Company Registration and the Private Placement Exemption

Over the last twenty years, there has been a steady shift in securities disclosure regulation away from its traditional transactional basis toward a system of company registration. Under the transaction based approach, each new public offering of a security has to be registered under the Securities Act of 1933 (the 1933 Act ), a requirement that reflects the SEC\u27s traditional concern that the most important time to have high-quality disclosure is at the moment of a securities offering. Under the company registration approach, an established, publicly traded issuer would register just once, provide information thereafter on a periodic basis, and then be able to offer and sell securities whenever it wishes, without the need to register the securities themselves. The logic of the shift to company registration rests on two pillars. One is the fact that pursuant to the periodic reporting requirements of the Securities Exchange Act of 1934 (the 1934 Act ), publicly traded issuers are already required on a continuing basis to answer most of the questions that they have been traditionally been asked to answer when they registered new offerings of securities under the 1933 Act. The other is the efficient market hypothesis, which holds that all information contained in an established issuer\u27s periodic reports is immediately reflected in the trading price of the issuer\u27s securities. Registration of new offerings, the logic suggests, serves no useful purpose since it simply involves repetition of information already reflected in the issuer\u27s secondary market share price, which in turn will set the price of the new offering