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CONTENTS:

Unregistered Securities
• Rule 144
• Regulation D
• Offering Memorandum
• Accredited Investors
• Viatical Investments

UNREGISTERED SECURITIES

RULE 144

As the name implies, unregistered securities are sold without the sale being registered with the U.S. Securities and Exchange Commission (SEC). The SEC allows this to encourage investment in small companies. Unrestricted securities are not, however, unregulated. They are governed by the SEC's Rule 144. Investopedia provides a brief explanation.

http://www.investopedia.com/terms/r/rule144.asp

And for the whole enchilada, go straight to the SEC Web site.

http://www.sec.gov/investor/pubs/rule144.htm

REGULATION D

Regulation D presents the three exemptions that allow unregistered securities to be sold. For the short explanation, go to:

http://www.sec.gov/answers/regd.htm

For all the gory details, read the Regulation D section of the Securities Lawyer's Deskbook.

http://www.law.uc.edu/CCL/33ActRls/regD.html

OFFERING MEMORANDUM

When unregistered securities are sold, the seller must provide an offering memorandum. An offering memorandum for unregistered securities is the equivalent of the proxy statement issued for the sale of registered securities.

http://www.investopedia.com/terms/o/offeringmemorandum.asp

ACCREDITED INVESTORS

Companies that wish to raise capital from individuals without issuing registered securities must sell to accredited investors, a special group deemed by the SEC to be able to understand and afford the financial risks associated with unregistered securities.

http://www.law.uc.edu/CCL/33ActRls/rule215.html

VIATICAL INVESTMENTS

The root word here is viatic, which according to my trusty Latin-English dictionary (yes, I actually have one bookmarked) means "pertaining to a journey, journey/money, or prize-money." I guess in this case the journey is into death and the prize is insurance payouts.

Basically, a viatical investment is when an investor buys life insurance policies from terminally-ill patients for a percentage of the face value, then cashes them in for the full value upon the patient's death. Talk about the Grim Reaper!

http://www.in.gov/sos/securities/investmentwatch/securities101.html#5

Apparently, this type of investment is not federally regulated and states are just beginning to regulate them. The North American Securities Administrators Association has come out with recommendations for regulation guidelines. While the document is written in a drier than dust policy format (I strongly recommend caffeine before reading), it does contain a wealth of vocabulary definitions.

http://www.nasaa.org/content/Files/NASAA_Guidelines_Regarding_Viatical_Investments.pdf

Chris Mildner

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