Marketing the IPO – Does an issuer need to disclose ownership by shareholders and/or management? (64)

IPO shares and must be sold pursuant to the IPO prospectus.
Does an issuer need to disclose ownership by
shareholders and/or management?
In addition to information about the issuer itself, federal securities laws are concerned with trading by
“affiliates” of the issuer and public disclosure of affiliate ownership of the issuer’s securities. The SEC has a simple definition of affiliate that is often hard to understand and apply to specific situations. An affiliate is any entity or person that, directly or indirectly, controls or is controlled by or under common control with the specified entity. While there is much written about affiliates, Congress in Section 16 of the Exchange Act has determined that directors, officers and holders of 10% or more of the issuer’s equity securities are persons likely to be affiliates. Therefore, under the Exchange Act, directors, officers and 10% shareholders must report their holdings of a company’s securities as well as their purchases and sales. The initial statement of ownership is on Form 3, which must be filed with the SEC on or prior to the effective date of the registration statement. Subsequent changes in ownership are filed on Form 4, or for certain transactions, on Form 5, all of which are available on the EDGAR system. In addition, under Section 13 of the Exchange Act and its rules, certain existing holders who will own 5% or more of the post-offering shares will be required to file a short-form Schedule 13G within 45 days after the end of the calendar year, since the holder will not have “acquired” securities triggering the long-form Schedule 13D; however, any subsequent transactions in the securities may require an amendment using Schedule 13D.

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