Silicon Valley Business School

Contents of SVBS Course: IPO & Securities Regulation

In the United States, the sale of shares and other securities to the public is highly regulated. Anyone raising finance from U.S. investors needs a good understanding of what forms of activities and investment structures are tolerated by the SEC and other regulatory bodies. This module provides the student with an understanding of the IPO process, the primary regulatory controls in the United States and the costs and benefits of IPO for startup entrepreneurs. Note: Key aspects of the US securities regulations are mirrored in most countries, and the principles covered in this module are applicable to raising finance in many different parts of the World.

Learning Objectives and Outcomes

Upon completion of this course you will be able to:

Describe how the sale of shares, bonds and other securities are regulated with rules administered by the Securities Exchange Commission in the U.S.
Appreciate when and how the sale of shares and other securities have to be registered with the SEC, and identify the point at which a company is required to start filing reports with the SEC and is required to conform with Sarbanes Oxley regulations.
Identify the steps in the process of registering a company (with the SEC) and selling shares in a U.S. initial public offering (IPO).
Appreciate how startup and smaller companies qualify for exemptions to escape the burden of registering their shares with the SEC when raising finance from venture investors and other accredited investors.


Course Sections

The course is organized into the following sections:

Securities: IPO & Registration
Securities: Exemptions from Registration
Securities: Regulation "D" Exemption
Securities: Regulations Applied to Startup Ventures
Securities: Alternative Exits for Founders and Investors in Startup Ventures
Securities: Insider Trading & Other Securities Liabilities
Securities: The Quiet Period
Securities: Public Disclosure of Material Information
Securities: Crowdfunding
Securities: U.S. Securities Exchange Commission (SEC)
Securities: Selling Securities using modified SEC Registration Procedures
Securities: The Basics
Securities: Brokers, Dealers & Exchanges

Securities: U.S. Securities Exchange Commission (SEC)
  • Video ~ 1929 Wall Street Stock Market Crash
  • Video ~ The New Deal-FDIC & SEC
  • A documentary that looks at the creation of the FDIC and SEC in the U.S., as part of the "New Deal" programs of President Franklin D. Roosevelt.

  • Video ~ How to Submit a Whistleblower Tip to the SEC
  • Sean McKessy, Chief of the SEC Office of the Whistleblower, explains how to submit a tip, complaint or referral to the SEC--and what happens during the process.

  • Reading ~ Mission & History of the SEC
  • The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The SEC oversees the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds.

  • Reading ~ The Laws That Govern the Securities Industry
  • This article introduces laws that governs the Securities Industry in the U.S., which include: Securities Act of 1933; Securities Exchange Act of 1934; Trust Indenture Act of 1939; Investment Company Act of 1940; Investment Advisers Act of 1940; Sarbanes-Oxley Act of 2002; Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and Jumpstart Our Business Startups Act of 2012.

  • Reading ~ SEC Whistleblower Program
  • The whistleblower program was established by Congress to incentivize whistleblowers with specific, timely and credible information about federal securities laws violations to report to the SEC.

    Securities: IPO & Registration
  • Video ~ Are you Selling Securities?
  • The sale of securities is highly regulated by the SEC. It is important to understand that the definition of “securities” is very broad. Securities include company shares and options. Bonds and other forms of debt are also classified as securities.

  • Video ~ The Registration Rule
  • The basic rule for selling securities is that they must be registered with the SEC or they must qualify for a valid exemption.

  • Video ~ The Potential Cost of Failing to Register or Find an Exception
  • Whether it is inadvertent or not, selling unregistered securities can be very costly.

  • Video ~ The Upsides and Downsides of Registration
  • The most obvious upside of registration of securities with the SEC is that it allows the company to raise funds from public investors. There are also downsides and costs to registration.

  • Video ~ When a Private Company is Required to Report by the SEC
  • Video ~ The IPO Registration Process
  • In this voice narrated slideshow, you will get acquainted with the steps involved in the IPO registration process.

  • Video ~ Do's and Don'ts in the Pre-Filing Period
  • Video ~ Do's and Don'ts in the Post-Effective Period
  • Video ~ Failure to Provide Prospectus
  • If one buyer does not get a prospectus when he/she should, all the investors in the public offering can sue for rescission of the sale, and demand a full refund.

  • Video ~ Registration for Follow-On Sales
  • Follow-on offerings are much quicker and easier than the IPO.

  • Video ~ Shelf Registration
  • Large, well-known seasoned issuers can now take advantage of “shelf registration”. They can register securities now for sale during the upcoming three years.

  • Video ~ Registration: Summary
  • Video ~ Why Facebook Was Forced to IPO
  • This video explains why Facebook was forced to register with the SEC, become a reporting company, and why IPO was the logical next step.

