Issuers

This section covers the definition of an issuer under the Uniform Securities Act (USA), issuer versus non-issuer transactions, registration of issuer agents, and the role of finders.

What Is an Issuer Under the USA?

An issuer is any person who issues or proposes to issue any security.

• For certificates of deposit, voting-trust certificates, or collateral-trust certificates, or for certificates of interest or shares in an unincorporated investment trust with no board of directors (the fixed, restricted-management, or unit type - i.e., a unit investment trust), the issuer is the person performing the acts of depositor or manager
• For oil, gas, or mining certificates of interest or participation, there is no issuer (these interests have no identifiable issuer under the USA)

What Is a Non-Issuer Transaction?

A non-issuer transaction is a transaction not directly or indirectly for the benefit of the issuer.

• Non-issuer transactions are secondary market sales where the issuer does not receive proceeds
• Issuer transactions are primary distributions where the issuer receives the proceeds

Exam Tip: Gotchas

• A transaction is an "issuer transaction" if the issuer benefits, even indirectly. An officer selling personal shares is a non-issuer transaction. A company selling treasury stock is an issuer transaction because the company receives the proceeds.

When Must an Issuer's Agent Register?

An agent of an issuer must register in the state unless an exclusion applies under the USA agent-registration provision.

Which Issuer Representatives Are Excluded From Agent Registration?

A person representing an issuer does NOT need to register as an agent when:

• Effecting transactions in exempt securities (government, Canadian/foreign government, bank, commercial paper, or employee benefit plan securities)
• Effecting exempt transactions
• Effecting transactions in federal covered securities sold to qualified purchasers or under a Regulation A Tier 2 offering
• Effecting transactions with existing employees, partners, or directors of the issuer if no commission or other remuneration is paid for soliciting

Exam Tip: Gotchas

• An issuer's employee selling the company's securities to the public in a non-exempt transaction MUST register as an agent. The "employee" exclusion only applies to sales to OTHER employees of the same issuer, with no commission paid.
• A person representing an issuer in an exempt transaction does not need to register as an agent. But a person representing a broker-dealer in the same exempt transaction DOES need to be registered (the exclusion only applies to issuer representatives).

What Is a Finder?

A finder is a person who introduces potential investors to an issuer, typically in private placements. Finders are NOT employed by the issuer; they receive a fee for introductions.

When Must a Finder Register as a Broker-Dealer or Agent?

• Under the USA, if a finder's activities go beyond mere introductions (e.g., negotiating deal terms, providing investment advice, handling funds), the finder may be required to register as a broker-dealer or agent
• The key question: does the finder's compensation and level of involvement constitute "effecting transactions in securities"?
• A finder who receives transaction-based compensation (a percentage of the amount invested) is more likely to be deemed a broker-dealer than one who receives a flat fee
• Transaction-based compensation is a hallmark of broker-dealer activity

Exam Tip: Gotchas

• Transaction-based compensation for a finder is more likely to require registration as a broker-dealer (BD) or agent than a flat fee. Transaction-based compensation is a hallmark of broker-dealer activity.

What Should You Check on Exam Day?

• Can you state who is an issuer under the USA, and the special "depositor or manager" rule for CDs, voting-trust certificates, and collateral-trust certificates?
• Do you know oil, gas, and mining interests have no identifiable issuer under the USA?
• Can you classify a transaction as issuer or non-issuer based on who receives the proceeds, including the officer-personal-sale versus treasury-stock examples?
• Can you list all four exclusions from issuer-agent registration, and why the employee exclusion only covers sales to other employees with no commission paid?
• Do you know when a finder's activities or compensation structure require broker-dealer or agent registration?