Unregistered Securities
Before securities—like stocks, bonds, and notes—can be offered for sale to the public, they first must be
registered with the Securities and Exchange Commission (SEC). Any stock that does not have an effective
registration statement on file with the SEC is considered “unregistered.”
Any security without a registration statement on file with the Securities and Exchange Commission (SEC)
is considered “unregistered.”
Only qualified investors, or individuals who have a net worth of at least one million dollars or an annual
income in excess of $200,000, are able to buy and sell unregistered securities.
Unregistered securities scams are often advertised as “private offerings” and take advantage of both
qualified and non-qualified investors, often promising returns that are too good to be true.
However, certain exemptions apply. For example, a privately-owned corporation may issue shares of stock
to its executives and board members. However, the new stockholders must notify the SEC before selling
the stock to anyone else
In addition, companies can raise capital by soliciting investments from individuals outside the company
who are considered to be “qualified investors.” The SEC defines a qualified investor as someone who has
a net worth of at least one million dollars or an annual income in excess of $200,000.