What Are The Responsibilities Of Security Issuers?

Many companies choose to issue securities as a way to raise money, reward employees and officers, and drive public interest. The act of issuing securities, however, comes with a number of legally-binding responsibilities. Before you issue securities, you'll want to ask a corporate lawyer for guidance. Let's take a look at three of the biggest responsibilities you will need to discuss.

Financial Reporting

When a company issues securities, it has to also submit reports. One set of reports will go to the Securities and Exchange Commission. Another set will go to your state's corporate regulatory agency. Finally, a set will be sent to the parties of record who hold the bonds or shares you have issued.

Note that all of these reports will be publicly available. Most agencies have websites that provide the reports. It's in the spirit of securities law that everyone who might hold or trade the securities you've issued will be operating on a level playing field.

Structured Selling

Anytime a company wants to issue securities, it must sell them in a structured manner. Normally, a corporation will retain the services of a securities law attorney to draft paperwork for the issue. The company may also hire an investment banking firm to act as a go-between for selling bonds and shares to the public.

When a sale is approved, there will be a specific date for the start of selling. For example, the investment bank might purchase a large number of shares from your company and hold onto them until the sale date. When the sale date arrives, they'll make them available to the public for purchase.

The goal of this requirement is to prevent companies from flooding the market without warning. Also, it gives potential investors a chance to research a company and decide whether the securities represent worthwhile investments.

Insider Compliance

Insiders must report their desire to buy or sell and wait until specific dates have passed. The idea here is to prevent people with inside information from trading on things the public doesn't know about.

For legal purposes, the term "insider" applies to virtually everybody who has actionable knowledge about a company's financial health. If the CEO tells a friend over dinner about a planned acquisition, for example, the friend who heard the news legally becomes an insider even if they have no association with the company. For this reason, it's good to have a securities law attorney perform a prior review of all disclosures. Visit a company like www.carterwestlaw.com online to get started.