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Section 134. Securities Act Section 4(2)
us SEC - C&DI - Securities Act Sections
Question 134.01
Question: Can a registration statement for a secondary offering be filed if the securities to be offered pursuant to the registration statement have not yet been sold to the selling security holders?
Answer: No. When the primary sale will be made in reliance upon the Section 4(2) exemption, having a registration statement for resale on file before the private offering takes place would cast doubt upon the validity of the exemption because distribution is clearly contemplated. Also, the registration of a secondary offering under such circumstances may call into question whether the offering is a genuine secondary. The resale registration statement may be filed if securities are privately placed, with the closing of the private placement contingent on filing or effectiveness of a resale registration statement. At the time of filing the registration statement, the purchasers in the private placement must be irrevocably bound to purchase the securities subject only to the filing or effectiveness of the registration statement or other conditions outside their control, and the purchase price must be established at the time of the private placement. The purchase price cannot be contingent on the market price at the time of effectiveness of the registration statement. [Nov. 26, 2008]
Question 134.02
Question: A company with a pending registration statement intends to withdraw the registration statement and immediately thereafter complete the same offering without registration in reliance upon the Section 4(2) private offering exemption. Is this consistent with Section 5 of the Securities Act?
Answer: No. The filing of a registration statement for a specific securities offering (as contrasted with a generic shelf registration) constitutes a general solicitation for that securities offering, thus rendering Section 4(2) unavailable for the same offering. As the Commission noted in Securities Act Release No. 8828 (Aug. 3, 2007), in footnote 122, “the Commission or a court could find a violation of Section 5 where a company begins an offering as a private placement and seeks to complete that offering pursuant to a registration statement, or where a company commences a registered offering and seeks to complete that offering through a private placement, except in those circumstances specified in Securities Act Rule 155.” [Nov. 26, 2008]
Question 134.03
Question: A company proposes to file a registration statement to register issuances of securities to purchasers who committed to purchase securities from the issuer before the filing of the registration statement on the condition that the securities be registered before issuance. Can the company register the issuance of securities to purchasers as a primary offering?
Answer: No. It appears that the purpose of this procedure is to provide the purchasers with registered (rather than restricted) securities. This procedure is not consistent with the registration provisions of the Securities Act, which cover offers and sales of securities, not issuances. In this situation, it appears that the offers were made and the commitments obtained before filing in reliance upon the Section 4(2) private placement exemption. If so, the registration statement should cover resales by the purchasers, not issuances to the purchasers, provided that the purchasers have become irrevocably bound to acquire the securities prior to the filing of the registration statement subject only to conditions outside their control and the purchase price is established at the time of the private placement and is not contingent on the market price at the time of effectiveness of the registration statement. [Nov. 26, 2008]
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