• Even small closely-held companies must obey SEC rules.Company logo image by Max creative from Fotolia.com
  
  Decisions to restrict corporate ownership to a small group of active contributors and investors requires strategic and effective planning. Offering the company's shares to more investors provides added practical and financial resources. Realizing gains of private investors requires liquidity. Closely-held corporations must adhere to the Security & Exchange Commission's rules in taking these financial steps.
  
  Others buying and selling shares of small closely-held companies should know about the importance of SEC's Regulation SHO.
  
  

Preliminary Steps

• Discuss the company's strategy to sell or offer company securities with an SEC-knowledgeable attorney.penny into antique piggy bank image by Joyce Wilkes from Fotolia.com
  
  Find a lawyer who specializes in securities law. State and federal securities regulations require registration of the offer or sale of a company's securities with the Securities & Exchange Commission. The company must also register its plan with state regulators. A preliminary prospectus should accompany these filings.
  
  Discuss registration requirements or possible exemption from them with your company's legal counsel. Obtain your lawyer's advance planning assistance before making costly decisions.
  
  The SEC recommends contacting the American Bar Association to obtain referrals if you need assistance finding the right legal resource.
  
  American Bar Association
  
  321 North Clark Street
  
  Chicago, IL 60610
  
  Phone: (312) 988-5522
  
  Toll free: (800) 285-2221
  
  Fax: (312) 988-3284
  
  abanet.org/legalservices/findlegalhelp/home.cfm
  
  

Regulation D

• Discuss the specifics of Regulation D as it pertains to your closely-held company's stock sales.bilancia image by Satan from Fotolia.com
  
  Review specifics of the Securities Act of 1933 and Regulation D with your attorney. Reg D lists the results concerning issuers' registration requirements and possible exemption from them. Some companies, including closely-held corporations, offer and sell securities without registering the securities with the SEC. Small companies requiring access to capital must carefully review Reg D before assuming exemption from it.
  
  In general, the SEC exempts issues of less than $5,000,000 from registration. Review Rules 504, 505 and 506 as they apply to you with legal counsel.
  
  Discuss the Dodd-Frank Act, signed into law on July 21, 2010 as it pertains to your company's needs. The law addresses protections for investors from the financial industry. Passage of the Act affects Reg D.
  
  Read about Reg D prior to discussing it with your company's attorney. Stephen M. Honig, a partner at Duane Morris LLP and securities law specialist, recommends
  
  reading "Fundamentals of Securities Regulation" by Louis Loss and Joel Seligman.
  
  

Regulation SHO

• Sell the shares of closely-held microcap companies with care.shaking hands image by Sean Gladwell from Fotolia.com
  
  Investing in small, closely held companies requires knowledge of SEC law. According to Reg SHO, these companies have lower potential to become financially rewarding investments. Investors in these companies must research how to buy and sell any closely-held company listed on the Pink Sheets.
  
  The SEC states that micro capitalization companies, those with combined equity and debt between $50 and $300 million, have lower potential for providing capital gains for investors. Closely held U.S. companies list their on the Pink Sheets because they do not meet minimum stock exchange listing requirements.
  
  Consider all fundamental information before purchasing companies whose shares trade on the Pink Sheets. Lower liquidity, limited real time trading information and investor relations concerns of these companies make them likely to decline in value, according to Regulation SHO.
  
  Traders taking advantage of short sales strategies, such as the "death spiral" to accelerate price declines of micro cap companies, fall under the jurisdiction of Regulation SHO.