Businesses need to raise capital for a

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1 April 2011 Vol. 25, No. 3 ILLINOIS STATE BAR ASSOCIATION The Counselor The newsletter of the Illinois State Bar Association s Section on Business Advice & Financial Planning Understanding securities issues for private companies By Elizabeth A. Bleakley and Howard Rosenburg Businesses need to raise capital for a number of reasons, including start-up expenses, working capital, inventory, and for expansion and growth. Selling equity or debt securities (an offering ) is one way for a business to raise needed capital. Securities can only be offered and sold in compliance with federal and state securities laws. 1 Under Section 5 of the Securities Act of 1933 (the Securities Act ), a business selling its own securities (an issuer ) must either register the offering or find an exemption from registration (an exemption ). 2 Generally, issuers must give prospective investors ( offerees ) full disclosure of all material facts important to making the investment decision before the securities are sold. 3 Federal and state securities regulators do not endorse securities offerings and most states do not perform merit reviews. 4 Registration is often time-consuming and expensive. Fortunately, the United States Securities and Exchange Commission ( SEC ) and state securities departments have developed uniform exemptions for many types of securities offerings. An issuer can save considerable time and money by qualifying for one or more of these exemptions. However, if an issuer fails to meet all of the conditions for an exemption, then investors may be entitled to rescind (undo) their purchases. 5 An issuer relying on an exemption from registration is not exempt from antifraud, civil liability, or other provisions of federal and state securities laws. 6 Issuers are responsible for any materially false or misleading statements or omissions they make regarding an offering or their company. 7 The SEC enforces federal securities laws and regulations through administrative and civil proceedings and recommends criminal proceedings to the Department of Justice. States also enforce securities laws and regulations and investors may bring private lawsuits against issuers. Even with the benefits of an exemption, a securities offering can be complicated. Factors to consider in deciding how and whether to proceed with an offering include: the amount of capital needed; the number, type, and residency of investors to participate; the disclosures required to be made; the length of time to complete the offering; and the cost of professional services involved. 8 The issuer must also decide what type of securities to offer, such as: common stock, preferred stock, convertible debt, limited partnership interests, or limited liability company membership interests. An issuer may be better served by seeking a loan 9 from a financial institution or the Small Business Administration, which is an exempt security under Section 3 of the Securities Act. 10 I. Security Defined The registration or exemption requirement only applies to a security. Section 2(a) (1) of the Securities Act defines a security as: any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profitsharing agreement... pre-organization certificate or subscription, transferable share, investment contract... or, in general, any interest or instrument commonly known as a security. 11 This definition is intentionally broad and expansive. Courts often apply the Howey test 12 to determine if an interest is an investment contract, which is how many offerings fall within the definition of a security. An interest is an investment contract, and therefore a security, if it is: 1. An investment; 2. In a common venture; 3. With a reasonable expectation of profits; 4. To be derived from the entrepreneurial or managerial efforts of others. Limited liability company interests are considered securities if they meet the Howey test, with emphasis typically being placed on the last prong. 13 Limited partnership interests are generally held to be securities on the same basis. 14 An interest in a general partnership or joint venture is presumptively not a security because profits are expected to be derived from one s own entrepreneurial or managerial contributions to the business. However, this presumption can be overcome if the investor can demonstrate that the investor had no meaningful partnership powers, in effect making the investor equivalent to a limited partner. 15 A promissory note is also a common way for a business to obtain capital, yet many businesses would never think of debt as a security. Whether a note is a security can be determined by the following four-part test: An objective inquiry into the motivations for buying and selling the note; The plan of distribution ; The objective expectations of investors; and Whether regulation would reduce investment risks. 16