  • Video ~ Presentation by Brad Gevurtz on Mergers, Acquisitions, IPO's and Capital markets
  • Video ~ What is an IPO?
  • Read Pages 194-223 Zero-to-IPO
  • This portion of the book, Zero-to-IPO, written by David Smith, focuses on how to prepare a company for the IPO process.

  • Read Pages 51-71 Zero-to-IPO
  • This portion of the book, Zero-to-IPO, written by David Smith, presents tips that can help a company to grow and get to the point where it is ready for IPO.

  • Reading ~ Registration Under the Securities Act of 1933
  • In general, all securities offered in the U.S. must be registered with the SEC or must qualify for an exemption from the registration requirements. The most common exemptions from the registration requirements include: Private offerings to a limited number of persons or institutions; Offerings of limited size; Intrastate offerings; and Securities of municipal, state, and federal governments.

  • Reading ~ IPO Process
  • This article presents an outline of the steps involved in the IPO process.

  • Slideshow Handout ~ IPO--Registering your Shares with the SEC
  • Reading ~ IPO Guide
  • Written by Wilson Sonsini Goodrich & Rosati attorneys, and published by Merrill Corporation, this guidebook explains the IPO process, step by step.

  • Reading ~ IPO Process Guidebook
  • This guidebook provides an overview of the most important aspects of planning, launching and completing a successful IPO.

  • Reading ~ Examples of Different Classes of Shares Following IPO
  • New IPO candidates are breaking with the tradition for having only one class of stock post IPO. Founders are retaining control through special shares and different levels of voting rights.

    Securities: The Quiet Period
  • Video ~ Do's and Don'ts in the Waiting Period
  • After the registration statement is filed with the SEC, you are not allowed to sell or make written offers to sell securities, but you are allowed to circulate the preliminary prospectus and make face-to-face presentation to potential investors.

  • Video ~ Groupon's (Not-So) Quiet Period
  • Reading ~ Quiet Period
  • Reading ~ Quiet Period
  • A quiet period extends from the time a company files a registration statement with the SEC until SEC staff declare the registration statement "effective." During that period, the federal securities laws limit what information a company and related parties can release to the public.

  • Reading ~ Google IPO May Be Delayed
  • Securities: Public Disclosure of Material Information
  • Video ~ How Did Investment Banks Allegedly Deceive Investors In Mortgage-Backed Securities?
  • This video discusses allegations that investment banks concealed important information and risks from investors who invested in residential mortgage-backed securities.

  • Reading ~ Disclosure & Materiality
  • Under the Securities regulation rules, enforced by the SEC in the U.S., information that's important enough to change an investor's decision (on whether to buy or sell the shares) is considered "material". This is clearly, very broad. When material information is available, it must be disclosed to the public via a filing with the SEC.

  • Reading ~ Netflix faces SEC probe over Facebook post
  • Netflix CEO Reed Hastings is under investigation by the Securities and Exchange Commission for posting information about the company on his Facebook page.

    Securities: Exemptions from Registration
  • Video ~ Exemptions from Registering your Shares
  • This voice narrated slideshow summarizes several exemptions available to companies looking to raise funds from investors, without having to incur the cost and administrative burden involved in registering securities with the SEC.

  • Slideshow Handout ~ Exemptions from Registering your Shares
  • PDF slides for the learning material titled: "Video ~ Exemptions from Registering your Shares".

  • Reading ~ Regulation A for Small Public Offerings
  • This article explains what a “Regulation A” offering is. It outlines the differences between Tier 1 and Tier 2 Regulation A offerings.

  • Reading ~ Regulation S Sales to Offshore Investors
  • Reading ~ Intrastate Offerings
  • Section 3(a)(11) of the Securities Act is generally known as the "intrastate offering exemption." This exemption facilitates the financing of local business operations. To qualify for the intrastate offering exemption, your company must: be organized in the state where it is offering the securities; carry out a significant amount of its business in that state; and make offers and sales only to residents of that state.

  • Reading ~ Rule 144: Selling Restricted and Control Securities
  • When you acquire restricted securities or hold control securities, you must find an exemption from the SEC's registration requirements to sell them in a public marketplace. Rule 144 allows public resale of restricted and control securities if a number of conditions are met. This overview tells you what you need to know about selling your restricted or control securities.

    Securities: Regulation "D" Exemption
  • Video ~ Raising Venture Capital with Reg. D
  • All companies raising funds from U.S. investors have to register their shares and other securities with the Securities and Exchange Commission. This voice narrated slideshow investigates how the Private Placement exemption is used to avoid registering shares that are sold in Venture Capital rounds and other private rounds of funding.

