Types of Registration with the Nevada Securities Division

Registration by Coordination

This type of registration is available when a corresponding registration statement has been filed with the U.S. Securities and Exchange Commission (SEC). In most cases, a registration by coordination is one that will be offered simultaneously in several, if not all states. It usually involves larger offerings that exceed $5 million. (See NRS 90.480.)

Registration by Qualification

This method of registration is generally used when offering a security in the State of Nevada only. It cannot be offered or sold in any other state unless "qualified" there as well. Most of these offerings are small in comparison to coordination filings and are sold on a local basis because of costs associated with selling in regional or national markets. (See NRS 90.490.)

At the heart of what the Securities Division does with these registrations is to examine the required documentation to see if all material information about an investment offering, or security, is available to an investor before he/she decides to invest. In other words, full and fair disclosure of anything that would be important for an investor to know in making an informed choice.

The four most important disclosures in an offering are: (1) Operating history of the company - including financials; (2) Background and experience of officers and managers; (3) Business plan of the company - how the money will be used; and (4) Risk factors - what obstacles there are to the success of the company and what could go wrong.

If you have a new company and are just getting started, you probably do not have much of an operating history to disclose, and you may not have fully developed your business plan. These are called "development stage companies" and are viewed in the industry as having a very high risk of failure. Because of these factors, there are special rules that apply to the registration and development stage company offerings. For example, you must have a minimum capitalization of 5% of the aggregate offering price or $50,000, whichever is less. (See NAC 90.475-492.)

Perhaps the most important requirement for a development stage company, is to have specific disclosures about your business plan and intended use of the offering proceeds. Knowing how to develop a comprehensive business plan that will not only meet disclosure requirements but help you understand and forecast your business is a critical step toward success.

The overriding theme of registration with the Securities Division is to insure the availability of information to the public. However, the Securities Division does not guarantee the accuracy of such information. That is the responsibility of the company. You should never make any representation that the Securities Division has passed upon the merits or qualifications of, or recommended or given approval to, any person, security, or transaction. To do otherwise is a violation of NRS 90.610 and you could be subject to criminal and/or civil penalties.

In any event, the advantages of a thorough and accurate registration statement for a small business are: (1) development of a comprehensive business plan; (2) full and fair disclosure to the investor; and (3) protection of the company against unwarranted claims of ignorance from investors.