New directors and executive officers of public companies are often dismayed at the number of rules and regulations to which their new status has subjected them. Since corporate management is frequently not well-versed in the intricacies of federal securities law, it is incumbent on securities counsel to advise new directors and officers of their new responsibilities as early in the process as possible.
Section 12(j) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), authorizes the Securities and Exchange Commission (the “Commission”) to revoke an issuer’s Exchange Act registration for failure to comply with any provision of the Exchange Act or any of the regulations promulgated thereunder. Section 12(j) also prohibits broker-dealers from effecting transactions in the securities of any issuer whose registration has been so revoked.
In today’s securities market, many micro-cap issuers choose to raise funds through “self-underwritten” offerings, in which securities are sold directly by the company’s directors and officers rather than through an outside underwriter. Both federal and state securities laws acknowledge this method of fundraising, commonly exempting issuers from the statutory definition of “broker-dealers.”