Inside Securities Law with Frederick M. Lehrer

Section 16 of the Exchange Act applies to three groups of people at a public company: officers, directors, and anyone who beneficially owns more than ten percent of a registered class of equity securities. If you are in one of those groups, you have personal filing obligations, separate from anything the company files.

Three forms.

Form 3 is the initial statement of beneficial ownership. It is due within ten days of becoming an officer, director, or ten percent holder — or, where the company is registering securities, by the effective date.

Form 4 reports a change in beneficial ownership. Due within two business days of the transaction. Two business days. This is the form that gets missed, and it gets missed because people think of it as a company obligation. It is not. It is yours, personally, and your name is on the late filing.

Form 5 is the annual catch-up for exempt transactions and anything that should have been reported earlier. Due forty-five days after fiscal year end.

Now the part with teeth. Section 16(b), short-swing profits.

If an insider buys and sells, or sells and buys, equity securities of the company within any six-month window, any profit from matching those trades is recoverable by the company. Automatically. There is no intent requirement. It does not matter that you had no material nonpublic information. It does not matter that you were not trying to do anything wrong. It does not matter that the two trades were unrelated in your mind. The statute matches the highest sale against the lowest purchase in the window, and the profit goes back to the issuer.

And the company does not have to be the one to enforce it. A shareholder can bring the action on the company's behalf, and there is a well-established plaintiffs' bar that watches Form 4 filings for exactly this pattern.

Two practical consequences.

First, insiders need a pre-clearance process. Before any transaction, someone checks the prior six months. That takes ten minutes and prevents a category of problem that cannot be fixed after the fact.

Second, late Form 4s get disclosed. Delinquent Section 16 filings must be identified in the company's proxy statement. It is a small item that signals a larger one to anyone reading carefully — including the staff.

Section 16 compliance is not complicated. It just requires that someone is actually watching the calendar.

This is Inside Securities Law. I'm Frederick M. Lehrer. General information, not legal advice.

Federal securities law gets the attention. State securities law — Blue Sky law — is where a surprising number of offerings actually go wrong, because issuers forget it exists.

The name comes from an early court decision describing speculative schemes with no more basis than so many feet of blue sky. Every state has its own securities statute, its own regulator, and its own registration and exemption framework. Complying with the SEC does not satisfy them.

Here is the framework you need.

Some offerings are covered securities under the National Securities Markets Improvement Act, which preempts state registration. Rule 506 offerings under Regulation D are covered. Securities listed on the New York Stock Exchange or Nasdaq are covered. Regulation A Tier 2 sales to qualified purchasers are covered.

But preemption of registration is not preemption of everything. States retain authority to require notice filings and fees, and they retain their antifraud authority in full. A Rule 506 offering still requires a Form D notice filing in each state where you sell, generally within fifteen days of the first sale in that state, with a fee. Miss those and you have a problem in that state even though your federal exemption is intact.

And plenty of offerings are not covered at all. Rule 504 offerings. Intrastate offerings. Regulation A Tier 1. Direct public offerings on Form S-1 where the security is not exchange-listed — this one surprises people. Registering with the SEC does not preempt state law unless the security ends up listed on a national exchange. If you are doing a DPO into the over-the-counter market, you need to register or find an exemption in every state where you intend to sell.

Some states apply merit review. The regulator evaluates whether the offering is fair to investors, not merely whether it is adequately disclosed. That is a different standard than the Commission applies, and an offering the SEC would clear can be blocked at the state level.

Practical guidance. Decide early which states you will actually sell into, and limit the offering to those states in writing. Most issuers do not need fifty-state clearance. They need five, done correctly.

And keep records of where every investor resided at the time of sale. That is the fact that determines which state's law applies, and it is the fact nobody can reconstruct two years later.

This is Inside Securities Law. I'm Frederick M. Lehrer. General information, not legal advice.

The day your registration statement goes effective, a clock starts, and it does not stop. This is the part of going public that founders underestimate most consistently.

Three filings define the rhythm.

The Form 10-K is the annual report. Audited financial statements, a full business description, risk factors, management's discussion and analysis, executive compensation, and management's assessment of internal control over financial reporting. The deadline depends on your filer status. Large accelerated filers have sixty days after fiscal year end. Accelerated filers have seventy-five. Non-accelerated filers — which is most companies that have recently gone public — have ninety.

