What is Rule 405 of the Securities Act?

The term “control” is defined in Rule 405 under the Act as “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.”

What are the benefits of being a Wksi?

The most significant advantage of being a WKSI involves the filing of an automatic shelf registration statement on Form S-3. A Form S-3 filed by a WKSI is automatically effective and, consequently, not subject to the SEC review process (such registration statements are filed on Form S-3ASR, a distinct EDGAR form type).

What does Wksi stand for?

Well-Known Seasoned Issuer (WKSI) is a concept adopted by the United States Securities and Exchange Commission (SEC) in 2005.

What is Rule 144 of the Securities Act?

Rule 144 provides an exemption and permits the public resale of restricted or control securities if a number of conditions are met, including how long the securities are held, the way in which they are sold, and the amount that can be sold at any one time.

What is a promoter for Form D?

The definition of “promoter” is found in Rule 405 of the Securities Act. Rule 405 defines “promoter” very broadly and includes officers, directors, and direct or indirect control persons of entities involved in the launch of an enterprise.

What is an affiliate for Rule 144 purposes?

Rule 144 at (a)(1) defines an “affiliate” of an issuing company as a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer.”

Who qualifies as a WKSI?

For an issuer to qualify as a WKSI, they must satisfy the three requirements of SEC Rule 405: The issuer must meet the requirements of Form S-3. This essentially requires that the issuer has (a) timely filed periodic reports for 12 calendar months and (b) not defaulted on any indebtedness or long-term leases.

How do you determine if a company is a Wksi?

A WKSI is an issuer that, among other things, has a worldwide market value of its outstanding voting and non-voting common equity held by non-affiliates of $700 million or more, as of any date within 60 days of the determination date.

Can an emerging growth company be a Wksi?

Yes, an emerging growth company may use a shelf registration statement. For a limited period of time, an issuer may be both an emerging growth company and a WKSI. Smaller emerging growth companies may use a shelf registration statement, subject to the one-third cap described above.

Who Does Rule 144 apply to?

Rule 144 applies to the sale into the public securities market of restricted stock by anyone and of unrestricted stock sold by a controlling person (“affiliate”) of an issuing company. Sales into the public market involve a brokerage firm and are not face-to-face sales negotiated between a seller and a buyer.