  • Slideshow Handout ~ Raising Venture Capital with Reg. D
  • PDF slides for the learning material titled: "Video ~ Raising Venture Capital with Reg. D".

  • Reading ~ Regulation D Offerings
  • Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. Regulation D (or Reg D) contains three rules providing exemptions from the registration requirements, allowing some companies to offer and sell their securities without having to register the securities with the SEC.

  • Reading ~ Rule 504 of Regulation D
  • Rule 504 of Regulation D provides an exemption from the registration requirements of the federal securities laws for some companies when they offer and sell up to $1,000,000 of their securities in any 12-month period.

  • Reading ~ Rule 505 of Regulation D
  • Reading ~ Rule 506 of Regulation D
  • Rule 506 of Regulation D is considered a "safe harbor" for the private offering exemption of Section 4(a)(2) of the Securities Act. Companies relying on the Rule 506 exemption can raise an unlimited amount of money.

  • Reading ~ Accredited Investor Exemption
  • Section 4(a)(5) of the Securities Act exempts from registration, offers and sales of securities to accredited investors when the total offering price is less than $5 million.

    Securities: Regulations Applied to Startup Ventures
  • Video ~ Startups & Securities
  • This voice narrated slideshow provides information regarding how U.S. Securities regulations apply to startup ventures worldwide.

  • Video ~ Regulation A+ & Other Options for Startups
  • Rod Turner, Founder & CEO of Manhattan Street Capital explains how Regulations A and CF can be used by startups.

  • Slideshow Handout ~ Startups & Securities
  • PDF slides for the learning material titled: "Video ~ Startups & Securities".

  • Reading ~ Small Business and the SEC
  • This article is a guide for small businesses on raising capital and complying with the federal securities laws.

  • Reference ~ Information for Small Businesses from the SEC
  • This page provides shortcuts to information for smaller companies on their legal obligations when they sell securities and on their financial and other reporting obligations when their securities are publicly traded.

  • Reading ~ Regulation A+ Mini IPO by the SEC
  • Regulation A is an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period; and Tier 2, for offerings of up to $50 million in a 12-month period.

  • Reading ~ Regulation A+ Mini IPO by SeedInvest
  • Reg A+ of Title IV of the JOBS Act is a type of offering which allows private companies to raise up to $50 Million from the public.

  • Reading ~ Regulation Crowdfunding (CF)
  • All transactions under Regulation Crowdfunding to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal. A company is permitted to raise a maximum aggregate amount of $1,070,000 through crowdfunding offerings in a 12-month period.

  • Reading ~ Rule 506c ~ For Accredited Investors
  • Rule 506(c) permits issuers to broadly solicit and generally advertise an offering, provided that: all purchasers in the offering are accredited investors the issuer takes reasonable steps to verify purchasers’ accredited investor status and certain other conditions in Regulation D are satisfied

  • Reading ~ FAQ on Regulation A+
  • Useful summary of Regulation A+ answering frequently asked questions.

    Securities: Alternative Exits for Founders and Investors in Startup Ventures
  • Video ~ Alternative Routes & Destinations
  • Video ~ Cashing Out Post-IPO
  • Slideshow Handout ~ Alternative Routes & Destinations
  • PDF slides for the learning material titled: "Video ~ Alternative Routes & Destinations".

    Securities: Insider Trading & Other Securities Liabilities
  • Video ~ Honesty with Shareholders
  • Video ~ Business Organizations -- Insider Trading
  • The U.S. securities laws clamp down hard on insider trading, as it is considered unfair to public investors when corporate officers or other insiders trade stock on the basis of inside information not available to the public.

  • Video ~ Business Organizations -- Corporations: Short Swing Profits
  • Video ~ Insider Trading
  • Video ~ High Frequency Trading Lawsuit: City of Providence v BATS
  • This video discusses some of the factual premises underlying the securities fraud lawsuit against high frequency traders and other defendants in a putative class action filed in the Southern District of New York.

  • Video ~ Pleading Requirements of the PSLRA
  • What are the pleading requirements of the Private Securities Litigation Reform Act (PSLRA)? This video discusses some of the basic pleading requirements of the PSLRA and the standards by which a court determines whether a complaint adequately alleges securities fraud.

  • Video ~ PlPSLRA Stay of Discovery
  • What is the Private Securities Litigation Reform Act (PSLRA) stay of discovery? This video discusses how the PSLRA make it more difficult for plaintiffs to start a federal securities fraud civil litigation by denying discovery pending a motion to dismiss.

  • Slideshow Handout ~ Honesty with Shareholders
  • PDF slides for the learning material titled: "Video ~ Honesty with Shareholders".

  • Slideshow Handout ~ Business Organizations -- Insider Trading
  • PDF slides for the learning material titled: "Video ~ Business Organizations -- Insider Trading".

