Chapter 2: Regulations of Securities and Issuers - A. Issuers

Question 1

Definition of an issuer

Answer 1

An issuer is a person that issues or proposes to issue a security. Any of the following entities could be issuers:

• Corporations;
• Cooperatives;
• Federal, state and local governments;
• Foreign governments;
• Nonprofits;
• Partnerships; and
• Small business investment companies licensed by the Small Business Administration with total assets of more than $10 million.

An issuer does not include the distributor of certificates of interest in oil and gas programs or mining leases. Note that the broker/dealer is also not considered the issuer. The broker/dealer is hired by the issuer to help raise capital to expand their business or for acquisitions.

Question 2

Issuer transaction

Answer 2

When the sale of securities is for the benefit of the issuer (whereby the issuer receives the proceeds from the sale), the sale is referred to as an issuer transaction. Because these sales take place in the primary or new issue market, these transactions are also known as primary transactions.

Question 3

Nonissuer transaction

Answer 3

When a security sale is not directly for the benefit of the issuer, that is, when the issuer does not receive the proceeds from the transaction, it is known as a nonissuer transaction. For example, when one investor sells outstanding securities to another investor, delivers securities and receives the proceeds, this is a nonissuer transaction. Because these transactions take place in the secondary market, they are most commonly known as secondary transactions.