Wednesday, June 12, 2013 12:37:41 PM
Here is some info on Rule 5 Reg D shares pertaining to microcaps from the DD Support Board and Fraud Research Forum here on IHUB...
SEC Rule 144 is quite clear as to what they expect for registering or using an exemption. However each state varies as to their own requirements for exemptions as you stated. The fact remains from the amount of SEC complaints it is rarely done correctly under both SEC regulations and State regulations.
Reg D Rule 504 is the number one choice for scams and the SEC along with the DTCC have both had long discsussion over how to handle the money laundering that often goes on with this exemption. Fact is that every OTC shell does not qualify for the use of any exemption period, yet the majority use them. In fact most claims of being development stage company are in fact false and it is used often to offer illegal 504's when they are actually shell companies.
So where is it used legally? There are some reporting OTC securities with operations and revenues that qualify to use 504's. In those cases there are some that use "floorless" conversions which would automatically disqualify the issuance. Making it very few that comply with both SEC and State laws
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