Types of SEC Whistleblower Cases:  Unregistered Stock Offerings

Unregistered stock offerings are a widespread form of securities fraud, and are aggressively pursued by the Federal Government when reported as SEC whistleblower cases.

unregistered stock offeringsSince, by their name, unregistered stock offerings are not “registered” with the SEC, many of them go undetected by the Commission until it is too late to stop the perpetrators from scamming investors, and they are often never discovered or reported altogether.

If potential SEC whistleblowers believe that they have information about a person, business or securities firm that is engaging in the sale or promotion of unregistered stock offerings, they can report it to the SEC.

What Are Unregistered Stock Offerings?

When describing a security, the most common example is that of a public company’s stock, sold on an exchange such as the NYSE or NASDAQ, in which investors receive “stock certificates” that authenticate their ownership.

However, the selling of any “investment” in a company, whether debt or equity, and no matter what form it is recorded in, is considered to be a sale of securities.

Regardless of what type of security is being sold to the public, it must be registered with the SEC before the date of sale.

In fact, before a company or brokerage firm can even offer, publicize, promote, solicit interest in, or sell securities to the public, they must be officially registered with the SEC.  If a security is sold or offered to the public without following this procedure, it is an unregistered security.  Doing so is a violation of the Federal securities laws and considered a fraud.

There are no minimum number of violations that must occur for the Commission to initiate whistleblower cases based on unregistered stock offerings.  SEC whistleblower cases can be brought for as little as one promotion or sale of an unregistered security.

Exempt Transactions:  Exceptions To Registration

As with most other areas of securities law, there are exemptions to the registration rules that allow for the sale of specific types of unregistered securities in certain situations.  These rules are part of the Securities Act of 1933 and commonly known as Regulation D or “Reg D”.

All of the rules, requirements, conditions, and exceptions for exempt transactions are too complicated to discuss at length here.  A few examples include, but are not limited to, the following:

    • Qualified or Accredited Investor exemptions;
    • Intrastate Exemptions; and
    • Corporate Insider exemptions.

Additional Information

For more information on unregistered stock offerings, click on the links below: