500 Investor Rule
Categories: Board of Directors, Company Management, Entrepreneur, Incorporation, Investing, Tech
Facebook ran into this problem. It stayed private for so long, and raised money from so many investors, that it pierced the 500-investor maximum rule...or at least got very close to hitting it. As a result, it encouraged aggregation, i.e. existing investors were encouraged to buy out smaller investors. At over 500 investors, a company is required by the SEC to, more or less, behave—and file—like it's a publicly traded company subject to all of the regulatory pains that go with it. Endless filings. Armies of lawyers and compliance officer stuff. Blech. Having over $10 million in assets is another hurdle companies jump to, and then require the filing garroting, with all efforts having to be fully filed within 120 days of the end of that company's fiscal year. Ouch.
Related or Semi-related Video
Finance: What are Pink Sheets?4 Views
Finance a la shmoop what are pink sheets? well they're just white sheets which got [White sheets in a washer]
washed with one new red sock thrown in yeah you know what we're talking about but
they're also a publication by the national quotation Bureau that lists
prices of over the counter or OTC stocks usually shares of delisted that are very
small thinly traded companies that pretty much well nobody cares about [Man underwater wearing snorkle and goggles]
anymore sorry guys just keeping it real other than you know bottom feeder
investors tax loss buyers and well the cardiologists investment Club of Greater
South Milwaukee yeah Bert we're looking at you
well these shares don't need to file papers with the SEC or meet pretty much
any form of registration rules the way that stocks on exchanges do they tend to
be highly illiquid and have maybe a single dealer making a market in them
that is if you want to buy them well you make an appointment for you know a [Man sitting in a waiting room]
see-you-next-tuesday at 11:30 a.m. and negotiate directly with the dealer who
may or may not have a few shares laying around to sell you or to buy from you
thanks to that publication which used to be printed on yes pink paper
pink sheets of papers, see the clever naming there...Trading OTC stocks is
sometimes referred to as trading on the pink sheets if a company's stock symbol
includes the letters PK well it trades on Pink Sheets no word on whether
matching shams or throw pillows are included when you trade those so you'll [A bed with pink sheets appears]
have to look that up on your own
Up Next
What is reg G? No, it's not an up-and-coming rap star...though we know what our rapper name is now. Hit play to find out.
A liquid market is a market featuring high trading volumes, i.e. investors actually want to put their cash to work.
Reg T, or Regulation T, is a federal regulation that covers the form and manner in which brokers, or brokerages, can extend credit to customers.
Reg A is an exemption for the sale of securities. We wonder if it has any sweet steel drums in the background.