This webinar provides an overview of securities law, including defining what constitutes a security, the key laws governing offers and sales of securities, registration requirements and available exemptions, consequences of failing to comply, and secondary market operations. A panel of securities law experts from large law firms discuss the fundamentals and latest developments in this area.

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5. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
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6. Meet the Faculty
MODERATOR:
Vanessa Schoenthaler - Sugar Felsenthal Grais & Helsinger LLP
PANELISTS:
Alissa Parisi - K & L Gates LLP
Julia Vax - Arnold & Porter Kaye Scholer LLP
Craig Mordock - Sheppard, Mullin, Richter & Hampton LLP
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7. About This Webinar
Securities Law: An Overview
Stocks and bonds are easily recognizable as securities, but did you know that promissory
notes may also be securities? So can certain joint venture interests and many other types of
investment contracts. Then there are cryptocurrency altcoins, which are sometimes securities
and sometimes not.
How do you identify a security? What are some of the requirements related to offering and
selling securities? How do they differ between private and public companies? What happens
if you fail to comply with securities laws? How has legislation like the JOBS Act, the FAST Act
changed the way in which companies offer and sell their securities?
In this webinar our expert panel provides you with a high-level overview of the federal
securities laws as well as tangible examples and practical advice in answer to these and
many more questions.
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8. About This Series
Securities Law Made Simple (Not Really)
The federal securities laws, made up of a interwoven collection of Congressional statutes,
rules and regulations promulgated by the Securities and Exchange Commission and federal
judicial precedent, play a ubiquitous role throughout a company’s life-cycle, relevant from the
first issuance of founder shares at organization, to the use of equity compensation to reward
and incentivize directors, employees and consultants, to offerings of equity and debt in
corporate finance transactions, to initial, secondary and alternative public offerings, in
mergers and acquisitions, strategic transactions and beyond. This webinar series of leading
securities law experts discusses both the fundamentals of the federal securities laws and the
latest developments in this ever-evolving area of law.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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9. Episodes in this Series
#1: Securities Law: An Overview
Premiere date: 5/14/20
#2: Private Offering Exemptions and Private Placements
Premiere date: 6/4/20
#3: Public Company Reporting
Premiere date: 7/16/20
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10. Episode #1
Securities Law: An Overview
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11. Background on Securities Law
 The regulation of securities in the United States is governed by both state and federal
legislation.
 Sometimes the federal laws preempt state laws.
 Sometimes you need to comply with certain aspects of both.
 The first federal securities laws were enacted as part of President Roosevelt’s New Deal
legislation following the 1929 stock market crash (the market lost a staggering 89% of its
value) and an investigation into stock market manipulation.
 Before the federal securities laws were enacted, beginning around 1911, most of
the states had enacted their own securities laws.
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12. What is a Security?
 The term “security” is defined in §2(a)(1) of the Securities Act and §3(a)(10) of the Exchange
Act in virtually the same way:
 “[A]ny note, stock, treasury stock, security future, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or
privilege on any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle, option, or
privilege entered into on a national securities exchange relating to foreign currency, or, in
general, any interest or instrument commonly known as a “security”, or any certificate of
interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or
warrant or right to subscribe to or purchase, any of the foregoing.” Sec. 2(a) Securities
Act of 1933.
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13. What is a Security?
 On the federal level, the definition of a “security” is covered by the Securities Act of 1933.
 It includes obvious things like “stocks” and “bonds”.
 It also includes not so obvious things that may require interpretation like “evidence of
indebtedness” and “investment contracts”
 This often leads to questions like is a promissory note a security?
 And what exactly is as an investment contract?
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14. What is a Security?
 In the case of promissory notes: there are certain types of notes that are exempt or have
been found by the courts not fall within the definition of a security, for example:
 Notes with a maturity of nine months or less;
 Notes secured by a mortgage;
 Notes secured by a lien on a business’s assets; or
 Notes evidencing a loan by a commercial bank for current operations.
