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Classification of Issuance of Securities

13. How are issuers of securities classified for purposes of the registration and offering process?

The rules applicable to an issuing company during the above time periods depend upon the issuer’s classification. The classifications are as follows:

•    Non-reporting Issuer – This refers to a company that is not subject to any SEC reporting requirements at the time of the issuance. This includes non-public companies below a certain capitalization ($75 million).

⁃    Note: Most companies seek to maintain a non-reporting status as long as possible. Many companies will maintain their private status until they reach this reporting threshold. Once the threshold is reached, the company is required to undertake the extensive reporting similar to that of a public company. At this point, the companies often decide to become public companies to open this funding channel.

•    Unseasoned Issuer – This is a company subject to SEC public reporting requirements, but it has either not been subject to the reporting requirements for 12 consecutive months or does not meet the $75 million public float requirement.

•    Seasoned Issuer – A seasoned issuer is a reporting company that has greater than $75 million in public float, but less than $700 million and at least one year of timely reporting.

•    Well-Known Seasoned Issuer (WKSI) – This is an issuer with worldwide stock float of $700M or outstanding debt of $1billion that has been issued within the past 3 years.

Each classification relates to the capitalization of the company or status as a company compelled to report to the SEC. The purpose behind classifying companies in this manner regards the ability of the company to offer for sale or solicit offers to purchase securities during the pre-filing and waiting periods.

•    Discussion: How do you feel about classifying companies and providing different rights to offer for sale or solicit purchasers of securities based upon the capitalization and reporting history of the company? Should there be other considerations that affect the extent of regulation? Why or why not?

•    Practice Question: What are the different classifications of issuers of securities?

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