is in, if you’re going to issue securities, you’re going to encounter the Securities and Exchange Commission (SEC). The SEC is an independent government agency that was created to enforce federal securities laws, protect investors, and maintain a fair marketplace. As a business owner, it’s crucial to have an SEC law firmthat can advise you and make sure your business is in compliance.

As an SEC attorney, I can tell you that the only way to make sure your business will comply with all of the SEC regulations is by working with a securities lawyer. Without an experiencedSEC lawyer, your company could inadvertently be breaking the law, which could result in financial penalties or even jail time. No Bueno.

If your company already offers securities, or if you’re considering it in the future, the best way to protect yourself is by consulting with an experienced securities attorney, like me, The LaunchUp Lawyer, and have them guide you as you go.

SEC ’34 Exchange Act Reports – The Enforcers Arrive

Back in 1934, the U.S. Government enacted the Securities Exchange Act of 1934. Amongst other things, this Act established the SEC and made it responsible for enforcing the federal securities laws. This act also gave the SEC the power to regulate markets and determine how corporations report their finances.

Since then, businesses that deal with securities have had a responsibility to follow the SEC rules and file annual, quarterly and current reports, proxy or information statements and other filings When these reports are completed, they need to be 100% accurate or your business could face the music.

SEC and FINRA Compliance – Follow The Rules

You’ve decided to sell securities in your company. Awesome! Then it’s time to get to work. Startups are invariably offered help by “finders” who will assist you in getting investors for a percentage of the money they help bring in.  Beware!  Finders generally do not register with the SEC as broker-dealers and licensed and registered with The Financial Industry Regulatory Authority (FINRA). TheSEC has found the following types of activities trigger the obligation to register as a broker-dealer:

  • Actively soliciting investors.
  • Advising investors on the merits of an investment.
  • Analyzing the financial needs of an issuer.
  • Participation in presentations or negotiations.
  • Prior dealings in securities transactions.
  • Receiving transaction-based compensation.
  • Structuring a transaction or making recommendations regarding the nature of securities, whether to issue securities or the value of securities sold.

If a finder who is not registered with the SEC and FINRA as a “broker” engages in more than just identifying prospective investors, it could jeopardize your private placement and result in investors having a rescission right to get their investment back until the later of three years from the date of issuance of the securities or one year from the date of discovery of the violation. Certain states, such as California, also provide a rescission right to purchasers of securities from unregistered broker-dealers, which can be exercised even if the purchaser no longer owns the securities.

The best way to avoid this headache and ensure your startup is following all of the rules? By using an SEC lawyer like me, the LaunchUp Lawyer. I can help make sure you’re following the letter of the law and that your business complies with all of the FINRA rules and regulations.