Reporting Obligations under the Securities Exchange Act of 1934

This week we’ll look at the Advisory Committee on Small and Emerging Business’ Recommendations Regarding Registration Requirements and Reporting Obligations under the Securities Exchange Act of 1934.

Do you know the law, rules and regulations about when a company has to become a 1934 Act reporting company?  And why is this important anyway?

It’s important because when you become a mandatory 1934 Act reporting company you must file K’s, Q’s and 8-K’s.  But you also become subject to the insider trading system, including the short swing profits limitations of section 16(b) and ownership reports including Schedule 13-D and ownership reports on Forms 3, 4 and 5.  In addition, you are subject to all of the proxy rules.  Filing all these reports is expensive.

I’ve never seen a good summary of these laws, rules and regulations all in one place.  The Committee lays them out in this recommendation, as follows:

  1. Under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act’) and the rules of the Securities and Exchange Commission (the “Commission”) thereunder, a company is required to register a class of its equity securities and is subject to a reporting obligation under the Exchange Act if, at the end of the company’s fiscal year, the securities are held of record by 500 or more persons and the company has total assets exceeding $10 million;
  2. A company becomes subject to a reporting obligation, under Section 15(d) of the Exchange Act, upon effectiveness of a registration statement relating to an offering of the company’s securities under the Securities Act of 1933;
  3. Under Section 12(g)(4) of the Exchange Act and Rule 12g-4 thereunder, a company that has a class of securities registered under Section 12(g) may terminate that registration and suspend its reporting obligation when the number of holders of record of that class falls below 300 or, alternatively, when the number of holders of record of that class falls below 500 and the company’s assets have not exceeded $10 million at the end of each of  its last three fiscal years;
  4. Under Rule 12g5-1 under the Exchange Act and Commission staff interpretations, the definition of “held of record” includes only those persons who are registered as shareholders on the records maintained by a company, which means that a broker-dealer or other securities intermediary that holds securities of a company would be registered on the records of the company as only one holder even if it holds securities of that company on behalf of a large number of clients, each of whom would be a beneficial owner; and
  5. Section 15(d) of the Exchange Act and Rule 12h-3 of the Commission’s Exchange Act rules provide for the suspension of a company’s Section 15(d) reporting obligation under the same thresholds as those that apply to suspending a Section 12(g) reporting obligation;

So you can keep this little summary handy for easy future reference on this issue.

Next blog we’ll look at the Committee’s analysis of these laws, rules and regulations and their recommended changes.

As always, if you want more information about this or any other securities law issue, you can e-mail Michael at and Todd Feinstein at   And check out our website at  Or just Contact Us.

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