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15. What is a Security?
 If a given promissory note is not included among the types of notes that are excluded
from the definition of a security, there is a four-factor test that is used to analyze whether
the note should be considered a security.
SHOULD A NOTE BE CONSIDERED A SECURITY? FOUR FACTOR TEST:
1. Motivation:
 Is the seller’s purpose to raise money for general business use or to finance
substantial investments?
 Is the buyer interested primarily in the profit the note is expected to generate,
including interest?
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16. What is a Security?
2. Plan of Distribution:
 Does the plan of distribution for the note resemble the plan of distribution of a
security?
3. Reasonable Expectations:
 Would the investing public reasonably expect that the note is a security?
4. Regulatory Scheme:
 Is there a regulatory scheme that protects the investor other than the securities
laws (e.g., Federal Deposit Insurance)?
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17. What is a Security?
 There is also a four-factor test used to analyze whether a contract is an investment
contract. This test was articulated in SEC v. W.J. Howey Co., 328 U.S. 293 (1946):
 Investment of Money
 Common Enterprise
 Expectation of Profits
 Substantially from the Efforts of Others
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18. What is a Security?
 Remember, securities are regulated on both the federal and state levels.
 There are a number of states, California being the largest, that use a slightly
different test to analyze whether something is a security, so it is possible that
while you may not have a security for purposes of the federal securities laws, you
might nevertheless have one for purposes of state securities laws.
 Accordingly, if you are offering and selling an instrument that might fall within the
definition of a security you will need to either register the instrument or ensure that there
is an exemption from registration available.
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19. Which Laws Govern the Offer and Sale of Securities?
 Federal and state laws, rules, regulations and common law.
 The first federal securities laws were enacted following the 1929 stock market crash.
 The Securities Act of 1933, as amended (Securities Act), regulates offers and sales of
securities, generally requiring that all securities either be registered or exempt from
registration before being offered and sold.
 The Securities Exchange Act of 1934, as amended (Exchange Act), created the
Securities and Exchange Commission (SEC) and regulates an issuer’s information
disclosure requirements, as well as things like securities exchanges, trading platforms
and intermediaries, like broker-dealers.
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20. Who is Responsible for Administering & Enforcing
the Securities Law?
 The SEC is the agency primarily responsible for administering the federal securities
laws.
 The SEC has an Enforcement Division responsible for prosecuting civil violations of the
federal securities laws.
 The Department of Justice (DOJ) US Attorneys’ Offices are responsible for prosecuting
criminal violations of the federal securities laws.
 Each state also has a regulatory body responsible for administrating and enforcing that
state’s securities laws.
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21. What Does the Registration Process Entail?
 The most commonly-known registration process is the initial public offering (IPO),
although there are many different types of registration requirements.
 Registering securities for sale in an IPO entails:
 Preparing a registration statement and filing it with the SEC.
 Undergoing a comment and review process.
 Simultaneously applying for an exchange listing
 Once an IPO registration statement has been declared effective by the SEC, there are
ongoing disclosure and reporting requirements under the Exchange Act.
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22. What are Some of the Available Exemptions from Registration?
 Most federal exemptions from registration requirements fall into two categories:
 Exempt securities; and
 Exempt transactions.
 State-level registration requirements may also apply, unless preempted by federal law:
 NSMIA – National Markets Securities Improvement Act – preempts state law for
many, but not all, federally-exempt transactions
 Watch out for state (“blue sky”) requirements in private placements not covered by
NSMIA.
 State anti-fraud statutes and notice requirements are still applicable, regardless of
preemption.
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23. What are Some of the Available Exemptions from Registration?
 Federal Exemptions - Common Exempt Securities under the Securities Act:
 Government and bank securities – Section 3(a)(2);
 Commercial paper – Section 3(a)(3);
 Securities issued in bankruptcy – Section 3(a)(7);
 Securities issued in exchange with existing security holders – Section 3(a)(9);
 Securities issued pursuant to a fairness hearing - Section 3(a)(10); and
 Securities offered and sold to persons within a single state – Section 3(a)(11).
