Chapter 6

SECURITIES REGISTRATION

Companies often decide to offer securities to the general public in an initial public offering.[1] Prior to the offer or sale of securities to the general public, it is necessary for an issuer to register with the Securities and Exchange Commission.[2] This registration provides for the protection of the investing public by requiring the issuer to give full disclosure to potential investors.[3]

 

SECTION 5 OF THE SECURITIES ACT OF 1933, 15 U.S.C. 77e (1988)

Section 501 of the Federal Securities Code[4] proposes to make it unlawful for any person in connection with a distribution to offer securities unless the issuer has filed an offering statement, but does provide circumstances whereby a holder of a particular class of securities can require the issuer to file such an offering statement.

An issuer of securities begins the process of registration with the Securities and Exchange Commission by preparing and filing a registration statement.[5] The attorneys for the issuer have the responsibility of preparing this registration statement.[6] The registration statement will contain detailed and comprehensive information on the issuer, including a prospectus, financial statements prepared by accountants, and necessary exhibits.[7]

 

SEC RULE 175, 17 C.F.R. 230.175 (1990)

SECTION 35A(a) OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. 78ii-1(a) (1988)

 

ADOPTION OF UPDATED EDGAR FILER MANUEL, Securities Act Release No. 33-7858 (May 16, 2000)

SECTION 8(b) OF THE SECURITIES ACT OF 1933, 15 U.S.C. 77h(b) (1988)

SECTION 8(d) OF THE SECURITIES ACT OF 1933, 15 U.S.C. 77h(d) (1988)

SECTION 8A OF THE SECURITIES ACT OF 1933, 15 U.S.C. 77h-1 (1988)

PRICELINE.COM, Form S-1 Registration Statement (March 2, 1998)

 

The process of going public entails selling and distributing the registered securities of the issuer to many different investors in the general public.[8]

Most issuers will use a broker-dealer to sell the securities to a very widespread group of individual investors.[9] The usual goal of the going public process is to sell to as large a number of investors as is feasible, with the investors located in as broad a geographic area as possible.[10] This will result in a diverse group of investors with an interest in the issuer and name recognition for the issuer.[11] The issuer will then be a publicly held company with the likelihood that a secondary market will develop in the securities sold.[12]

 

HARDEN v. RAFFENSPERGER, HUGHES & CO., INC., 65 F.3d 1392 (7th Cir. 1995)

 

Certain SEC reporting companies, publicly held for a time, can file for a shelf registration.[13] This is a type of registration whereby a company will register securities for sale at some as yet undetermined time.[14] Once the shelf registration is effective, the company need only notify the SEC and the offering can immediately commence.[15] This type of offering can be useful to a company when market conditions are extremely volatile and constantly changing.[16] Of course, the company and the broker-dealer or broker-dealers must continuously monitor market conditions.[17] This type of offering has significantly changed the relationship of some companies and their broker-dealer or broker-dealers by increasing competition among the investment banking firms.[18]

 

SEC RULE 415, 17 C.F.R. 230.415 (1990)

 

USE OF ELECTRONIC MEDIA, Securities Act Release No. 33-7856 (April 28, 2000)

 

2000 Harry Stansbury

 

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[1] See JAMES D. COX, ROBERT W. HILLMAN & DONALD C. LANGEVOORT, SECURITIES REGULATION 215-216 (1991); LISA ENDLICH, GOLDMAN SACHS 253-260 (1999); Michael S. Malone, Nerd's Revenge: A How-To Manual, New York Times, Feb. 18, 1996, at 3-1; Hillary Rosner, Fortune Teller, Village Voice, July 20, 1999, at 42; Nelson D. Schwartz, Inside the Markets Myth Machine, Fortune, Oct. 2, 2000, at 114; James Sterngold, The Johnny Appleseed of a Biotechnology Forest, New York Times, Aug. 18, 1996, at 3-1.

[2] See, e.g., WILLIAM L. CARY, CORPORATIONS 1376-78 (4th ed. unabridged 1969); ERWIN O. SMIGEL, THE WALL STREET LAWYER 160-63 (1964); Irwin B. Arieff, New Stock Issues Glide into Market, Legal Times, May 9, 1983, at 1.

