Non-Issuer Transaction
A non-issuer transaction is a transaction involving a security that is not directly or indirectly executed for the benefit of the issuing company. An isolated non-issuer transaction involves an ad-hoc exchange of securities between two private parties, often on an over-the-counter (OTC) basis, exempting it from registration. Non-issuer transactions involving outstanding securities refer largely to trades executed among counterparties on secondary markets that do not involve the issuer. Isolated non-issuer transactions are exempt from the registration requirements of the Securities and Exchange Commission (SEC). Most deals that occur on the secondary market, such as stock exchanges, involve non-issuer transactions; with the exception of initial public offerings (IPOs); secondary offerings; or share buybacks that will involve the issuer. A non-issuer transaction involves the purchase or sale of securities that does not involve the issuer of those securities. Auditors of non-issuer broker-dealers must continue to comply with Exchange Act Rule 17a-5(f)(3), which states that the auditor “shall be independent in accordance with the provisions of §210.2-01(b) and (c) of this chapter.”
What Is a Non-Issuer Transaction?
A non-issuer transaction is a transaction involving a security that is not directly or indirectly executed for the benefit of the issuing company. Most deals that occur on the secondary market, such as stock exchanges, involve non-issuer transactions; with the exception of initial public offerings (IPOs); secondary offerings; or share buybacks that will involve the issuer.
Understanding Non-Issuer Transactions
Isolated non-issuer transactions are exempt from the registration requirements of the Securities and Exchange Commission (SEC). For instance, if Joe sells 100 shares of XYZ stock to his brother, this transaction would be exempt from registration requirements.
However, once Joe sells those 100 shares to his brother, he officially becomes what's known as a non-issuer broker-dealer. Non-issuers can be described as a person or company that doesn't issue securities or have plans to do so and a broker-dealer is a person or firm that buys and sells securities for its own account or on behalf of its customers.
Regulations are much lighter on non-issuer broker-dealers, although these figures are also very limited in what they can do while legally maintaining this status.
Auditors and Non-Issuer Broker-Dealers
Auditors of a non-issuer broker-dealer must be registered with the Public Company Accounting Oversight Board (PCAOB) as of the date of the auditor’s report. Auditors are encouraged to begin the registration process with the PCAOB as soon as practicable. Non-public broker-dealers are also advised to contact the Commission’s Division of Trading and Markets to discuss individual circumstances if necessary.
Auditors of non-issuer broker-dealers must continue to comply with Exchange Act Rule 17a-5(f)(3), which states that the auditor “shall be independent in accordance with the provisions of §210.2-01(b) and (c) of this chapter.” However, auditors of non-issuer broker-dealers are not subject to the partner rotation requirements or compensation requirements of §210.201(c).
Types of Exempted Non-Issuer Transactions
Related terms:
SEC Release IA-1092
SEC Release IA-1092 provides standard interpretations for how laws apply to those that provide financial services. read more
Auditor
An auditor is a person authorized to review and verify the accuracy of business records and ensure compliance with tax laws. read more
Broker-Dealer
The term broker-dealer is used in U.S. securities regulation parlance to describe stock brokerages because the majority of the companies act as both agents and principals. read more
Exempt Transaction
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies. read more
Issuer
An issuer is a legal entity that develops, registers and sells securities for the purpose of financing its operations. read more
National Futures Association (NFA)
National Futures Association (NFA) is an independent, self-regulated entity for the U.S. derivatives industry that mandates industry best practices. read more
Public Company Accounting Oversight Board (PCAOB)
The Public Company Accounting Oversight Board (PCAOB) is a non-profit organization that regulates auditors of publicly traded companies. read more
Qualified Institutional Buyer (QIB)
A qualified institutional buyer (QIB) is a type of investor that is assumed to be a sophisticated investor and in little need of regulatory protection. read more
Rule 144
Rule 144 is an SEC rule regulates the resale of restricted or unregistered securities read more
SEC Form 10
SEC Form 10 is a filing with the Securities and Exchange Commission (SEC) used to register a class of securities in preparation for potential trading on U.S. exchanges. read more