Non-Issuer Transaction

Deciphering Non-Issuer Transactions: A Comprehensive Guide

Unraveling the Mystery of Non-Issuer Transactions

In the labyrinthine world of securities trading, non-issuer transactions stand as a distinct category, presenting a unique set of characteristics and regulatory considerations. But what exactly do non-issuer transactions entail, and how do they differ from other forms of securities dealings?

Understanding Non-Issuer Transactions

Non-issuer transactions involve the buying or selling of securities without the direct involvement or benefit of the issuing company. These transactions primarily occur on secondary markets like stock exchanges, excluding instances such as initial public offerings (IPOs) or share buybacks directly involving the issuer. They encompass a broad spectrum of activities, from individual ad-hoc exchanges to trades among counterparties on secondary markets.

Exploring Exemptions and Regulations

Isolated non-issuer transactions, such as private sales between individuals, are exempt from registration requirements imposed by the Securities and Exchange Commission (SEC). However, participants in such transactions may assume roles as non-issuer broker-dealers, subject to limited regulatory oversight. Despite lighter regulations, non-issuer broker-dealers must navigate legal constraints while conducting business within this capacity.

Auditors' Role in Oversight

Auditors of non-issuer broker-dealers must adhere to specific regulatory standards, including registration with the Public Company Accounting Oversight Board (PCAOB) and compliance with Exchange Act Rule 17a-5(f)(3). While certain requirements, such as partner rotation and compensation stipulations, may not apply, auditors remain obligated to maintain independence and uphold professional integrity.

Navigating Types of Exempted Transactions

Exempted non-issuer transactions encompass various scenarios, each subject to specific criteria and regulatory considerations:

• Isolated Non-Issuer Transactions: These one-off transactions, occurring between private parties, enjoy exemption from registration requirements. However, the term "isolated" may vary based on local regulations and interpretations.

• Non-Issuer Transactions in Outstanding Securities: Commonly referred to as the "manual exemption," these transactions involve securities from issuers compliant with SEC reporting standards. Provided certain conditions are met, including the securities' public circulation for a minimum duration, such transactions are exempt from registration requirements.