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24. What are Some of the Available Exemptions from Registration?
 Federal Exemptions - Common Exempt Transactions under the Securities Act:
 Transactions by an issuer not involving a public offering:
 Section 4(a)(2) (and related Regulation D or Regulation S safe harbors)
 Rule 701 - employee/service provider equity incentive grants
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25. What are Some of the Available Exemptions from Registration?
 Federal Exemptions - Common Exempt Transactions under the Securities Act (cont’d):
 Transactions by persons other than an issuer, underwriter or dealer:
 Section 4(a)(1)
 Rule 144
 Rule 144A
 Section 4(a)(7) – FAST Act
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26. How Have the JOBS Act and FAST Act Changed the
Securities Law?
 Section 4(a)(7)
 General Solicitation
 Regulation A+
 Crowdfunding
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27. Failing to Comply With Securities Law
 Failure to comply with the securities laws can give rise to liability in a number of different
ways, which broadly fall into two categories: Civil Liability and Criminal Liability.
 Civil Liability
 Investors can bring private civil actions for fraud or inadequate or misleading
disclosure;
 The SEC can also bring civil enforcement actions for fraud or inadequate or
misleading disclosure as well as for things like insider trading (even if you’re a
private company; See e.g., the enforcement action against Stiefel Laboratories)
 Each of the state level securities regulators has similar authority.
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28. Failing to Comply With Securities Law
 Remedies generally include things like:
 Investors can be awarded damages;
 Investors may also have a right of rescission (meaning an issuer would be
required to offer to repurchase any securities sold in violation of the securities
laws with interest);
 The SEC and state securities regulators can seek penalties and fines as well as
cease-and-desist orders and injunctions.
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29. Failing to Comply With Securities Law
 Criminal Liability
 The SEC is an administrative agency, so it does not have the authority to
prosecute criminal matters.
 The SEC can refer matters to the DOJ for investigation and criminal prosecution.
 Both the SEC and the DOJ may pursue civil and criminal matters simultaneously.
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30. Failing to Comply With Securities Law
 Criminal Liability (cont’d)
 On the state level, state Attorney Generals’ offices often prosecute violations of the
securities laws.
 On the state level, securities violations involving Regulation D, Rule 506 offerings
are the most commonly pursued enforcement actions.
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31. How Do Resale & Secondary Markets Operate?
 Private resale exemptions:
 Rule 144
 Rule 144A
 Section 4(a)(1 ½)
 Section 4(a)(7)
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32. How Do Resale & Secondary Markets Operate?
 Secondary market sales:
 Examples for registered securities
 NASDAQ or NYSE
 Examples for unregistered securities:
 SharesPost
 EquityZen
 ForgeGlobal (formerly Equidate)
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33. What Happens Once a Company Sells Securities, Whether
to Friends and Family or to Other Investors?
 Securities issued in an unregistered offering are “restricted securities.”
 For a transfer or resale to take place a restricted security must either be registered or
exempt from the registration requirements of the Securities Act.
 Resales without registration can take place in both privately negotiated transactions and
publicly using Rule 144.
 Rule 144 generally allows non-affiliate public resales of a private company’s restricted
securities following a one-year holding period.
 Contractual provisions may also effect transfers or resales, for example, the original
purchase agreement or issuance award may be made subject to a right of first refusal.
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34. About the Faculty
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35. Vanessa Schoenthaler - vschoenthaler@sfgh.com
Vanessa Schoenthaler is a partner in the New York office of Sugar Felsenthal Grais & Helsinger. She focuses
her practice on corporate and securities matters with an emphasis on private and public securities transactions,
compliance and disclosure obligations and corporate governance matters. Her clients rely on her deep
experience navigating the complexities of both the public and private securities regulatory environment.
