Can I offer equity to investors without violating securities laws in Massachusetts? What are the requirements?

Requirements for Offering Equity to Investors in Massachusetts

In Massachusetts, offering equity to investors must comply with regulations prescribed by the commissioner ^[1.1]. Here are some of the requirements:

1. Prior approval of the commissioner: Any subsidiary banking institution must obtain prior approval of the commissioner before issuing any securities to the general public ^[1.1].
2. Nontransferable subscription rights: Eligible account holders must receive nontransferable subscription rights to purchase securities for the same price as offered to the general public ^[1.1].
3. Offering to investors generally: An offer to the general public means an offer to investors generally ^[1.1].
4. Limitation on transfer of employees’ stock: Shares of employees’ stock shall not be sold or transferred except to an employee of the corporation or to the corporation itself ^[4.2].
5. Commercially reasonable manner: Securities intermediaries must perform their duties and entitlement holders must exercise their rights in a commercially reasonable manner ^[3.1][3.2].
6. Compliance with other statutes, regulations, or rules: Compliance with other statutes, regulations, or rules satisfies the duty imposed upon a securities intermediary by sections 8-504 to 8-508 ^[3.2].
7. Approval of the commissioner: Any investment in excess of 50% of tier 1 capital of the bank must be made only with the approval of the commissioner and under the limitations and conditions imposed by the commissioner ^[1.1][2.2].

Conclusion

To offer equity to investors in Massachusetts, it is important to comply with the regulations prescribed by the commissioner, offer nontransferable subscription rights to eligible account holders, and perform duties and exercise rights in a commercially reasonable manner. Additionally, any investment in excess of 50% of tier 1 capital of the bank must be made only with the approval of the commissioner and under the limitations and conditions imposed by the commissioner.

Source(s):

• [1.1] Subsidiary banking institution; issuance of securities to general public
• [3.1] Securities Account; Acquisition of Security Entitlement from Securities Intermediary
• [4.2] Employees’ stock; transfer; redemption; limitation upon number of shares
• [3.2] Specification of Duties of Securities Intermediary by Other Statute or Regulation; Manner of Performance of Duties of Securities Intermediary and Exercise of Rights of Entitlement Holder
• [2.2] Powers

Jurisdiction

Massachusetts

• General