The Other Side of the Table · Appendix D

Securities Law Glossary

32 terms used throughout the book, each with its own link.

Accredited investor: An investor meeting income, net worth, professional, or entity criteria defined in Regulation D.
Affiliate: A person that directly or indirectly controls, is controlled by, or is under common control with the issuer, typically including officers, directors, and significant shareholders.
Bad actor disqualification: The rule that makes Rule 506 unavailable if the issuer or a covered person is subject to specified disqualifying events, such as certain convictions, regulatory orders, and injunctions.
Blue sky laws: State securities laws. For Rule 506 offerings, states may require notice filings and fees but not registration.
Comment letter: Written comments from the SEC's Division of Corporation Finance on a company's filing.
Control securities: Securities held by an affiliate of the issuer.
Expert Market: An OTC market segment where quotations are restricted and retail investors generally cannot buy.
Finder: A person who introduces investors to an issuer. A finder who solicits investors or receives transaction-based compensation risks acting as an unregistered broker.
Form 1-A: The offering statement, including the offering circular, used for Regulation A offerings.
Form 10: A registration statement registering a class of securities under the Exchange Act.
Form 12b-25: The notification of late filing for a periodic report, which can provide a short extension if properly filed.
Form 211: The FINRA form a broker-dealer files to initiate quotation of an OTC security.
Form D: The notice filed with the SEC for Regulation D offerings.
Form S-1: The general registration statement for offerings under the Securities Act.
General solicitation: Advertising or other public communication used to offer securities.
Howey test: The Supreme Court test for whether an arrangement is an investment contract, and therefore a security.
Integration: The analysis of whether two or more offerings should be treated as a single offering for purposes of an exemption.
Materiality: Whether a reasonable investor would consider information important, in light of the total mix of information.
MD&A: Management's Discussion and Analysis of Financial Condition and Results of Operations.
OTCQB: The venture market tier of OTC Markets, with reporting, audit, bid price, float, and shareholder requirements.
Regulation A: An exemption permitting public offerings of up to $20 million (Tier 1) or $75 million (Tier 2) in a twelve-month period.
Restricted securities: Securities acquired in unregistered, private transactions.
Rule 10b5-1 plan: A written trading plan that provides an affirmative defense to insider trading claims when properly adopted and operated.
Rule 144: A safe harbor for resale of restricted and control securities.
Rule 15c2-11: The Exchange Act rule governing broker-dealer publication of quotations for OTC securities.
Rule 506(b): The Regulation D exemption permitting sales to accredited investors and up to thirty-five sophisticated non-accredited investors, without general solicitation.
Rule 506(c): The Regulation D exemption permitting general solicitation, provided every purchaser is accredited and the issuer takes reasonable steps to verify that status.
Section 16: The Exchange Act provisions requiring directors, officers, and ten-percent owners to report their holdings and transactions and to disgorge short-swing profits.
Shell company: A company with no or nominal operations and no or nominal assets, or assets consisting mainly of cash.
Super 8-K: The Form 8-K containing Form 10 information that a shell company must file after a transaction ending its shell status.
Toxic financing: Convertible financing with a floating conversion price at a discount to market, which can produce escalating dilution.
Wells notice: A notice from SEC staff that it intends to recommend an enforcement action.