How To Raise Capital Through Exempt and Limited Offerings
Protecting investors and ensuring efficient capital markets is one of the main purposes of the federal securities laws. Disclosure is one of the primary means through which these two objectives are achieved. This contrasts against the merit-based approach to regulating the capital markets, in which regulators evaluate the suitability of securities offered to the public. While a disclosure-based regime provides market participants with more autonomy, it also relies on their aptitude for discerning worthwhile and legitimate investment opportunities from mere lemons. More importantly, the success of a disclosure- based regime depends on the extent and quality of the disclosure. The securities laws mandate disclosure in a variety of circumstances. For instance, companies whose securities are listed on a national securities exchange must periodically disclose quarterly and annual information with the Securities and Exchange Commission (the “SEC”).1 This provides investors and analysts information upon which to make or recommend investment decisions. Also, when a company reaches a certain size in terms of its total assets and has a class of equity securities held by a certain number of persons, it too must disclose periodic information even if its securities are not listed on an exchange.
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