§15.6 - Considerations Relating to Offering Disclosures

• Jurisdiction: Washington

§15.6 CONSIDERATIONS RELATING TO OFFERING DISCLOSURES

The foregoing discussion has focused primarily on the specific registration requirements relating to securities transactions and the exemptions from registration that may be available. No discussion of securities regulation would be complete, however, without some discussion of the disclosure requirements generally applicable to securities transactions.

(1) Importance of disclosure

"Sunlight is said to be the best of disinfectants; electric light the most efficient policeman." Justice Louis Brandeis, OTHER PEOPLE'S MONEY: AND HOW THE BANKERS USE IT (1933) (with Norman Hapgood).

Although state regulation continues to include a component of "merit" review, it is fair to say that the touchstone of federal and state securities regulation is the "electric light" referenced by Justice Brandeis: full and adequate disclosure to investors.

With respect to registered securities offerings, legal advice to an issuer is guided by the specific requirements of the registration statement. At the other end of the spectrum, however, is an offering conducted pursuant to Rule 506 of SEC Regulation D, 17 C.F.R. § 230.506, and directed solely to accredited investors. In such a circumstance, there are no specifically enumerated disclosure obligations. It would be a mistake, however, to advise a client that such an offering may be conducted without adequate disclosure. Both federal and state securities laws contain extensive and broadly construed antifraud provisions. In the same breath, those provisions prohibit both the misstatement of a material fact and the "omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not...