The Form 10-Q is the quarterly report for the first three quarters. Unaudited financials, updated MD&A, updated risk factors, legal proceedings. Forty days for accelerated and large accelerated filers, forty-five for everyone else.

The Form 8-K is the one that catches companies off guard. It reports material events, and it is generally due within four business days of the event. Not four weeks. Four business days. Entry into a material agreement. Termination of one. A completed acquisition. Bankruptcy. A delisting notice. Departure or election of a director or principal officer. A change in auditor. A determination that previously issued financial statements should no longer be relied upon.

That last one — the non-reliance item — is the item that most often precedes a staff inquiry.

Here is what I want to convey. The 10-K and the 10-Q are scheduled. You can staff for them. The 8-K is unscheduled, and it requires that someone inside the company recognizes an event as reportable in real time, on a four-day fuse, usually while that same event is consuming everyone's attention.

The failure mode is almost never a company deciding to hide something. It is a company that had no process for noticing. A CFO negotiates a material contract on a Thursday and does not think of it as a filing event until the following week.

Build the process before you need it. A short written list of trigger events, kept where the finance and legal teams will actually see it. One person who owns the calendar. And a standing instruction that anything ambiguous gets a phone call to counsel the same day, not after the deal closes.

One more point. Risk factors are not boilerplate you write once and copy forward. A risk factor section identical to last year's, in a year when the business changed materially, invites a comment letter.

Missed filings compound. A late 10-K can jeopardize shelf registration eligibility and Rule 144 availability for your shareholders, and it is visible to everyone who looks.

This is Inside Securities Law. I'm Frederick M. Lehrer. General information, not legal advice.

Going Public Is the Beginning: What Happens After SEC Effectiveness

Becoming public is often treated as the finish line. In reality, SEC effectiveness and the beginning of trading mark the start of a new legal and operational system.

In this episode of Inside Securities Law, securities attorney and former SEC enforcement attorney Frederick M. Lehrer explains the continuing responsibilities a company assumes after going public.

Public companies must file periodic reports, disclose material events, maintain disclosure controls, manage insider-trading risks, and ensure that statements remain consistent across filings, interviews, earnings calls, presentations, social media, and investor communications.

Topics include:

• Continuing SEC reporting obligations
• Forms 10-K and 10-Q
• Identifying and escalating material information
• Disclosure controls and procedures
• Tracking material contracts and related-party transactions
• Updating risk factors and management discussions
• Board and accounting documentation
• Evaluating cybersecurity incidents
• Insider-trading policies, trading windows, and preclearance
• Assigning responsibility for disclosure decisions
• The ongoing organizational cost of operating as a public company

Material information can originate anywhere within an organization, including finance, operations, sales, litigation, cybersecurity, human resources, regulatory affairs, or a subsidiary. Effective compliance requires a system that moves important information from the operating level to those responsible for evaluating materiality and preparing disclosures.

Periodic reports should not be reconstructed from scratch near each filing deadline. Companies should maintain an ongoing disclosure record, document material developments as they occur, and clearly establish who identifies, evaluates, drafts, reviews, and approves public disclosures.

The central lesson: a company does not become public merely by completing a transaction. It becomes public by building the systems necessary to communicate accurately, consistently, and on time.

This podcast is provided for general educational purposes only and does not constitute legal advice.

Learn more: SecuritiesAttorney1.com

Host Bio

Frederick M. Lehrer is a securities attorney and former enforcement attorney with the U.S. Securities and Exchange Commission. He advises companies on going-public transactions, SEC registration statements, periodic reporting, corporate disclosure, Regulation A offerings, private placements, and SEC comment letters.

Drawing on his experience inside the SEC and more than two decades in private practice, Lehrer helps issuers prepare securities filings and establish compliance processes informed by how regulators evaluate disclosure, materiality, risk, and investor protection.

He hosts Inside Securities Law with Frederick M. Lehrer, an educational podcast examining the legal and regulatory responsibilities companies face when raising capital, becoming public, communicating with investors, and operating within the federal securities-law framework.

Companies raising capital have every reason to explain their strengths, market opportunities, management experience, and growth potential. The legal risk begins when optimism is presented as certainty.

In this episode of Inside Securities Law, securities attorney and former SEC enforcement attorney Frederick M. Lehrer explains how aggressive promotional language can create material disclosure problems in private placements, Regulation A offerings, and registered securities offerings.

A statement does not need to be completely false to be misleading. A technically accurate statement may still create an inaccurate impression when important context or qualifying information is omitted.

