double taxation

larger market

taxed like partnership

flow throgh taxation

less than 100 shareholders

Raises money to invest in real estate activities and mortgages

profit = difference between rental income and property mgmt fees + difference between sale price and purchase price

95% of income is derived from real estate activities

must distribute 90% of income

Ownership tests: 100 shareholders and 5 or fewer cannot control 50% of common stock

Certain types of institutions (insurance co., registered investment company, pension plans, corporations and registered investment advisers)

must be buying on own account or behalf on QIB

 must own and invest at least $100M not affiliated with buyer

Private placement of securities in which broker dealer assist an issuer by helping distribute estricted securities to small group of investors

The restricted securities are purchased from issuer who already has publicly traded shares outstanding

When PIPE offering are announced, share price will often decline due to dilution and the company’s need of capital

allow private placement securities owner to sell securities when IPO or follow on offering

 Piggyback registration rights - permit investor to register and sell securities during a public offering

Demand registration rights - obligate issuer to file registration statement covering potential sale and can be forced by investors

Filed for securities registered through employee benefits plan

Red herring (includes price range)

disclosure document for potential investors

issued during the waiting period

indication of interest

Nonreporting, but listed companies - 25 days

Nonreporting and not listed with publicly traded securities - 40 days

Nonreporting, not listed IPO - 90 days

dictates amount of time that pre-IPO holders have to wait to sell their shares

Generally 6 months

Issuers business

balance sheet

profit/loss statements

Market cap

Use of proceeds

money paid to affiliates

directors owning >10%

Must have: market value of 700M or 1B in nonconvertible securities issued within last 3 years

required to file Sections 13(a) and 15(d)

eligible to register for Form S-3

Must file prospectus supplement

Permitted to use term sheet for offering as free writing prospectus

eligible for automatic shelf registration

Shelf offerings

Rule 415

Allows issuers to file registration docs and offer securities on a delayed continuous basis for 3 years after initial registration

not allowed for IPOs or Treasuries

notice, whether writen or broadcast that offers a security for sale

Tombstone – identifies security, price, name of underwriters and from whom the prospectus may be obtained

doesnt meet standard of statutory prospectus

an offer to sell or solicitation to buy securities

can be used as disclosure document by seasoned issuers

ex. press release, emails, term sheets, marketing materials

requires a legend (indicates whether issuer will file registration statement and how prospectus is obtained)

written - any written, printed, broadcast on TV/radio, and graphic communications (electronic media)

Oral - Live and retransmitted using graphic communications to live audience are oral communications

permits publication of simple advertisements

Tombstone - identifies name of isuer, security, amt beign offered, issuers business, price, date, name of underwriters, schedule of the offering,  and name of selling shareholders

Allows advertisement that describe how investment company works

cannot talk about desiribility of owning company shares

allows nonreporting company to publish factual information for suppliers and customer, but not investors

No forward looking information

Establishes guidelines for the format of presenting projections used in nonfinancial statement contained in registration statement

projections must be based on reasonable basis

Discloses information on # of meetings held by BOD and name of each director who attended less than 75% of meetings

internal controls for financial reporting

attestation msut be reported by indpendant accountant

Stale financial statement is when over 135 days elapse between date of statement filing and effective date of registration

audit procedures

  Procedures designed to provide reasonable assurance of detecting illegal acts that have material effect in determining financial statement amounts

Procedures designed to identify related party transactions that are material to financial statements

Evaluation whether the issuer is doubtful to continue as a going concern during fiscal year

Bars issuers from selectively disclosing nonpublic information to securities professional if they will probably trade based on this information

Nonpublic material information must be disclosed within 24 hours in 8K

Financial Disclosure – annually and quarterly report of all material off balance sheet activity

CEO and CFO Certification of Annual and Quarterly Reports

Loans to officers and directors - illegal

Disclosure of Insider Transactions – at the end of 2nd day following date of transaction

Establish Code of Ethics for Senior Executives

Section 404 – “stress test” that tests internal controls relevant to financial reporting

all members must be independant and member of BOD

must disclose if:

At least one audit committee financial expert serving on its audit committee and disclose their names

 That the issuer doesn’t have an audit committee financial expert serving on its audit committee

NYSE and NASDAQ need financial expert

State Securities exemt from registration if:

domiciled within state

80% of assets within state

80% of revenues derived from state

80% of sale proceeds from new issue within state

100% of sale of new issue to state residents

Residents who own shares cannot sell for 9 months

provides registration exemption for small security offerings:

In US

5M within 1 year, 1.5M by selling shareholder

After filing, but before qualification, a preliminary offering circular may be used to make a written offer of securities if similar information to final offering circular

Issuers can test the interest level prior to offering statement with only factual information and 20 days separating a soliciting statement and sale of business

If Regulation A is suspender,  the issuer has 30 DAYs to request a hearing and hearing will be within 20 days

executive summary of a private placement memorandum

Disclosure documents, use of proceeds, financial statements, suitability standards

sales contract for sale of securities 

 Statement which investor agrees that he alone has sufficient knowledge and experience to evaluate the risks of investment

Statement by investor providing annual gross income and net worth   Statement regarding status of investor and accreditation

   # of shares and unit price

   Statement by investor that they received appropriate disclosure document

Statement that investor knows the investment is illiquid and high degree of speculative risk

   Statement of investor residency

exempts registration from offering not involved with public offering

ex. private placements

private offerings

offerings less than 1M can be sold to unlimited # of investors to accredited and nonaccredited investors

cant be sold to: blank check company, shell company and penny stock

private offerings

offerings less than 5M can be offering to unlimited # of accredited investors

must have: net woth of 1M or gross income for last 2 yrs of 200K

max 35 unaccredited investors

private offerings

offerings exceeding 5M can be offered to unlimited people with knowledge and experience in finanial matters

unaccredited investors must use purchaser representative

Cannot own 10% or more of stock in issuer, be an affiliate, be given blanket approval,

permits sale of restricted stock to QIBs

seller doesnt need to be QIB

transaction occur in PORTAL market

US companies can issue unlimited securities outside US

Transaction must be offshore ( buyer is outside US or transaction is through designated offshore securities market)

sold to non-US persons

Private placement where member firm issues securities and conduct placement on its own behalf 

 There must be a market for OTC BB securities outside member firm

       Required to file disclosure docs when owns more than 50% of company        Exemptions:Institutional investors with $50M in assets and QIB in Rule 144A

permits resale of restricted and control stock

filed day of sale

Holding period of 6 months for restricted stock (not control stock) is required for:

Individual who purchases stock and wants to sell,Individual who acquires stock as a gift from original purchased, Securities acquired by trust of original purchaser,  Securities acquired by a pledge from pledgor who was original purchaser

Must notify SEC if share are greater than 5,000 and dollar amount greater than $50,000