2 The Counselor April 2011, Vol. 25, No. 3 There are statutory exemptions for notes with maturities not exceeding nine months and notes obtained from banks or other listed financial institutions. 17 II. Federal and State Securities Laws - Who Governs What? A. Dual Regimes. Federal and state governments each have their own securities laws and regulations under which an issuer must register or find an exemption for any offering. An exemption under federal securities laws does not necessarily mean that the same exemption exists under state securities laws. Issuers often find themselves having to navigate securities laws at the federal level, as well as in each state in which an investor resides. B. National Securities Markets Improvement Act of Under the National Securities Markets Improvement Act of 1996 ( NSMIA ), the SEC retains authority to require that securities offerings be registered at the federal level. States are not permitted to require registration of offerings involving covered securities ; 18 however, states may continue to regulate other types of securities. Covered securities include, among others: Securities issued in exempt offerings under Rule 506 of Regulation D; Securities listed on a national exchange; and Securities issued by an investment company registered under the Investment Company Act of Covered securities do not include securities sold under Rule 504, Rule 505, or many other transactional exemptions. Thus, federal securities laws do not preempt state securities laws under many exemptions and issuers must still find a separate exemption or register at the state level. C. Federal Securities Laws. 1. Securities Act of The Securities Act of ( Securities Act ) is a federal law that has two basic objectives: To require that investors receive financial and other significant information concerning securities being offered for public sale; and To prohibit deceit, misrepresentations, and other fraud in the sale of securities. 21 As the name implies, the Securities Act was passed in 1933 after the Stock Market Crash of Issuers must either register or find an exemption from registration under the Securities Act. 2. Securities Exchange Act of The Securities Exchange Act of ( Exchange Act ) is a federal law that grants the SEC broad authority over the securities industry, including brokerage firms, transfer agents, clearing agencies, and securities self regulatory organizations (SROs), such as the Financial Industry Regulatory Authority ( FINRA ). 23 Even if a company never files a registered offering with the SEC, the company can become public if it has more than $10 million in total assets and a class of equity securities with 500 or more shareholders. 24 The company must then register its securities under the Exchange Act and file periodic reporting with the SEC. 3. Investment Company Act of Companies that engage primarily in investing, reinvesting, and trading in securities of other companies must comply with the federal Investment Company Act of ( Investment Company Act ) and register with securities regulators or must find an exemption from registration. Historically, investment funds have often relied on exemptions from registration under Sections 3(c)(1) and 3(c)(7). 26 Under the Dodd Frank Wall Street Reform and Consumer Protection Act 27 (the Dodd-Frank Act ), funds relying on these exemptions become known as private funds Investment Advisers Act of Any person who is compensated for advising others about investing in securities must comply with the federal Investment Advisers Act of ( Investment Advisers Act ) and register with securities regulators or must find an exemption from registration. The Dodd-Frank Act (and SEC implementing rules) is having a significant impact on investment advisers and investment funds because it: 2 Eliminates the exemption for advisers with fewer than 15 clients, causing a loss of exemption for many previously unregistered advisers to hedge funds and private equity funds, who must now register by July 21, 2011; Exempts from registration advisers to venture capital funds and family offices, as well as private funds with less than $150 million under management; Mandates reporting to the SEC and recordkeeping by many non-registered investment advisers; and Increases the threshold for assets under management ( AUM ) before an investment adviser is required to register with the SEC, bringing more investment advisers under regulation at the state level. D. State Blue Sky Laws. Every state has its own securities ( blue sky ) laws designed to protect its residents from fraudulent securities sales and activities. Among other things, blue sky laws regulate securities offerings, brokerage firms, and investment advisers. Blue sky laws vary from state to state and issuers must register, find an exemption, or make a notice filing in each state in which an investor in an offering resides. III. Types of Exemptions - Generally An issuer may take advantage of an exemption from registration by either offering exempt securities or offering securities through an exempt transaction. An exemption from registration is not an exemption from antifraud, civil liability, or other provisions of federal and state securities laws. 30 A. Exempt Securities. Exempt securities are covered under Section 3 of the Securities Act and corresponding sections of state securities laws. Generally, exempt securities include: bank and government securities; notes and drafts maturing in less than nine months; securities of charitable organizations; securities of savings and loans organizations regulated by state authorities, federal authorities, or both; securities issued by common carriers; securities issued by a bankruptcy trustee or receiver; and insurance, endowment, and annuity policies issued by state-supervised agencies. 