[3] See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN, CORPORATE FINANCE 988-93 (3d ed. 1987).

[4] FEDERAL SECURITIES CODE 501 (1980).

[5] 15 U.S.C. 77f, 77h (1988); see SEC, INSTITUTIONAL INVESTOR STUDY REPORT, H.R. DOC. NO. 92-64, 92d Cong., 1st Sess., at 2343-2373 (1971); LOUIS LOSS, SECURITIES REGULATION 166‑67 (1951); see, e.g., Claudia MacLachlan, It Was a Good Year For Law Firms That Did Equity Issues, Nat'l L.J., Jan. 17, 1994, at 17.

[6] See MARTIN MAYER, THE LAWYERS 317-19 (1966); GERALD J. ROBINSON & KLAUS EPPLER, GOING PUBLIC, 81, at 354-56 (1978); WHEN CORPORATIONS GO PUBLIC 121-28 (Carlos L. Israels & George M. Duff, Jr. eds., 1962).

 

[7] 15 U.S.C. 77g, 77j, 77aa sched. A-77bb sched. B (1988); Regulation S-X, 17 C.F.R. 210.1-01 to .12-29 (1990); Regulation S-K, 17 C.F.R. 229.10 to .802 (1990); see EDWARD T. MCCORMICK, UNDERSTANDING THE SECURITIES ACT AND THE S.E.C. 109-59 (1948); GERALD J. ROBINSON & KLAUS EPPLER, GOING PUBLIC, 83, at 358-60 (1978); JAMES B. STEWART, THE PARTNERS 114-51 (1983); Joseph W. Bartlett & J. David Waldman, Select Problems in Late-Round Private Financings: Soft Information; Integration; Debt vs. Equity, 17 Sec. Reg. L.J. 227, 227-28 & n.3 (1989); Bruce A. Mann, Integration in the Context of Registered Public Offerings, in FOURTEENTH ANNUAL INSTITUTE ON SECURITIES REGULATION 3, 3-6 (Stephen J. Friedman, Charles M. Nathan, Harvey L. Pitt & Roland J. Santoni eds., 1983).

[8] See ADAM SMITH, SUPERMONEY 19‑22 (1972). See generally Thomas N. Cochran, Baby Boom, Barron's, Dec. 20, 1993, at 15; Scott DeCarlo & Gilbert Steedley, Stock Market Lotto, Forbes, June 21, 1993, at 210; Ann Hagedorn & Anne Newman, Blair New Issues Defy Gravity - With Help From J. Morton Davis, Wall St. J., May 6, 1991, at A1; Michael Siconolfi & William Power, Underwriting Boom Puts Tortoises Ahead Of Wall Street's Hares, Wall St. J., March 26, 1992, at A1.

 

[9] See JOHN BROOKS, THE GO-GO YEARS 27-28 (1973).

 

[10] See WHEN CORPORATIONS GO PUBLIC 10-11 (Carlos L. Israels & George M. Duff, Jr. eds., 1962).

[11] See Carl W. Schneider, Joseph M. Manko & Robert S. Kant, Going Public - Practice, Procedure and Consequences, 27 Vill. L. Rev. 1, 3-37 (1981).

[12] See Francis M. Wheat & George A. Blackstone, Guideposts for a First Public Offering, 15 Bus. Law. 539, 540-62 (1960). See generally Robert L. Frome, Do the Markets Affect an IPO's Performance?, N.Y. L.J., Sept. 28, 1989, at 3.

[13] See, e.g., JOHN BROOKS, THE TAKEOVER GAME 107-30 (1987); DAVID L. RATNER, SECURITIES REGULATION 69-70 (3d ed. 1986).

 

[14] See Donald C. Langevoort, Information Technology and the Structure of Securities Regulation, 98 Harv. L. Rev. 747, 771-73 (1985).

[15] See RON CHERNOW, THE HOUSE OF MORGAN 661-62 (1990).

[16] See PAUL FERRIS, THE MASTER BANKERS 98-99 (1984).

[17] See PAUL HOFFMAN, THE DEALMAKERS 106-19 (1984).

 

[18] See A.F. Ehrbar, Upheaval in Investment Banking, Fortune, Aug. 23, 1982, at 90.