This is the first in a series of articles on Securities Law & Raising Money.

Securities Act of 1933: THE SELLING STOCK ACT

The basic federal law governing the sale of securities is the Securities Act of 1933. I call this the “Selling Stock” Act.

The three principal sections of the 1934 Selling Stock Act that relate to the sale of your company’s securities are:

• Section 5: You have to register your stock with the SEC in order to sell your stock unless there is an exemption available in another section of the 1933 Selling Stock Act. The stock you register is free trading, meaning unless otherwise restricted by SEC Rules, the stock can be sold free and clear of any resale restrictions imposed by SEC rules.

• Section 3: Stock sold under a Section 3 exemption is free trading for all resales, meaning the stock can be sold and resold free and clear of any resale restrictions imposed by SEC rules.

• Section 4: Stock sold under a Section 4 exemption is restricted and not free trading for all resales, meaning the stock can be cannot be resold unless the resale is exempted by other SEC rules.

Section 5 of the Selling Stock Act: The “You have to register with the SEC or find an exemption” Section.

Section 5(a) of the Selling Stock Act provides:

Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly–

1. to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise; or

2. to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale.

Translation: You cannot sell your stock publicly unless you have filed and cleared a registration statement with the SEC.

Registered Securities are generally “free trading,” meaning that they can be resold by the purchaser free and clear of any SEC transfer restrictions if the purchaser is not an insider of the company.

• Shares owned by insiders, meaning officers, directors and control persons, called affiliates, of the company however are never free trading, even if purchased in a public offering.

Michael T. Williams, Esq.

Williams Securities Law Firm

www.gopublicdirect.com

wmslaw@tampabay.rr.com