Nose to the Grindstone

The Securities Law Professor Blog has a post about the SEC's case against two lawyers in Georgia who were running a "144 opinion mill" called 144 Opinions, Inc. 144 Opinions issued 29 opinions which allowed a company called Mobile Ready Entertainment to sell 22 million unregistered shares.

Through exempt transactions, corporate insiders often acquire unregistered stock of reporting issuers. Such stock is called "restricted" because it can't be resold without first being registered under section 3 of the '33 Act. Section 4 of the Act contains exemptions from that general requirement. One of the exemptions is for transactions "by a person other than an issuer, underwriter or dealer." The definition of underwriter (s. 2(a)(11)) is broad. Rule 144 was developed as a safe harbor to enumerate situations where a reseller is not an underwriter to allow unregistered securities to be resold without being registered.