Subscription Agreement dated February 8, 2013 by and between the person whose name(s) appear on the signature page of this Agreement (the «Investor» or the «Undersigned») and China Shouguan Mining Corporation, a Nevada company (the «Company»), at Room 3207, New World Centre, 6009 Yitian Road, Futian District, Shenzhen, PR China; Clem Turner: Yes. There are also a variety of legends [restriction disclosure] that must be placed on subscription contracts sold jointly with Reg S. They wanted to avoid a fictitious transaction to bring their securities to the United States without an otherwise valid registration exemption. Reflux was probably the SEC`s biggest concern when it thought about it. * Manhattan Street Capital Site software automatically checks the location of potential investors and asks the investor to certify their location before allowing a non-U.S. investor to see the Reg S. Kurt Reuss offer: It seems that the SEC is very concerned about the return. What does reflux mean and do you think that was essentially the SEC`s main concern? The undersigned (the «Subscriber») irrevocably subscribes to the number of common shares (the «Shares») listed below at a price of US$0.10 per share and agrees to acquire them from Owlhead Minerals Corp. The Subscriber agrees to be bound by the terms and conditions set out in the attached «General Conditions of Subscription of Shares». This is an offer under Regulation S of U.S. securities laws.
There is a lot of talk about this in the opening remarks to Reg S, but also about the restrictions on resale that try to solve this problem. They divided the transactions into three different categories, which were classified according to the probability that the stock could return to the United States. Reg S requires that the offer of investment and sale to investors outside the United States be made and U.S. investors cannot be informed of non-U.S. investment terms.* This article contains securities attorneys Clem Turner and Jackie Prester and Kurt Reuss, a registered securities dealer who works exclusively in EB-5. Kurt Reuss: The intention of the SEC was essentially to say, «You can sell securities outside the U.S., we just don`t want Americans to rely on unregistered investment offers. Is that essentially how you see it? «Reg S,» which refers to Regulation S, is a set of rules that clarify the U.S. Securities and Exchange Commission`s (SEC) position that securities offered and sold outside the U.S.
do not need to be registered with the SEC. These Investment Subscription and Representation Rules will be entered into as of November 25, 2014 between Aoxin Tianli Group, Inc., a British Virgin Islands company (the «Company»), and the underwriters whose names appear on the signature page(s) (the «Investors»). Kurt Reuss (Moderator): Clem, can you give us some context about Reg S and how it was born?. It should be used only as an exception to the registration of securities and, under no circumstances will other laws associated with an issuer`s offer be relaxed because they have relied on Reg S. THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (THE «SUBSCRIPTION AGREEMENT») RELATES TO AN OFFER OF SECURITIES IN AN OFFSHORE TRANSACTION (THE «OFFER») TO PERSONS WHO ARE NOT, THE PROCESS CAN BE EXTREMELY COSTLY; $1 million is not unknown given accounting fees, legal fees, etc. Once the security is registered, you are subject to the accounting requirements of the Exchange Act, i.e. 10-Qs, 10-Ks, so there are also ongoing costs associated with maintaining your registration. Kurt Reuss: Let`s say that an offer «blew» its exception Reg S.
You will then have to register, comply with the registration requirements and be held responsible at this level. Is that correct, Jackie? An offer under Regulation S may issue shares or debt securities. A company making its offer under Reg S may also use another method to raise capital from U.S. investors – typically Reg D 506c. Most importantly, the SEC takes a close look at every page of it. You have a review and feedback process that comes and goes over and over again. Recording titles can easily take up to a year. Kurt Reuss: Jackie, can you tell the audience what recording entails and what advantage Reg S offers to issuers by not having to register their offer? Write a sentence or two explaining the value of this offer and what the user gets by subscribing. Investors, including EB-5 investors, have the right, under federal securities laws, to get their money back and claim their money plus interest. States may also apply sanctions, fines, sanctions and reparations.
Kurt Reuss is the founder of eb5Marketplace.com. He is a registered investment dealer working exclusively in EB-5. Jackie Prester: To register shares, the SEC requires the filing of a Form S-1 for someone who is not yet a publicly traded company. In general, a registration declaration can contain several hundred pages of information, all of which must be absolutely correct. There is quite a bit of work to be done to file the registration declaration. The SEC can intervene, which means you have to stop your offer until you have properly registered it. They can also impose penalties and fines. Clem Turner: Reg S is essentially a codification of the fact that the SEC understands that its role is to regulate offerings of securities in the U.S. and to protect investors who invest in the U.S. It should be clarified that, to the extent that an offer is made primarily for investments abroad, it would be a valid exemption under the registration requirement of section 5 of the Securities Act. Reg S investors from outside the U.S.
can be of any asset level (which is much easier to work with than in a Reg D). Reg S is a good complement to Reg D because Reg S allows non-U.S. investors to invest in a U.S. company or a non-U.S. company on a basis similar to reg D terms, but without the requirement to be accredited (rich) investors. Regulation S provides U.S. and international (non-U.S.) companies with an SEC-compliant way to raise capital outside the U.S. It is not necessary to have a company in the United States to use Reg S.
Clem Turner: Securities certificates issued in Reg S are required that when the security lands in the United States, it must be due to a registration of the security or some other section 5 exemption. Article 5 requires that all titles be registered unless they meet an exception. Reg S is one of those exceptions, and if these securities return to the United States, the issuer must find another exception. Clem Turner: I think that was it, among other things. First and foremost, the SEC is concerned that U.S. issuers are trying to take advantage of Reg S`s advantages by selling their securities to another country and then returning those securities to the U.S. through resales, which essentially represents paper compliance with «an offshore transaction.» It does not protect you from any liability in case of fraud. Nor does it protect you from the need to comply with other securities regulations such as the Investment Company Act of 1940 or the Exchange Act of 1934 with respect to investor information. There is no SEC registration required for Reg S offerings, but there are methods and best practices that must be followed. We hire a lawyer who will draft a Private Placement Memorandum (PPM) and a subscription contract for your offer – this will describe the investment in legal and financial terms. With the PPM and the subscription contract, you can raise funds online through our platform if we both decide to work together.
The categories where reflux was considered most likely had more limitations in terms of legends. There were also more restrictions in terms of periods and other things to try to avoid the reflux problem. Let me add that in the opening remarks to Regulation S, the SEC also makes it very clear that Regulation S is only an exception under Section 5. Jackie Prester: Under federal securities laws, there are a number of different remedies when a person offers and sells securities that should have been registered but were not. .