Topics include:

• When legitimate optimism becomes a disclosure risk
• Technically true statements that create misleading impressions
• Describing preliminary discussions as probable contracts
• Claims about product readiness and commercialization
• Revenue projections without a reasonable factual basis
• Why disclaimers cannot cure unsupported predictions
• The limits of generic risk-factor language
• Distinguishing facts, expectations, objectives, and possibilities
• Words such as “guaranteed,” “proven,” “secured,” and “committed”
• Reusing promotional language in securities offering documents
• Evaluating whether significant claims can be supported later

Strong offering documents distinguish between what exists today, what management reasonably expects, what the company intends to pursue, and what remains merely possible. Those categories should not be blended together or expressed with language that turns uncertainty into an implied promise.

Before making a significant investor-facing claim, management should ask:

1. What evidence supports the statement?
2. What information would materially qualify it?
3. How would the statement appear if later reviewed by the SEC, a court, or an investor who lost money?

Good disclosure is not written only for the day an offering closes. It must remain defensible after a missed projection, delayed product launch, failed transaction, or liquidity problem.

The objective is not to make the company sound less compelling. It is to communicate the opportunity accurately without converting uncertainty into certainty.

This podcast is provided for general educational purposes only and does not constitute legal advice.

Learn more: SecuritiesAttorney1.com

Host Bio

Frederick M. Lehrer is a securities attorney and former enforcement attorney with the U.S. Securities and Exchange Commission. He advises companies on securities offerings, private placements, Regulation A, going-public transactions, SEC registration statements, periodic reporting, disclosure compliance, and SEC comment letters.

Drawing on his experience inside the SEC and more than two decades in private practice, Lehrer helps issuers prepare accurate, defensible securities disclosures informed by how regulators evaluate material statements, omissions, risk, and investor protection.

He hosts Inside Securities Law with Frederick M. Lehrer, an educational podcast examining the legal and regulatory responsibilities companies face when raising capital, making disclosures, communicating with investors, and operating within the federal securities-law framework.

An SEC comment letter may look like a list of technical revisions. It is better understood as a regulatory examination of whether a company has explained its business, finances, risks, and material judgments clearly and credibly.

In this episode of Inside Securities Law, securities attorney and former SEC enforcement attorney Frederick M. Lehrer explains what the SEC staff is evaluating during the disclosure-review process—and why answering only the literal wording of each comment may be inadequate.

The staff may ask about a single sentence, financial table, risk factor, transaction, accounting conclusion, or proposed use of proceeds. The underlying concern, however, is often broader: whether the filing accurately reflects the economic reality of the company and provides investors with the material information necessary to make informed decisions.

Topics include:

• What SEC comment letters are designed to accomplish
• Why narrow, literal responses may create additional problems
• Identifying the underlying concern behind a comment
• Conflicts among business disclosures, risk factors, and financial information
• Supporting legal, accounting, and factual conclusions
• Responding when a company disagrees with the SEC staff
• Why every written response becomes part of the review record
• Balancing transaction speed against accuracy
• Coordinating management, securities counsel, auditors, and advisers
• Reviewing the entire filing for related disclosure issues

An effective response should be accurate, complete, internally consistent, and supported by the company’s records and decision-making process. When disclosure is revised, the response should identify the change. When the company disagrees with a comment, it should provide a reasoned legal, accounting, or factual basis.

The objective is not to argue with the SEC staff. It is to understand and resolve the staff’s concern without creating new inconsistencies or unsupported positions.

The central lesson: SEC disclosure review is not simply about placing the correct words in the correct section. It is about whether the filing presents a coherent, supportable, and materially accurate description of the company.

This podcast is provided for general educational purposes only and does not constitute legal advice.

Learn more: SecuritiesAttorney1.com

Host Bio

Frederick M. Lehrer is a securities attorney and former enforcement attorney with the U.S. Securities and Exchange Commission. He advises companies on SEC comment letters, registration statements, periodic reporting, disclosure compliance, going-public transactions, Regulation A offerings, and private placements.

Drawing on his experience inside the SEC and more than two decades in private practice, Lehrer helps issuers prepare accurate, defensible filings and respond to regulatory questions with an understanding of how the SEC evaluates disclosure, materiality, legal support, and investor protection.

He hosts Inside Securities Law with Frederick M. Lehrer, an educational podcast examining the legal and regulatory responsibilities companies face when raising capital, becoming public, preparing SEC filings, and communicating with investors.

