Holding Periods Shortened: Getting to Know Rule 144

The SEC (Securities and Exchange Commission) voted unanimously on November 15, 2007 to cut the required holding period in half from twelve to six months for selling restricted and control securities.

This exciting change came into effect on February 15th, 2008. The change will bring a welcome relief to many smaller companies, because the shorter holding period is intended to lower the cost of capital and make it more accessible to those companies.

While this is exciting news for many and its effects will be far-reaching, the matter can be a bit confusing. Here is a brief overview.

What are Restricted or Control Securities?

A restricted security is paper certificate that proves ownership of a stock that was issued in an unregistered or private sale from a company or an affiliate of the company. Restricted securities are usually sold to investors or given as employee benefits.

Control securities are usually held by affiliates or shareholders of a company that have the power to direct the company. When the affiliate sells these control securities, they become restricted securities for the purchaser.
When a security is restricted, it will usually have a “restricted” legend stamped on it. This legend must be removed before the security can be sold to the public. To remove the legend, the conditions of Rule 144 must be met and the issuer’s approval given before a transfer agent, such as First American Stock, can legally remove it.

What is Rule 144?

Rule 144 is a Securities and Exchange Commission rule created under the Securities Act of 1933. This rule defines conditions that must be met prior to the sell of a restricted security. The rule stipulates the following five conditions:

1. The required holding period must be met (the reduced holding period is six months as opposed to one year).

2. There must be adequate current information about the issuing company, meaning that it is keeping up with its reporting requirements.

3. The trading volume formula is met. This formula stipulates that no more than 1% of a company’s outstanding shares can be sold in any 3-month period and that they must be less than 1% of the of the company’s average trading volume over the past month.

4. That routine trading conditions, which apply to all trades, have been met.

5. That Form 144 is filed with the SEC prior to selling more than 500 shares or shares worth more than $10,000 within a three-month period.

Restricted securities can also be sold, freely without the restrictions of Rule 144 after two years if the seller is not affiliated with the security issuer.

What difference will the changes to holding periods make?

The short answer is many. The shorter required holding period on restricted securities was intended to help smaller companies raise capital and to expand the availability capital, but the effects will reach beyond the small company spectrum.

According to John W. White, the Director of the SEC’s Division of Corporate finance, “The revisions to Rule 144 should make it more efficient for companies of all sizes to access private markets. In the coming months, we expect to recommend that the Commission finalize additional rules that will further promote capital formation by smaller companies.”

Essentially, the changes to Rule 144 will help an old rule keep up with the new market.

Julius Csurgo will answer any stocks related & Rule 144 questions.

Proprietary Trading: Just one More Alternative for the Absolutely serious Trader

Seasoned traders who want the thrill of trading, but not the strain involved with risking their own personal money have the option of going into the proprietary trading business.

Proprietary trading, as identified by Julius Csurgo, is whenever “a company has traders who actively trade equities, futures or perhaps other products utilizing the firm’s cash as opposed to their personal or a client’s. The firm sets up all of the risk capital and margin money (proprietary money), and takes legal responsibility for losses. Income generated from trading activities are generally divided amongst the corporation as well as the trader.”

Prop trading firms employ primarily, self-employed traders, although they could have many traders within the company. Even freelance traders are given an area to work, usually, for a small fee. Looking at a couple of books or even watching a few videos will not qualify you to definitely be employed by a trading firm; on the other hand, if this type of stock trading is a thing you certainly want to do, some proprietary trading firms do contain training programs. EchoTrade, in particular is simply interested in hiring skilled traders. Bright Trade, in contrast, provides a Bright Trading Boot Camp in their Vegas office. It’s a 2 to four week program “meant to speed up your own learning curve.”

Seasoned traders who consider they have what must be done, can have a look at their directory of US and also European based prop trading firms. If you don’t know much about these types of firms and how they function, Brett Steenbarger, publisher of the Daily Trading Coach (Wiley, 2009), supplies a list, on his weblog, of pitfalls that aspiring day traders must avoid. For example, Steenbarger warns aspiring day traders to stop working for those trading firms that charge a percentage for each and every trade, instead of simply charging a commission on the the traders earn. And it must go without stating that any firm that makes big pledges should be avoided.

The proprietary trading world is very competitive. Despite the fact that, an active stock trader is also probably the most sought after jobs around. Even though some companies provide training classes for newbie traders, trading stocks really should be left to people who’ve numerous years of experience in the trading and investing industry.

Julius Csurgo is one of the top professional traders providing trading services to those wanting to professional traders.

Avoid These Common Investment Errors

Mutual funds are always looked at with scepticism, because the decisions you make about them could make you very rich or very poor. But the important point here is that you’re the one making the decisions. When you’re starting out, it’s natural for you to make mistakes. But both you and your money would be better off if your mistakes were as few as possible. Here are some common but crucial mistakes that investors make.

The first thing to keep in mind is to approach investments with a clear cut plan. You need to have at least a vague plan in place for you to make good on your investment. Decide how much money you want to earn and by which time – this will be a good starting point. Depending on this – you can decide whether you want to invest more in equity or debt funds. Equities are better for long terms goal while debt funds are better for short term goals. This is because equities are volatile – and long term goals are things you can take a risk on. Stop for a minute and give a thought to how you’re going to allocate your funds. You have several options like stocks, bonds – both international and domestic – equities and so on. A common mistake that investors make is that they don’t diversify. Diversification helps to minimise the level of risk you would face. One sector performs where another doesn’t – this would mean that your risks are balanced. Also remember to diversify within a sector – invest in large, medium and small caps according to what your needs are.

