What are unregistered securities or stocks?

By Katie Adams AAA
A:

Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with the Securities and Exchange Commission (SEC). Any stock that does not have an effective registration statement on file with the SEC is considered "unregistered." To sell or attempt to sell a financial security before it is registered is considered a felony.

However, certain exemptions apply. For example, a privately-owned corporation may issue shares of stock to its executives and board members, but the new stockholders must notify the SEC before selling the stock to someone else. In addition, companies can raise capital by soliciting investments from individuals outside the company who are considered to be "qualified investors." The SEC defines a qualified investor as someone who has a net worth of at least one million dollars or an annual income in excess of $200,000. Individuals who meet "qualified investor" status also can become victims of "private offering" unregistered securities scams.

(For more on this topic, read Policing The Securities Market: An Overview Of The SEC.)

This question was answered by Katie Adams.

RELATED FAQS

  1. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ...
  2. Are there regulations against monopolies?

    A monopoly occurs when a single company or group owns all or nearly all of the market for a particular type of product or ...
  3. What is the Dodd-Frank Act? How does it affect me?

    The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation passed by ...
  4. Can a company be state-run and publicly traded at the same time?

    A state-run company or enterprise cannot be publicly traded in the U.S. However, it is possible to purchase shares of state-run ...
RELATED TERMS
  1. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
  2. Asset Liquidation Agreement (ALA)

    A contract between the Federal Deposit Insurance Corporation ...
  3. Adverse Domination

    A legal doctrine that allows regulators to bring litigation against ...
  4. Affordable Market Value (AMV)

    The sale price of a multi-family residential housing unit sold ...
  5. Financial Action Task Force (FATF)

    An intergovernmental organization that designs and promotes policies ...
  6. patent attorney

    A lawyer with expertise in intellectual property law as it pertains ...
comments powered by Disqus
Related Articles
  1. Six Economic Reasons For Hong Kong Independence ...
    Economics

    Six Economic Reasons For Hong Kong Independence ...

  2. Material Adverse Effect A Warning Sign ...
    Markets

    Material Adverse Effect A Warning Sign ...

  3. SEC Filings: Forms You Need To Know
    Investing Basics

    SEC Filings: Forms You Need To Know

  4. Changes In Tax Legislation And Regulation
    Taxes

    Changes In Tax Legislation And Regulation

  5. Footnotes: Early Warning Signs For Investors
    Retirement

    Footnotes: Early Warning Signs For Investors

Trading Center