31 B. Exempt Transactions. Exempt transactions in securities 32 are covered under Sections 3(b) and 4 of the Securities Act. Section 3(b) provides authority for safe harbor Rules 504 and 505 of Regulation D, Rule 701, and Regulation A. 33 Section 4(2) exempts offerings not made to the public, 34 aka private offerings. Rule 506 of Regulation D is the safe harbor rule adopted under Section 4(2). Section 4(5) 35 exempts offerings made solely to Accredited Investors. Securities acquired in an exempt transaction are restricted securities. 36 The term restricted securities generally includes: Securities acquired directly or indirectly from the issuer in a transaction not involv-

3 April 2011, Vol. 25, No. 3 The Counselor ing any public offering; Securities acquired from the issuer under Regulation D or Rule 701; and Securities acquired from the issuer in a transaction subject to an exemption under Section 4(5) 37 of the Securities Act. C. Safe Harbor Rules. A safe harbor rule is a guideline or set of guidelines on how to technically comply with securities laws that provides the issuer with a presumption the exemption has been met. Attempted compliance does not act as an exclusive election. 38 For example, an issuer s failure to satisfy all of the terms and conditions of safe harbor Rule 506 does not raise any presumption that the exemption provided by underlying Section 4(2) of the Securities Act is not available. 39 D. Public Offering and Private Offering 1. Definition. The terms public offering and private offering are not specifically defined in the Securities Act. Rather, the Securities Act refers to transactions by an issuer not involving any public offering 40 and limitations are placed on the manner of offering. This type of offering has become known as a private offering. 2. Limitation on Manner of Offering. Under a private offering, securities cannot be offered or sold by any form of general solicitation or general advertising, including but not limited to: Any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or any seminar or meeting where attendees have been invited by any of the foregoing; or Any indiscriminate contact by mail, telephone, or similar communicative process Substantive Pre-existing Relationship. To avoid being deemed a public offering, issuers (or their broker-dealers) 42 must have a substantive pre-existing relationship with prospective investors. 43 A substantive relationship exists where the issuer has information regarding a prospective investor that permits the issuer to evaluate the prospective investor s sophistication and financial circumstances. The relationship is pre-existing where it occurs before the offering of the specific investment opportunity. 44 IV. Investors (aka Purchasers) A. Accredited Investors. Generally, an Accredited Investor 45 is a person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person: 1. Any bank or savings and loan association, any broker or dealer, any insurance company, an investment company, a business development company, or a Small Business Investment Company that meets certain criteria; 2. Any private business development company that meets certain criteria; 3. Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, [limited liability company,] Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5 million; 4. Any director, executive officer, [LLC manager,] or general partner of the issuer; Any natural person whose individual net worth, or joint net worth with that person s spouse exceeds $1 million, excluding the value of the person s primary residence; Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person s spouse in excess of $300,000 in each of those years and who has a reasonable expectation of reaching the same income level in the current year; 7. Any trust with total assets in excess of $5 million that meets certain criteria; and 8. Any entity in which all of the equity owners are Accredited Investors. The value of a person s primary residence was excluded from the individual s net worth calculation effective July 21, 2010, with the passage of the Dodd-Frank Act. The change applies to on-going offerings. The Dodd- Frank Act also tasked the SEC with reviewing the entire definition of Accredited Investor now and at least every four years thereafter. B. Non-Accredited Investor. A non-accredited Investor 48 is an investor who does not meet any of the definitions of an Accredited Investor under Rule 501 of Regulation D. Including even one non-accredited Investor triggers significant additional disclosure 3 requirements and may cause the loss of an exemption. C. Sophisticated Investor. A sophisticated investor 49 is a purchaser, either alone or with a purchaser representative, who has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment, and who the issuer reasonably believes immediately prior to making any sale comes within this description. 