FINRA Rule 6490

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					FINRA Rule 6490 – Securities Lawyer 101- Go Public Blog

Posted on December 23, 2012 by Brenda Hamilton, Attorney




                                    FINRA Rule 6490 was enacted in September
2010. Rule 6490 requires issuers of equities and debt securities not listed on
national securities exchanges to provide timely notice to FINRA of certain
corporate actions including name changes, forward stock splits, reverse stock
splits, distributions of cash or securities, reinstatement of dormant public shell
companies, spin-offs, stock splits and other actions, and rights and subscription
offerings.

FINRA Rule 6490 requires issuers to provide FINRA with notice of certain
corporate actions such as dividends and stock splits, or be subject to a $5,000
fee. The rule has had considerable impact on issuers who undertake corporate
changes.

Securities and Exchange Commission (“SEC”) Rule 10b-17 requires issuers with
publicly traded securities to notify FINRA of certain corporate actions. The rule
applies to all issuers with securities quoted by the OTC Markets since such
securities are publicly traded.

Complying with FINRA 6490′s requirements is often an unanticipated legal and
compliance cost for issuers and their securities attorney, who may be unfamiliar
with FINRA’s authority under 10b-17. Additionally, many OTC Markets issuers
are not prepared for the Depository Trust Company (“DTC”) review that may be
prompted by the issuer’s notification to FINRA.

FINRA Rule 6490 requires advance notice to FINRA of the following corporate
actions:

♦ dividends or other distributions;

♦ forward or reverse stock splits, or rights or other subscription offerings;

♦ any issuance or change to a symbol or name;

♦ mergers, acquisitions, dissolutions or other company control transactions; and

♦ bankruptcy or liquidations.

FINRA Notice Requirements

Rule 6490 requires issuers to complete and provide the required notice to
FINRA at least 10 business days prior to the record date of the corporate action.
FINRA approval must be received prior to the corporate action becoming
effective. In addition, FINRA may request additional documents, conduct
detailed and selective reviews of the issuer submissions and cause the issuer to
delay the announcement of its corporate action.

Rule 10b-17 prescribes information that must be included in the notice as
follows:

♦ the title of the security;

♦ date of declaration;

♦ record date;

♦ payment or distribution date;

♦ for cash distributions, the amount to be paid per share;
♦ for distribution of securities, generally the amount of the security outstanding
immediately prior to and immediately following the dividend or distribution and
the rate of the dividend or distribution;

♦ details of any conditions that must be satisfied to enable the payment or
distribution; and

♦ additional details relating to stock or reverse splits.

Supporting Documentation

The issuer should be prepared to provide the following documentation which
may vary depending upon the particular corporate action being taken:

♦ File-stamped copy of the original articles of incorporation from the original
state of incorporation which shows the company’s current name;

♦ File-stamped articles of merger for both the acquired and acquiring issuer if a
merger was completed;

♦ If an amendment to the issuer’s articles of incorporation is not required, then
the issuer’s securities attorney should provide written confirmation citing the
applicable law or corporate by-law;

♦ Executed and notarized resolutions appointing the current and former officers
and directors and resignations from former officers and directors;

♦ Transfer Agent Verification Form from the issuer’s transfer agent;

♦ Legal opinion from a qualified securities lawyer opining that the corporate
action being taken complies with applicable state law;

♦ Notarized shareholder consent approving the action; and

♦ Cover letter providing the complete corporate history of the issuer and all
material facts of the corporate action being requested starting on the original
date of incorporation and including all corporate changes that have occurred
from the issuer’s incorporation until present including, but not limited to,
changes of control, reverse mergers, name changes, etc.
The issuer is also required to provide confirmation of its new CUSIP number
from CUSIP Service Bureau. Any issuer whose securities are publicly traded
should consult with an experienced securities attorney to determine whether
notice to FINRA is required before taking significant corporate actions.

Hamilton & Associates has assisted multiple issuers with 6490 compliance and
providing the FINRA notices required. For further information about this article,
please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite
201     S,   Boca    Raton     Florida,  (561)    416-8956,    by     email    at
info@securitieslawyer101.com        or   visit   www.gopublic101.com.       This
memorandum is provided as a general informational service to clients and
friends of Hamilton & Associates Law Group and should not be construed as,
and does not constitute, legal and compliance advice on any specific matter, nor
does this message create an attorney-client relationship. For more information
concerning the rules and regulations affecting the use of Rule 144, Form 8K,
FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504
offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1
and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure
requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public
direct transactions and direct public offerings or please contact Hamilton and
Associates at (561) 416-8956 or by email a info@securitieslawyer101.com.
Please note that the prior results discussed herein do not guarantee similar
outcomes.

				
DOCUMENT INFO
Description: FINRA Rule 6490 was enacted in September 2010. Rule 6490 requires issuers of equities and debt securities not listed on national securities exchanges to provide timely notice to FINRA of certain corporate actions including name changes, forward stock splits, reverse stock splits, distributions of cash or securities, reinstatement of dormant public shell companies, spin-offs, stock splits and other actions, and rights and subscription offerings.