Regulation

      • Regulation - Accredited Investor

The SEC has established criteria for preventing people who perhaps should know better from investing in unregistered securities and other things that are less well known than stocks and bonds. For example, if you've ever been interested in buying into a privately held company, you have probably heard all about this. In a nutshell, for an individual to be considered a qualified investor (also termed an accredited investor), that person must either have a net worth of about a million bucks, or have an annual income in excess of 200k. Companies who wish to raise capital from individuals without issuing registered securities are forced to limit their search to people who fall on the happy side of these thresholds.

To read the language straight from the securities lawyers, follow this link:
http://www.law.uc.edu/CCL/33ActRls/rule215.html

       •Securities and Exchange Commission (U.S.)

Just in case you want to ask questions, complain about your broker, or whatever, here's the vital information:

    Securities and Exchange Commission
        450 5th Street, N. W.
        Washington, DC 20549
        Office of Public Affairs: +1 202 272-2650
        Office of Consumer Affairs: +1 202 272-7440

SEC policy concerning online enforcement: http://www.sec.gov/enforce/comctr.htm

A web-enabled complaint submission form: http://www.sec.gov/enforce/con-form.htm

E-Mail address for complaints: enforcement@sec.gov

         •Regulation - SEC Rule 144

The Federal Securities Act of 1933 generally requires that stock and other securities must be registered with the Securities and Exchange Commission (the "S.E.C.") prior to their offer or sale. Registering securities with the S.E.C. can be expensive and time-consuming. This article offers a brief introduction to SEC Rule 144, which is a safe harbor allowing for the sale of restricted and affiliate securities in limited quantities without requiring the securities to be registered.

First it's probably appropriate to explain the basics of restricted securities. Restricted securities are generally those which are first issued in a private placement exempt from registration and which bear a restrictive legend. The legend commonly states that the securities are not registered and cannot be offered or sold unless they are registered with the S.E.C. or exempt from registration. The restrictive legend serves to ensure that the initial, unregistered sale is not part of a scheme to avoid registration while achieving
some broader distribution than the initial sale. Normally, if securities are registered when they are first issued, then they do not bear any restrictive legend and are not deemed restricted securities.

Rule 144 generally applies to corporate insiders and buyers of private placement securities that were not sold under SEC registration statement requirements. Corporate insiders, also known as affiliates, are officers, directors, or anyone else owning more than 10% of the outstanding company securities.

Under Rule 144, non-affiliates of SEC reporting companies may sell restricted securities to the public without registration (the restriction lapses upon transfer of ownership) so long as they have held the securities for six months. To qualify as a reporting company, the issuer must be, and must have been for at least 90 days prior to the sale, subject to the reporting requirements of section 13 or 15(d) of the Securities Act of 1934. To be considered a non-affiliate, one must not be an affiliate at the time of sale and must not have been an affiliate during the preceding three months. For non-affiliates of non-reporting companies, there is a one year holding period requirement. Affiliates of reporting companies have a six month holding period requirement for restricted stock as well, and under the Rule the sale must also comply with volume limitations and manner-of-sale requirements, generally. For non-reporting companies, the holding period for affiliates, if the stock is restricted, is one year. Unrestricted stock held by affiliates does not have a holding period requirement but is still subject to the volume limitations and manner-of-sale requirements.

The most recent rule change of February, 2008 reduced most holding periods under Rule 144 to six months. For all the details, visit the SEC's page on the revisions to the Rule: http://www.sec.gov/rules/final/2007/33-8869.pdf

Julie O'Neill offers some insights about the SEC's Rule 144:
http://www.feinberglawgroup.com/Rule144.html