Vanessa's corporate finance experience ranges from advising investors and development stage companies in
early round financings to representing issuers and intermediaries in registered and exempt offerings of equity
and debt securities. She has worked with foreign and domestic issuers on matters such as periodic and ongoing
disclosure obligations, corporate governance practices, exchange listing standards, joint ventures, equity
compensation arrangements, ESOP transactions and mergers, acquisitions and dispositions.
Vanessa counsels foreign and domestic sponsors, private funds and investment managers with regard to
formation and operation, investment adviser registration, and periodic and ongoing disclosure obligations. She
also guides her clients in structuring investments, compliance with regulatory requirements (including under
Section 13, Section 16 and Rule 144) and addressing insider trading issues.
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About The Faculty

36. Alissa Parisi - alissa.parisi@klgates.com
Alissa Parisi is a partner in K&L Gates’s Corporate/M&A practice group and resides in the Washington, DC
office. Ms. Parisi advises clients on a full range of corporate, securities, governance and compliance matters.
Ms. Parisi has significant experience in advising boards and executive management on complex business
and operational matters, including in the areas of risk assessment, implementation of governance initiatives
and alignment of corporate strategy to achieve corporate goals. She also acts as corporate counsel for
companies, advising on a host of general corporate matters, including fiduciary duties, management
transitions, relationships with shareholders and effective approaches to the changing regulatory environment.
Ms. Parisi advises companies on compliance matters relating to the SEC, NYSE, Nasdaq, state regulators
and other authorities. Her compliance experience includes preparing of SEC reports, advising with respect to
the timing and substance of disclosure of material events and counseling with respect to shareholder
meetings. Ms. Parisi also represents publicly and privately held entities in merger and acquisition
transactions. She has broad experience in representing clients in the structure, negotiation, diligence and
documentation of transactions ranging from several million dollars to several billion dollars. Ms. Parisi serves
as co-chair of the Women in the Profession Committee and the Associate Development Committee.
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About The Faculty

37. About The Faculty
Julia Vax - julia.vax@arnoldporter.com
Julia Vax focuses her practice on corporate and securities laws in representing emerging growth
and public companies, primarily in the life sciences and technology sectors, from formation and
early-stage capital raising to publicly traded entities. Ms. Vax has advised clients in the
biopharmaceutical, genomics, medical device, diagnostics, Internet and digital media, software, IP
telephony, telecommunications and financial services sectors in all aspects of their corporate
development and in connection with a broad range of financing and strategic transactions. Ms. Vax
has extensive experience in IPOs, Rule 144A transactions, shelf registrations, private placements,
including PIPE transactions and venture capital financings, as well as in executive compensation,
corporate governance and SEC reporting and compliance for public companies. She has been
involved in numerous public and private financing transactions representing companies, investors,
underwriters and placement agents. Ms. Vax is a faculty member at the Center for International
Legal Studies and has taught US corporate securities laws at the University of Tartu, Estonia,
School of Law, as a Visiting Professor in the Fall 2017.
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38. About The Faculty
Craig Mordock - CMordock@sheppardmullin.com
Craig Mordock is a partner at Sheppard Mullin, where he maintains a corporate and securities practice
with special on private and public securities offerings, corporate governance, and mergers and
acquisitions. His corporate finance experience ranges from representing venture capitalists, institutional
investors, and start-up companies in early-stage financings to representing issuers and investment banks
in public offerings of equity and debt securities. He advises purchasers and sellers of companies in a
variety of industries, including software, communications, semiconductors, life sciences, renewable
energy, consumer products, and financial services. Craig has extensive experience representing public
companies in connection with disclosure and compliance matters under the Securities Act of 1933 and
the Securities Exchange Act of 1934 and provides general corporate and business counseling to several
privately held companies. He regularly counsels boards of directors and board committees in connection
with their duties under state and federal law as well as their compliance with the rules of self-regulatory
organizations such as the New York Stock Exchange and NASDAQ. Craig has been a speaker at
numerous conferences on securities and corporate governance matters and has published articles on
various topics in these areas.
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39. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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40. About Financial Poise
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