Before any effort is made to offer or solicit business capital, the reader should have a good understanding of the securities laws at the federal and state levels. While there are similarities between these laws, it should not be assumed that what applies for one will necessarily apply for the other. There are also important differences in laws from one state to another. It is essential to know the legal requirements in all affected jurisdictions in order to avoid both civil and criminal penalties. This section will provide a general overview of Nevada Securities Law. For a more thorough reading, please refer to Chapter 90 of the Nevada Revised Statutes and Chapter 90 of the Nevada Administrative Code.
What is a Security?
A security is defined in our statutes under NRS 90.295 as anything that is commonly known as a security, i.e., stocks, bonds, notes and debentures. Also named are several other kinds of commercial instruments, i.e., limited partnerships, collateral trust certificates, limited liability company, investment contracts, etc., which are securities.
Perhaps the most important type of security referenced in the statute is an "investment contract." This covers a whole variety of business transactions where there is an investment motive. It is difficult to think of business relationships that do not have an investment motive. This should give you some idea of how broad the mission of the Securities Division really is.
The importance of knowing what a security is will help you understand what your obligations are to the investing public when you are seeking to raise money for your business. The Securities Division has the mission of helping you understand these obligations and keeping unscrupulous promoters away from precious capital resources that are essential for legitimate businesses and a healthy economy.
Do I need to register with the Securities Division?
If you are raising capital for your business, you should assume that you need to register your offering with the Securities Division unless you have an exemption from securities registration. (See NRS 90.460.) This is also true at the federal level as well. You need to consider both federal and state registration requirements when you are thinking of raising investment capital.
When you register an offering, you are "going public" with important information about your company. This information is not only important to the initial investor, but to any subsequent purchaser of the security when it is traded or resold.
Do I have to be licensed to sell securities?
It is one thing for the company to have a securities offering properly registered or exempt, it is another thing for the person offering or selling the securities to be properly licensed. Securities laws require a person to be licensed or exempt before engaging in the offer or sale of a security.