50 V. Documentation A. Accredited Investor Questionnaire. An issuer should have each prospective investor complete an Accredited Investor Questionnaire on the prospective investor s accredited status and the basis for such status. 51 An issuer may rely on the investor s representations, as long as the issuer s reliance is based on a reasonable belief. B. Subscription Agreement. A Subscription Agreement is a contract between an investor and an issuer regarding the purchase of securities in an offering. A Subscription Agreement should contain disclosures to and representations from investors regarding compliance with the legal requirements for an exemption. Each investor should be required to make representations that the investor, among other things: has reviewed all financial and non-financial information necessary to make an informed investment decision, was given an opportunity to ask questions and receive answers about the investment, is sophisticated, did not receive any general solicitation or general advertising about the offering, and has been advised and understands that the securities are restricted. C. Offering Document. Offering documents have many different names, including: private placement memorandum ( PPM ), private offering memorandum ( POM ), offering circular, disclosure document, and offering memorandum. A Prospectus is an offering document that follows very specific rules for a registered offering of the sale of securities to the public and is filed with the SEC. Offering documents in federally exempt securities transactions are not required to be filed with the SEC, but may be required to be filed in one or more states. When disclosure documents are required, an issuer must disclose all material information required for an investor to make an in-

4 The Counselor April 2011, Vol. 25, No. 3 formed decision about investment in the offering. Disclosure requirements vary depending on the exemption to be met. Generally, private offering documents contain: 52 (a) information about the issuer; (b) risk factors; (c) offering price factors; (d) use of proceeds; (e) capitalization; (f) a description of the securities offered; (g) the plan of distribution; (h) dividends, distributions and redemptions; (i) officers and key personnel of the company; (j) directors of the company; (k) principal shareholders; (l) management relationships, transactions and remuneration; (m) legal matters, including litigation; (n) tax matters; (o) financial statements (historical and pro forma); (p) management discussion and analysis of relevant factors ( MD & A ); and (q) miscellaneous factors. 1. Accredited Investors Only. If Accredited Investors only participate in an exempt offering, generally there are no mandated disclosure requirements. Some issuers merely obtain Accredited Investor Questionnaires and completed Subscription Agreement from prospective investors. However, even if all investors are accredited, issuers should provide adequate disclosures to comply with the antifraud provisions of securities laws. 53 For example, an issuer should disclose if it is experiencing financial distress, has significant leverage, or is dependent upon a patent being granted. An issuer also must inform potential investors of resale restrictions on securities being sold. 54 Issuers may choose to prepare an offering document for Accredited Investors to stay on message, avoid material misstatements or omissions that could be considered fraudulent, and present company specific marketing information and risk factors to prospective investors. The growth stage of the company and the number of prospective investors will also affect an issuer s decision to prepare an offering document. 2. Non-Accredited Investors Included. Under Rule 505 and Rule 506 of Regulation D, if an issuer offers and sells securities to any non-accredited Investors then the issuer must provide them with specific information a reasonable time prior to sale. This information generally includes: 1. The same kind of information that would be required in Part II on Form 1-A of Regulation A or Part I of a registration statement filed under the Securities Act; 2. Audited financial statements; 3. A brief written description of any material written information concerning the offering that has been provided to any Accredited Investor; 4. The opportunity to ask questions and receive answers concerning the terms and conditions of the offering; and 5. The opportunity to obtain any additional information that the issuer possesses, or can acquire without unreasonable effort or expense, that is necessary to verify the accuracy of information furnished. While an issuer is not required to provide this information to Accredited Investors, if both non-accredited and Accredited Investors participate in an offering the issuer should consider providing the information to all investors. VI. Preserving an Exemption. Issuers must use care when relying on an exemption. If even one investor does not meet the requirements for an exemption or required disclosures are not made, the exemption can be destroyed resulting in an unregistered securities offering potentially subject to enforcement or legal action and rescission. 