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Securities Frequently Asked Questions

Securities Frequently Asked Questions

The following questions are representative of inquiries frequently received by our staff members. Click on your question to get to the answer. 

If you don't see your question, please feel free to Contact us or call at (608) 266-1064

 

What is a security?
"Security" is broadly defined. It includes all of the readily recognizable investment instruments, such as stocks, bonds, limited partnership interests, and notes, as well as lesser known vehicles. In general, any investment of money in an enterprise, with an expectation of profits to be earned through the efforts of someone other than the investor, is a security.

 

What is the role of the Division of Securities?
In order to protect investors, Wisconsin law requires that every security that is offered or sold in the state must either be registered or qualify for an exemption from registration. Many of the registration and exemption provisions require a filing to be made with the Division. The filing requirements depend on the registration or exemption provision relied upon. In some cases, the filing requirements may be minimal. In other cases, it will be necessary to file a disclosure document, typically called a "prospectus" or "offering circular," and various exhibits. Regardless of an issuer's filing requirements (even if it has none!), the antifraud provisions of the Securities Law require that all material facts regarding the issuer and the offering be disclosed to prospective investors.

 

How may I obtain copies of Wisconsin's securities statutes and rules?
The Wisconsin Uniform Securities Law and Administrative Rules are available at your local library or accessible from our web site.

 

Does making the appropriate exemption or registration filing in Wisconsin allow me to sell my company's securities in other states?
No, the issuer must generally register or qualify for an exemption from registration in each state in which it wishes to sell. Issuers should also note that the federal government, through the Securities and Exchange Commission (SEC), also regulates securities. The federal system is similar to the state system in that federal registration is required unless an exemption from registration is available. Many issuers making an offering entirely within one state rely on the "safe harbor" provision of Rule 147 from federal registration requirements. This safe harbor could be lost by making offers or sales in more than one state. For information on federal securities regulation, contact the Chicago office of the SEC at (312) 353-7390.

 

I want to sell the offering myself. Do I need to be licensed as a securities salesperson?
Officers, directors, employees or other persons representing an issuer in the sale of its securities must be licensed as securities agents if they receive compensation related to the sale of those securities. Compensation, whether cash or not, may be in the form of commission, bonus, or even salary, if the compensation is based, in whole or in part, upon the person's sales activity.

 

I want to use a broker to sell my offering. Does the Division of Securities have a list of brokers that have sold small offerings in the past?
No. Most small offerings, particularly those under $1 million or so, are marketed by officers of the issuer. Broker interest in these small offerings has been very limited.

 

How can I get a copy of a previously filed offering circular to use as an example for my offering document?
Copies are available for inspection and copying in the offices of the Division of Securities.

 

What is the Midwest Regional Review Program?
The Midwest Regional Review Program allows an issuer of securities, exempt from registering federally with the Securities and Exchange Commission because of an exemption under either Regulation A or Rule 504 of Regulation D, to file an application simultaneously in any or all of the states participating in the Program (Illinois, Indiana, Iowa, Kansas, Michigan, Missouri, Nebraska, North Dakota, South Dakota, and Wisconsin) where it proposes to sell securities. A single member state will be responsible for coordinating the review and communicating with the issuer to resolve issues. Once the single member state has permitted the application to become effective, all other states, where regional review has been requested, will also make the application effective. The issuer must comply with the requirements of the NASAA Statement of Policy Regarding Small Company Registration (SCOR). For more information on SCOR see the next question. Details of the Program and an application may be obtained from any member state.

 

What is the SCOR form and where can I get one?
"SCOR" stands for "Small Company Offering Registration" and the form (also known as the U-7) is a question-and-answer form of prospectus that meets the disclosure requirements of the Wisconsin Securities Law. The SCOR form is available from the Division in either printed format or computer diskette for a prepaid fee of $5. The SCOR form is also available for downloading from the North American Securities Administrators Association ("NASAA") website.

 

Am I required to use the SCOR form?
No. The traditional narrative form of prospectus may always be used.

 

My business has no operating history. Can I still make an offering of securities?
There is no requirement that a business must be in operation for a certain period of time before it can sell its securities. However, a company without a significant operating history that uses the SCOR form may find it difficult to answer the questions. At the very least, a company should complete a thorough (and realistic) business plan before attempting to draft a securities disclosure document. Companies without significant operating histories may also have a more difficult time attracting investors to their offerings.

 

What is the filing fee?
The fee is $1,500 to file an application to register or $200 if a notice filing is required for use of an exemption or if you are seeking a discretionary order of exemption.

 

What forms do I need to file?
Notice filings and discretionary order requests are made by letter. A securities registration filing must use the Adobe PDF Document  Uniform Application to Register Securities (Form U-1) (PDF: 10 KB / 3 pages) and the Adobe PDF Document  Uniform Consent to Service of Process (Form U-2) (PDF: 6 KB / 2 pages). An issuer filing an application under the Midwest Regional Review Program must also file that application.

 

Do I need a lawyer to draft a disclosure document?
There is no legal requirement that a lawyer be retained to prepare a disclosure document. Nevertheless, it is usually quite helpful at least to get input from a lawyer familiar with securities matters. Furthermore, for a registration filing, it is necessary to obtain an opinion of counsel that the issuer has been properly formed and the securities will be validly issued.

 

Can the Division of Securities recommend a lawyer?
We cannot recommend any particular lawyer. We suggest you ask for referrals from your friends and business associates. or call the Wisconsin State Bar Association Lawyer Referral number, (608) 257-4666. One way to get started is to look in the "Attorneys" section of the Yellow Pages. Following the alphabetical listings will be listings by area of practice. One of the areas of practice usually listed is "business and corporate law."