Remember to have your mutual fund company change your investment plan as time moves on. You need to be aware whether you can risk your money in the market when you’re close to retirement. In fact, the closer you are to your goal, the more you need to move your money to the less volatile debt funds. Don’t be too confident that your fund managers will beat the index. The opposite is what consistently happens. You can use the index as a benchmark – to know how your mutual fund is performing. But if you’re hoping to beat it, then you might as well forget it.

You need to keep in mind that you’re hoping to have enough returns for a specific goal. Make a plan and stick to it – don’t keep changing your funds to what ‘market analysis’ says is the top mutual fund. The more you think that you’re losing out on opportunities and moving your money, the more you actually do lose your money.

Be wise and choose among the top mutual funds available in the market. Or contact Julius Csurgo for any help & advise.

How You Can Perform an IPO Valuation

Are you wondering which portions of the current stock market are the best areas of the market to place your capital into? If you are wondering which portions of the current market you should invest into, look into what is known as an IPO. An IPO is an initial public offering. An initial public offering is the first step a company must take in order to be represented on an open stock exchange. Before you can purchase an IPO though, you should perform an IPO valuation in order to guarantee you are purchasing investments that are worth your capital.

As you can see, the initial evaluation process you must perform when you are purchasing an IPO is definitely the most important action you can take when you are first investing into this realm the stock market. The first aspect you should look into as you are investing into an IPO is the amount of assets the company has within its balance sheet compared to the amount of debt the company owes.

(more…)

Raising capital in today’s market.

When times are well financially there is a generous amount of money available. In contrast a poor economy makes lenders and individuals more conservative in their lending. A business plan is almost mandatory for most funding from outside sources. Creating a business plan is to show investors the amount of benefits and risk.

A bank is normally the first choice for funding. Banks can help you obtain the capital you need by loans. Most banks offer numerous loan types including an equity loan which no other source offers. It’s not difficult in getting a loan, you’ll need proof of income and a good credit report. You’ll also have to write a goal oriented and detailed business plan. The same loans that will help you get started could turn into a major downfall. If you default on a loan by not paying, or paying late it can impact your credit score. Another downfall to consider is by defaulting on a loan regardless of the type (adjustable or fixed) the interest rates can increase dramatically and your business could be repossessed.

Another option where you can attempt to receive a loan is through the S.B.A. (Small Business Association). The S.B.A. offers lower interest rates when repaying the money you borrow. You will need a business plan. However, the S.B.A. also offers help in writing them and on various topics if you plan needs more clarification, sometimes these workshops are at no cost to you! One downfall in using the S.B.A. is that they can run out of money, since they are budgeted by the government.

Family and friends offer a benefit being you may not need as stellar of a business plan as you do for other sources. Family and friend funding can also bluntly tell you their opinion on your ideas. A potentially devastating side effect of using family and friends to raise capital is the rift and unpleasant feelings that can occur when things do not go as planned.

Wherever you search for a loan you need to be prepared. A business plan helps better your chances of securing a loan. All options you find have pros and cons and suite different needs. Researching the options will help distinguish which source will be the most beneficial to you.

There are many investors out there that you can contact in order to raise capital. This can be a rather difficult process. Finding the right VC/PE firm or Angel investor for your business can bring about many headaches and disappointments.
Wanting to raise capital, you need to first make a preliminary search of investors and filter out those investors who do not show interest in your industry or region. This can be a very time consuming process and you will end up making a lot of phone calls that can lead to nowhere. Furthermore, you can end up banging your head against the wall when you see one firm after another not sounding interested in what you have to say.

It cannot be as difficult as that. You can find the right venture capital firm or angel investor and bypass all the red tape that you have to go through going the down the list way. Contacting VC firms at random and trying to find the best vc for you is like shooting arrows at flies, which miss most of the time.

Furthermore, there are some investors out there who do not publish or advertise their services and you cannot find them through any search engine or other internet query. But here is one – Julius Csurgo.

Effectively Communicating Your Business Plan

Your business plan can be communicated in such a simple way as to make it understandable to all: it would only be effective when it is understood by all and sundry. Communicating your plans has to follow the normal principles of communication irrespective of the fact it is done in the business sphere.

When your plans are presented in such a simple way, everyone would be able to understand what you intend to do; how to do it, when to do it and where to do it. It is only when your information has been understood by the simplest person that you are said to have effectively communicated your business plan.

1. You must present your plan in a plain language that all would understand. You must avoid the use of vocabulary or ambiguous terms as long as there are employees who are illiterate or semi literate. Don’t assume everybody is able to decipher your grammatical expressions. Your employee should not look for someone else to interpret to him what you have said.

2. Allow your employees to ask questions as you make your plans known to them. Asking questions would allow you iron out any grey areas that they do not understand. Don’t get offended when they ask questions that you consider too simple or silly. You have to tell them what they want to know and let everyone go home with a proper understanding of your plan.

3. You should occasionally ask them questions to be sure they understand all you have said. Never assume that their silence means they’ve all understood you. Some could be timid and refuse to ask questions even when they don’t get you right. But asking them questions would help you know if they truly get your points.

4. Listen effectively while they ask their questions or while they answer yours. Effective listening would help you fish out areas of misunderstanding in their answers. Address every misconceptions or misinformation and be sure everyone is cleared about your plan.

5. Coin special slogans that would enable them remember the salient points of your presentation. As they keep repeating your slogans daily, the points stick into their brain and they will never forget those important parts of your plan.

6. Send reminders to your employees to help them remember all that have been discussed. This would remind them of any point that might have escaped their memory. People get busy with so many things and could easily forget what they’re told; but when you send reminder notes, their memories are refreshed.

By the time you do all these, you would have effectively communicated your business plan to every member of your organization or business. And the success of your plans would be guaranteed if majority of the people are able to digest what you tell them.

Do you need help for your struggling small business? Julius Csurgo has some tips for you to make your business grow.