55 In addition, offerings made too close together in time may be integrated, thereby destroying an exemption. However, an issuer may rely on one or more exemptions, and the loss of one exemption does not preclude reliance on another exemption. An issuer claiming an exemption bears the burden of proof. 56 Issuers must exercise reasonable care to determine that purchasers are not underwriters 57 and that the securities have come to rest in the hands of purchasers. 58 Otherwise, the offering is considered continuing and the issuer risks the offering becoming public. Reasonable care is demonstrated by: Reasonable inquiry to determine if the purchaser is acquiring the securities for itself; Written disclosure to each purchaser prior to sale that the securities have not been registered under the Securities Act and cannot be resold unless registered or a separate exemption is available; and Placement of a legend on the certificate or other document that evidences the securities stating that the securities have not been registered and there are restrictions on transferability and sale of the securities. 59 The issuer should also give stop transfer instructions to its transfer agent to prevent 4 restricted securities from changing hands. VII. Issuer s Exemption from Broker- Dealer Registration Generally, an issuer and its agents can rely on the Issuer s Exemption under the Exchange Act 60 to avoid having to register as a broker-dealer. However, this exemption is not available if an employee or associated person of the issuer, among other things: (a) receives compensation, directly or indirectly, related to the sale of the issuer s securities; (b) does not perform substantial duties for the issuer other than those related to the securities; or (c) is or was associated with a brokerdealer within the preceding 12 months. VIII. Rule Resale of Securities Acquired in Exempt Transactions When restricted securities are acquired in an exempt transaction, the securities must be registered or a separate exemption from registration found before the securities can be resold. Rule is a safe harbor rule that allows public resale of restricted securities. Generally, under Rule 144 an investor must hold restricted securities of reporting company issuers 62 for six months before the securities can be resold. Restricted securities of non-reporting issuers 63 are subject to a oneyear holding period prior to resale. Form 144 is required to be filed for certain resales. Even if the conditions of Rule 144 have been met, the securities cannot be resold until the certificate legend or restriction on transfer instructions has been removed. 64 The removal is a matter solely within the discretion of the issuer. 65 State law, not federal law, covers disputes about the removal 66 and the SEC will not intervene on an investor s behalf. Additional Information For additional information on specific securities transaction exemptions, please see the article Regulation D and Other Exempt Securities Offerings, by Elizabeth A. Bleakley and James L. Kopecky. The article is also published by the Illinois State Bar Association for the Business Advice and Financial Planning Council. About the Authors Elizabeth Bleakley is a founding principal of Chicago Loop law firm Kopecky, Schumacher & Bleakley, P.C. Elizabeth has experience in private offerings, securities-related matters, business mergers and acquisitions, corporate governance and business transactional matters. She is the

5 April 2011, Vol. 25, No. 3 The Counselor Ex-Officio Chair of the ISBA Business Advice and Financial Planning Council, a former ABA Business Law Fellow, and serves on the Board of the University of Chicago Booth Alumni Club. Howard Rosenburg is a partner with Chicago based Kopecky, Schumacher & Bleakley, P.C., handling business, investment and securities litigation, and regulatory matters. His experience includes serving as an Enforcement attorney with the SEC, and as General Counsel and Chief Regulatory Officer of a broker-dealer and investment advisor. While working at a major law firm, Howard represented clients in investigations brought by the following regulators: SEC, CBOE, FINRA (NASD and NYSE), state securities regulators, FDA and NCAA. 1. Securities Act of 1933, 15 U.S.C. 77a et seq. (2002); Illinois Securities Law of 1953, 815 ILCS 5/1 et seq. 2. As provided under Sections 3 and 4 of the Securities Act, 15 U.S.C. 77c and d. 3. Q & A: Small Business and the SEC, U.S. SEC, pp. 2-3, (July 2006). 4. Id U.S.C 77l(a)(1). 