Bay Area Business Lawyers | Primum Law

SEC Compliance for Companies

When a company sells securities, issues debt, or has investors, it must comply with the rules of the Securities and Exchange Commission. SEC rules applying to private companies primarily govern raising capital.

Even private securities must either be registered with the SEC or qualify for an exemption to registration. When smaller companies want to access the capital markets, they must follow Regulation D. Companies that rely on these types of offerings can offer unlimited securities, so long as there is no solicitation to the general public, and they have no more than 35 accredited investors participating in the offering. Accordingly, businesses will need to pay very close attention to how they sell securities, so they are not found in violation of federal securities laws.

There are several ways that companies can offer securities under Regulation D. Each involves some restrictions on the manner of sale.

There is a commonly held misconception that SEC regulations apply only to public companies. The main SEC anti-fraud regulation, Rule 10b-5, can also apply to private issuers. The rule prohibits “any manipulative or deceptive device” in connection with the sale or transaction of any security. Companies may be subject to enforcement action (or lawsuits) in connection with private securities sales. In addition, these companies would be subject to state Blue Sky securities laws.

The SEC may focus even more on private companies because the agency knows that they may not have the same robust risk controls as public companies. Your business should develop policies and procedures to remain in compliance with SEC regulations.

Contact a San Francisco Small Business Attorney Today

The Primum Law Group works with California small businesses on compliance law issues, helping you follow the myriad of government regulations. To speak with an attorney, contact us online or call us at 415.293.8042.

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