The Section 3(a)(10) Exemption: The Odd-Person-Out of the Securities Law
Document Type
Article
Publication Title
The Section 3(a)(10) Exemption: The Odd-Person-Out of the Securities Law
Abstract
The federal securities laws require that those who offer and sell securities must first register them with a government agency, the Securities and Exchange Commission. But since that is a lengthy and expensive process, the securities laws have several exemptions from registration which provide alternative ways for corporate/securities lawyers to assist their clients in lawfully issuing securities. Some, like the private placement exemption, are well known and used, but there is one that is less understood and rarely put into practice the Exchange Exemption, found in Section 3(a)(10) of the Securities Act of1933.
It can apply when securities are issued for debt obligations, in mergers, or in settlement of claims in litigation. And unlike registration and its other exemptions that are premised on the philosophy of disclosure, the Exchange Exemption allows securities to be exempt from registration when their issuers can demonstrate to state authorities that the offerings are fair to the investors who receive them.
The exemption thus offers a different approach to compliance with the securities laws. This Article explores it in depth and finds that despite some examples of its misuse and some drawbacks, it can be a helpful tool for corporate/securities lawyers. And it can make it easier for businesses to raise capital by affording them a simpler and less expensive way to satisfy the requirements of the securities laws. In addition, it may give investors greater protection from fraud than registration and its better known exemptions by assuring them that the securities they are offered have honest value.
First Page
1
Last Page
39
Publication Date
11-2024
Recommended Citation
Daniel J. Morrissey, The Section 3(a)(10) Exemption: The Odd-Person-Out of the Securities Law, 73 University of Kansas Law Review 1 (2024).