The Securities and Exchange Commission (the SEC) regulates public companies in the United States. Organizations subject to public reporting requirements must file all sorts of forms, including 10-Ks, 8-Ks, and Proxy Statements. But which businesses count as public companies?
How Companies Go Public
There are three ways companies become subject to SEC reporting.
Section 12(b) — National Securities Exchange
An issuer of securities must register pursuant to Section 12(b) of the Exchange Act if it wants to list securities on a national securities exchange (like the New York Stock Exchange or NASDAQ). To go this route, companies must file a long-form Form 10 or a short-form Form 8-A.
Section 12(g) — Large Companies
Many businesses would rather stay private to avoid burdensome SEC reporting. However, once companies get big enough, they have no choice but to go public.
How big is too big?
According to Section 12(g) of the Exchange Act, companies must start reporting to the SEC once they have:
- Over $10 million of assets; and
- At least 2,000 shareholders (or at least 500 shareholders that aren’t accredited investors)
Section 15(d) — Public Offering
Some companies want to go public but don’t qualify for a national exchange. Perhaps their share price is too low. Or maybe they don’t have enough shareholders. Here’s a list of NASDAQ listing requirements as of March 2021.
If you want to raise money in the public markets, you can still file a registration statement on Form S-1 and publicly offer securities. After the offering, you’ll be subject to SEC reporting requirements under Section 15(d).
Do Other Companies Need to Worry About the SEC?
Yes!
Just because your business isn’t public doesn’t mean you can escape the securities laws. Even private placement (such as those under Rules 506(b) and 506(c)) are within the SEC’s jurisdiction.
If you’re offering securities of any kind, you must undertake a careful analysis to ensure you don’t run afoul of the SEC’s regulations. If you’re not sure whether what you’re selling is a security, check out this article.
Plus, you can always get in trouble for securities fraud. Fraud is bad, whether your company is private or public. Let’s agree to stay away from fraud.
Need Help With SEC Compliance?
If you run a public company and want to ensure you’re complying with the securities laws — or if you’re considering taking your business public — feel free to reach out. I help public companies stay within the SEC’s good graces.