Finders, Consultants, and the Unregistered Broker-Dealer Problem

Companies raising capital often hire “finders,” consultants, advisors, or business-development professionals to introduce them to potential investors. But under federal securities laws, the person’s title does not control the legal analysis. What matters is what that person actually does—and how they are paid.

In this episode, securities attorney and former SEC enforcement attorney Frederick M. Lehrer explains why seemingly informal capital-raising arrangements may constitute unregistered broker activity. He discusses the warning signs regulators examine, including investor solicitation, investment recommendations, participation in negotiations, handling documents or funds, and transaction-based compensation.

The episode also explains an important distinction for issuers: qualifying for a private-offering exemption, including Regulation D, does not automatically permit an unregistered intermediary to sell the securities.

Topics include:

• When a finder or consultant may be acting as a broker
• Why transaction-based compensation is a major warning sign
• Payments made through commissions, shares, warrants, or success fees
• The difference between an exempt offering and lawful intermediary activity
• Potential rescission, disclosure, attribution, and enforcement risks
• Problems that may surface during later financings, audits, mergers, or public offerings
• Why carefully drafted agreements cannot cure prohibited conduct
• Steps issuers should take before an intermediary contacts investors

The central lesson is simple: broker-dealer status is determined by substance, not labels. Companies should evaluate an intermediary’s registration status, activities, compensation, communications, and supervisory controls before capital-raising work begins.

This podcast is provided for general educational purposes only and does not constitute legal advice.

Learn more: SecuritiesAttorney1.com

Frederick M. Lehrer is a securities attorney and former enforcement attorney with the U.S. Securities and Exchange Commission. He advises companies on securities offerings, going-public transactions, SEC filings and reporting, Regulation A, private placements, disclosure compliance, and responses to SEC comment letters.

Drawing on his experience inside the SEC and more than two decades in private practice, Lehrer helps issuers structure transactions and prepare disclosures with an understanding of how regulators evaluate compliance, risk, and investor protection in practice.

He hosts Inside Securities Law with Frederick M. Lehrer, an educational podcast examining the legal and regulatory issues companies encounter when raising capital, making disclosures, and operating within the federal securities-law framework.

The “Use of Proceeds” section is one of the most important—and most frequently overlooked—parts of a securities offering. It tells investors exactly how a company intends to use the capital it raises and provides insight into management’s priorities, financial condition, and strategic direction.

In this episode, securities attorney Frederick M. Lehrer explains why generic disclosures such as “working capital” or “general corporate purposes” often fail to give investors meaningful information. He discusses how companies should disclose debt repayment, insider compensation, litigation costs, operating losses, acquisitions, research and development, and other planned uses of offering proceeds while avoiding both misleading omissions and false precision.

The discussion also covers minimum-maximum offerings, management discretion to reallocate capital, consistency throughout the offering document, board oversight, and when changing circumstances may require additional disclosure.

Whether you’re an issuer, investor, founder, executive, or securities professional, understanding the Use of Proceeds section is essential to evaluating both regulatory compliance and management credibility.

Topics covered:

• Why the Use of Proceeds section matters
• Avoiding vague disclosure
• Debt repayment and existing obligations
• Minimum-maximum offerings
• Management discretion over capital allocation
• Consistency throughout the offering document
• Board oversight and disclosure obligations
• Building investor confidence through transparent capital planning

About the series

Inside Securities Law is hosted by securities attorney Frederick M. Lehrer and examines the legal, regulatory, and practical issues that shape capital formation, SEC compliance, securities offerings, corporate governance, and investor protection. Each episode provides practical guidance for companies, boards, founders, investors, and legal professionals navigating today’s securities landscape.

Regulation A Is a Securities Offering—Not a Crowdfunding Shortcut

Regulation A is often promoted as a simpler way for companies to raise capital from the public. But it is not merely a crowdfunding campaign with additional paperwork. It is a regulated securities offering involving formal disclosures, financial statements, SEC review, controlled marketing communications, and—in many cases—continuing reporting obligations.

In this episode, securities attorney and former SEC enforcement attorney Frederick M. Lehrer explains what companies should understand before pursuing a Regulation A offering.

Regulation A provides two offering tiers: Tier 1 permits offerings of up to $20 million within a 12-month period, while Tier 2 permits offerings of up to $75 million. Those limits describe how much a company may offer—not whether the company is financially, operationally, or commercially prepared to complete the offering successfully.

