A big part of any public offering is knowing the rules of the public shell game. Pleading ignorance after you’ve broken the law is not an excuse from the perspective of regulators. In short, asking for forgiveness is NOT the better than asking for permission. One area where shareholders and management get tripped-up is when companies are looking to raise money using associated persons through Direct Public Offerings. What follows are a few of the rules for raising money using associated persons in a DPO.
When it comes to selling your company’s securities without registration with the SEC, the following rules will apply to associated persons:
The associated person is also restricted to any one or more of the following:
Using associated persons for raising capital is a powerful tool and helps to bypass some of the issues inherent with the SEC when it comes to raising capital for your company. Knowing where such associated persons could trip-up and break the rules is critical so you remain above the law in your efforts to engage in a Direct Public Offering. Once you know the rules involved the question is whether or not a DPO is the right option among many for your private company. That will often involve going through the detailed cost and timing analysis of a Direct Public Offering vis-a-vis other options.