  • Slideshow Handout ~ Business Organizations -- Corporations: Short Swing Profits
  • PDF slides for the learning material titled: "Video ~ Business Organizations -- Corporations: Short Swing Profits".

  • Insider Trading Case ~ Microsoft
  • SEC case against Microsoft employee for insider trading.

  • Reading ~ Social Media Stock Market Case
  • Reading ~ DJ Khaled, Floyd Mayweather Jr. Charged with Cryptocurrency Fraud
  • Music producer DJ Khaled and boxer Floyd Mayweather Jr. were charged by the Securities and Exchange Commission with promoting investments in initial cryptocurrency coin offerings without revealing that they'd been paid.

  • Reading ~ Former Apple Lawyer Charged with Insider Trading
  • Lawyer faces 20 years in jail for insider trading in Apple stock.

  • Reading ~ Penny Stock Fraud
  • Facing up to 20 years as SEC alleges illegal schemes to obtain free-trading shares.

  • Reading ~ SEC Asks Judge to Hold Elon Musk in Contempt
  • Bloomberg reports that the agency claims Musk violated his Oct. 16 settlement with them—which requires him to “seek pre-approval from Tesla Inc. for social media posts and other written communication that would be material to the company or investors.”

    Securities: Selling Securities using modified SEC Registration Procedures
    Securities: Crowdfunding
  • Video ~ Crowdfunding
  • Video ~ What is Crowdfunding?
  • Video ~ Reward or Donation-Based Crowdfunding
  • In this video, you will get acquainted with how reward- or donation-based crowdfunding allows you to raise money online in exchange for a promised gift.

  • Video ~ Equity Crowdfunding
  • This video highlights steps needed in order to land equity investors for your crowdfunding campaign.

  • Video ~ Crowdfunding Raising Equity & Non-Equity
  • Video ~ 5 Reasons SEC Regulation A+ is Revolutionary
  • Reading ~ SEC Adopts "Regulation A+" Rules for Small Companies
  • Reading ~ Perspective: Ignore the Hype – Regulation A+ is NOT Crowdfunding
  • Audio Radio Discussion Re: Crowdfunding Regulation
  • Discussion regarding the contrasting interests of the investor vs. the startup entrepreneur.

  • Reading ~ SEC Approves Limited Crowdfunding with Non-Accredited Investors
  • Press Release regarding the Securities and Exchange Commission's adoption of final rules to permit companies to offer and sell securities through crowdfunding.

    Securities: Brokers, Dealers & Exchanges
  • Video ~ Exchanges, Brokers, Dealers, Clearinghouses
  • After a discussion of the difference between brokers and dealers, the speaker outlines the history of securities exchanges from ancient Rome, to the Amsterdam Stock Exchange and Jonathan's Coffee House in London, until the formation of the New York Stock Exchange. He complements this historic account with an overview of securities exchanges all over the world, covering India, China, Brazil, and Mexico.

  • Video ~ Investment Banks
  • The speaker characterizes investment banking by contrasting it to consulting, commercial banking, and securities trading. Then, in order to see the essence of investment banking, he reviews some of the principles that John Whitehead, the former chairman of Goldman Sachs, has formulated. These principles are the basis for a discussion of the substantial power that investment bankers have, and their role in society.

  • Video ~ Issuers not Required to be Registered Broker Dealers
  • Issuers are not considered brokers because they sell securities for their own account, not for the account of others. If you are a partner, director, officer, or employee of a company that is offering its securities for sale, and you’re not primarily engaged by the company to sell its securities, meaning that you are not being paid commissions and you have other duties for the company, you’ll be considered an “associated person of an issuer” and not be required to register as a broker dealer under the Exchange Act.

  • Reading ~ Broker-Dealer Registration
  • Under Section 15 of the Securities Exchange Act of 1934, most "brokers" and "dealers" must register with the SEC and join a "self-regulatory organization," or SRO.

  • Reading ~ Guide to Broker-Dealer Registration
  • The Securities Exchange Act of 1934 governs the way in which the nation's securities markets and its brokers and dealers operate. This guide to summarizes some of the significant provisions of the act and its rules. You will find information about whether you need to register as a broker-dealer and how you can register, as well as the standards of conduct and the financial responsibility rules that broker-dealers must follow.

  • Reading ~ What is a Broker Dealer?
  • This paper provides a discussion of broker dealers, the regulatory framework and the duties of registered broker dealers. The paper discusses what constitutes a broker and a dealer, and how advisers and agents for buyers and sellers of securities must be aware of the broker/dealer regulations.

    Certificate Course
    This certificate tracks your progress and tests you in each section. Once you have passed all the quizzes, submitted an assignment and reviewed all the materials, you will be awarded a certificate of completion.