6. A Guide to Going Public with a Small Business in Illinois, Illinois Securities Department, p U.S.C. 77q; Exchange Act Rule 10b-5, 17 C.F.R b A Guide to Going Public with a Small Business in Illinois, Illinois Securities Department, p In many cases, an issuer s principals will be required to personally guarantee a business loan, even though the business itself would otherwise have limited liability, especially if the company is in the start-up phase U.S.C. 77c U.S.C. 77b(a)(1); see also 815 ILCS 5/2(1). 12. SEC v. W.J. Howey Co., 328 U.S. 293 (1946). 13. SEC v. Glenn W. Turner Enters., Inc., 474 F.2d 476 (9th Cir. 1973); LLC & LLP Interests as Securities, Robert R. Kearinge, 02/10/ Siebel v. Scott, 725 F.2d 995 (5th Cir. 1985); LLC & LLP Interests as Securities, Robert R. Keatinge, 02/10/ Williamson v. Tucker, 645 F.2d 404 (5th Cir.1981); S.E.C. v. Parkersburg Wireless Ltd. Liability Co., 991 F.Supp. 6 (D.D.C. 1997); LLC & LLP Interests as Securities, Robert R. Kearinge, 02/10/ Reves v. Ernst & Young, 494 U.S. 56, (1990); SEC v. J.T. Wallenbrock and Assocs., 313 F.3d 532 (9th Cir. 2002) U.S.C. 77c(a) C.F.R ; Pub. L , 110 Stat (Oct. 11, 1996). 19. Section 18 of the Securities Act of U.S.C. 77a et seq. 21. SEC, The Laws that Govern the Securities Industry, < accessed 04/03/ U.S.C. 78a et seq. 23. SEC, The Laws that Govern the Securities Industry, < accessed 04/03/ U.S.C. 78l(g)(1); 17 C.F.R g U.S.C. 80a-1 et seq. 26. Id. at 3(c)(1) and 3(c)(7). 27. P.L , enacted July 21, Under the Dodd Frank Act, an investment fund that is exempt from registration under Section 3(c)(1) or 3(c)(7) is now defined as a private fund ; Section 43 of the Dodd-Frank Act U.S.C. 80b-1 et seq. 30. Regulation D Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933, Preliminary Note U.S.C. 77c. 32. A private offering of securities to friends and family, per se, is not exempt from compliance with securities laws. A personal loan from a family member to a family member in each individual s name with no expectation of profits in the business or obligation on the part of the business would likely fall outside of the purview of securities laws, but would rest on a facts and circumstances test U.S.C. 77c(b); Mary E.T. Beach, Unregistered Offerings of Corporate Securities including Regulation D and Regulation A, p. 3 (April 2005). 34. See SEC v. Ralston Purina, 346 U.S. 119 (1953); and Resale of Restricted Stock and the Section 4 (1 1/2) Exemption, Jennifer Hagan, Dec A hybrid Rule 4 (1 1/2) has been recognized by some courts for a private resale of restricted securities not involving the issuer where the seller is not deemed to be an underwriter for purposes of Section 4 (1) if the person resells restricted securities under certain conditions. The name of the exemption comes from interpreting Sections 4(1) and 4(2) together. There is some debate over whether this is really necessary or merely the result of a clarification of definitions and roles as they relate to Sections 4(1) and 4(2). 35. Former Section 4(6) of the Securities Act was renumbered to Section 4(5) by Section 944 of the Dodd-Frank Act. 36. Defined in Rule 144a Former Section 4(6) of the Securities Act was renumbered to Section 4(5) by Section 944 of the Dodd-Frank Act. 38. Regulation D, Preliminary Notes, Id. 40. Securities Act Section 4(2) C.F.R (c) Limitation on manner of offering; Regs. under IL Securities Law (d). 42. Issuers may use a registered broker-dealer to satisfy the substantive pre-existing relationship. 43. H.B. Shaine & Co., Inc., No Action Letter, May 1, 1987; Lamp Technologies, Inc., SEC No Action Letter, May 29, 1997; Woodtrails-Seattle, Ltd., SEC No-Action Letter (Aug. 9, 1982). 44. See E.F. Hutton & Co., SEC No-Action Letter, 1985 WL (S.E.C.), at *5 (Dec. 3, 1985) C.F.R Or any director, executive officer, [LLC manager,] or general partner of a general partner of that issuer. 47. The SEC has provided guidance on indebtedness related to the primary residence. See SEC, Division of Corporation Finance, Compliance and Disclosure Interpretations, Q , July 23, C.F.R (b)(2)(ii). 49. Id.;. 50. Id.; SEC v. Ralston Purina, 346 U.S. 119 (1953); Q & A: Small Business and the SEC U.S.C. 77d(2); Peter B. Finn, Structuring 52. See Form 1-A, Regulation A Offering Statement Under the Securities Act of U.S.C. 77a et seq; Peter B. Finn, Structuring 54. A Guide to Going Public with a Small Business in Illinois, Illinois Securities Department, p U.S.C. 77a et seq.; Peter B. Finn, Structuring 56. A Guide to Going Public with a Small Business in Illinois, Illinois Securities Department, p U.S.C. 77b(a)(11) 58. SEC Release No Id. 60. Rule 3a4-1 promulgated under the Securities Exchange Act of 1934 ( Exchange Act ) C.F.R ; Rule 144: Selling Restricted and Control Securities. 62. Issuers that are subject to the reporting requirements of the Exchange Act. 63. Issuers that are not subject to the reporting requirements of the Exchange Act. 64. Rule 144: Selling Restricted and Control Securities, < rule144.htm> (10/06/2003). 65. Id. 66. Id. REPRINTED WITH PERMISSION FROM THE ILLINOIS STATE BAR ASSOCIATION S THE COUNSELOR NEWSLETTER, VOL. 25 #3, APRIL COPYRIGHT BY THE ILLINOIS STATE BAR ASSOCIATION. 5