Earlier this week, I addressed some common queries regarding California's limited offering exemption, which is often referred to as the "F" exemption because it is found in Corporations Code Section 25102(f). Today's post will address a few more questions.
Is the Commissioner's consent required to transfer shares originally sold in reliance on Section 25102(f)? No. The statute does not require the issuer to impose any legend on the shares (see yesterday's post on the subject of California securities legends). However, Section 25102(f) requires that each purchaser represent that the purchaser is purchasing for the purchaser's own account and not with a view to or for sale in connection with any distribution of the security. Thus, a resale in some circumstances could be viewed as inconsistent with this condition. In addition, any nonissue transactions must be qualified, exempt or otherwise not subject to California's qualification requirement. Cal. Corp. Code § 25130.
Are commissions permitted in Section 25102(f) transactions? The statute does not prohibit the payment of commissions. However, the payment of commissions to an unlicensed broker-dealer or agent can have serious consequences for the recipient and the person paying the commission. Thus, it is important that experienced securities counsel vet any proposed commission payments.
Harvard Shareholder Rights Project Wortwechsel Shows No Signs Of Abating
Stanford Law School Professor Joseph A. Grundfest and Yale Law School Professor Jonathan R. Macey continue to post replies, rebuttals, sur-replies, sur-rebuttals and sur-sur-replies on the Harvard Law School Forum on Corporate Governance and Financial Regulation. The latest, posted by Professor Macey, entitled "Professor Grundfest’s Latest Reply Flip-Flops Allegations and Further Demonstrates that He and Commissioner Gallagher Wrongfully Accused the SRP", is a response to Professor Grundfest's "No Good Deed Goes Unpunished: A Reply to Professor Macey’s Reply". In the midst of this tit-for-tat, former SEC Chairman Harvey L. Pitt posted his reply to the professors, "A Reply to Professors Macey and Grundfest" and Andrew Ross Sorkin took note in The New York Times Dealbook column, An Unusual Boardroom Battle, in Academia. I'm not taking any bets on who will get the last word.
Special note to readers: This is not a complete description of the Section 25102(f) exemption nor is it legal advice. If you are not an experienced securities lawyer, please consult one.