Topics include:

• The differences between Regulation A Tier 1 and Tier 2
• The Form 1-A offering statement and SEC qualification process
• Why SEC qualification does not guarantee investor participation
• Legal readiness compared with market readiness
• Required business, ownership, capitalization, risk, and financial disclosures
• How promotional statements may be compared with the offering circular
• Risks involving videos, interviews, social media, email, and online advertising
• The distinction between expressions of interest and completed investments
• Tier 2 audited financial statements and continuing reporting obligations
• Why Regulation A cannot repair unresolved financial, operational, or governance problems
• The internal systems a company needs after its offering is qualified

A company may invest substantial time and money in a Regulation A offering that becomes legally qualified but remains commercially unsuccessful. Management must therefore evaluate its financial records, governance, working capital, professional team, marketing strategy, investor demand, and capacity to maintain compliance after qualification.

The central lesson: Regulation A can be a useful capital-raising pathway, but companies must approach it as a public securities offering—not an easy substitute for one.

This podcast is provided for general educational purposes only and does not constitute legal advice.

Learn more: SecuritiesAttorney1.com

Frederick M. Lehrer is a securities attorney and former enforcement attorney with the U.S. Securities and Exchange Commission. He advises companies on Regulation A offerings, private placements, going-public transactions, SEC filings and reporting, disclosure compliance, and responses to SEC comment letters.

Drawing on his experience inside the SEC and more than two decades in private practice, Lehrer helps issuers prepare securities filings and structure capital-raising transactions with an understanding of how regulators evaluate disclosure, compliance, and investor protection.

He hosts Inside Securities Law with Frederick M. Lehrer, an educational podcast examining the legal and regulatory issues companies encounter when raising capital, making disclosures, and operating within the federal securities-law framework.

Private Placements: Where Issuers Actually Get Caught

The phrase “private placement” can create a dangerous misunderstanding. Private does not mean informal, unregulated, or outside the SEC’s attention.

A private placement is generally conducted under an exemption from securities registration. It is not an exemption from federal antifraud provisions—and it does not allow an issuer to disregard the specific conditions of the exemption it claims.

In this episode, securities attorney and former SEC enforcement attorney Frederick M. Lehrer explains where issuers commonly create problems when conducting private offerings under Regulation D.

Topics include:

• The differences between Rule 506(b) and Rule 506(c)
• General solicitation and general advertising restrictions
• Public promotion through social media, websites, podcasts, emails, and investor events
• Accredited-investor requirements and verification
• Why checking a box may not satisfy Rule 506(c)
• Conflicts between offering documents and management’s actual conduct
• Material omissions and inconsistent investor communications
• Financial projections and unsupported assumptions
• Unregistered finders and transaction-based compensation
• The purpose and limitations of Form D
• Federal and state notice-filing obligations
• Maintaining an organized compliance record

Rule 506(b) generally prohibits general solicitation and advertising. Rule 506(c) permits broad public solicitation, but every purchaser must be an accredited investor, and the issuer must take reasonable steps to verify that status.

Problems often arise when an issuer’s documents claim compliance with one exemption while its marketing, investor screening, disclosures, or compensation arrangements tell a different story. Merely inserting a rule number into offering documents does not establish the exemption. The company must actually satisfy the rule.

Private placements also remain subject to federal antifraud provisions. Materially false statements and misleading omissions may create liability whether they appear in a formal private placement memorandum, presentation, email, investor call, projection, or due-diligence response.

The central lesson: a private placement is not defined by secrecy or informality. It is defined by compliance with a specific exemption. Private capital can be raised lawfully and efficiently, but “private” should never be mistaken for “unregulated.”

This podcast is provided for general educational purposes only and does not constitute legal advice.

Learn more: SecuritiesAttorney1.com

Host Bio

Frederick M. Lehrer is a securities attorney and former enforcement attorney with the U.S. Securities and Exchange Commission. He advises companies on private placements, Regulation D offerings, Regulation A, going-public transactions, SEC filings and reporting, disclosure compliance, and responses to SEC comment letters.

Drawing on his experience inside the SEC and more than two decades in private practice, Lehrer helps issuers structure capital-raising transactions and prepare securities disclosures with an understanding of how regulators evaluate compliance, risk, and investor protection.

He hosts Inside Securities Law with Frederick M. Lehrer, an educational podcast examining the legal and regulatory issues companies encounter when raising capital, communicating with investors, making disclosures, and operating within the federal securities-law framework.