Companies going public and offering stocks must follow specific rules. When they don’t, there is a chance that criminal charges might follow. In some cases, civil lawsuits are possible. It is imperative that anyone who is in this profession understands what they are expected to do to avoid legal issues.
There are two primary federal securities acts that govern the companies that are offering securities. These include the Securities Act of 1933, which is commonly referred to as the Securities Act, and the Securities Exchange Act of 1934, which is known as the Exchange Act. Failing to comply with the terms set forth in these can lead to serious issues.
The Securities Act requires that companies offering securities submit a registration statement that contains specific information. These are reviewed by the Securities and Exchange Commission; however, no determinations about the viability of the security is made by the SEC. Even though there are some specific exemptions for having to do this, those are few and far between. Companies that are considering claiming an exemption should ensure they qualify.
The Exchange Act sets a requirement for a company to have an effective registration for the company. It also outlines specific reports that must be filed. It also requires that certain information is sent directly to the individuals who invest in the business.
If you or your company is accused of violating these laws, you need to know your legal options. Getting your case started as soon as you know there is a problem can help you to avoid having to rush through your defense planning.