Registration under the 1933 Act: Overview, definition, and example
What is registration under the 1933 Act?
Registration under the 1933 Act refers to the process of registering securities with the U.S. Securities and Exchange Commission (SEC) in accordance with the Securities Act of 1933 before they can be publicly offered or sold. The 1933 Act is a cornerstone of U.S. securities law, designed to protect investors by requiring issuers to provide full and fair disclosure of material information.
Why is registration under the 1933 Act important?
Without proper registration—or a valid exemption—selling securities in the U.S. is illegal and can result in severe penalties. This clause typically appears in securities purchase agreements, private placements, and investment-related contracts to clarify whether securities are being registered, when registration may be required, and what the issuer’s obligations are. It also signals to investors that their ability to resell the securities may be limited until registration occurs.
Understanding registration under the 1933 Act through an example
A startup issues preferred shares to a group of angel investors in a private financing round. The subscription agreement includes a clause stating that the shares have not been registered under the 1933 Act and may not be sold or transferred unless an exemption applies or the company later files a registration statement. If one of the investors later wants to resell the shares on a public exchange, they’ll need to wait until the company goes public or registers the shares.
Example of a registration under the 1933 Act clause
Here’s how a registration under the 1933 Act clause may look like in a contract:
"The securities offered hereby have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold, or otherwise transferred unless registered under the Act or pursuant to an available exemption therefrom. The Company shall have no obligation to register the securities unless otherwise expressly provided in this agreement."
Conclusion
The registration under the 1933 Act clause helps define the legal status of a security and informs investors of any resale restrictions. Whether you're issuing or purchasing securities, this clause is critical for understanding your regulatory obligations and limitations. For companies raising capital or structuring investment deals, getting this language right is essential for legal compliance and investor transparency.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.