Article
What are the biggest compliance mistakes newly public companies make?
The biggest mistakes are paid stock promotion without proper disclosure, and public statements that aren't factually based or that management doesn't truly believe. Things may not work out the way you expect. That's allowed. Saying something you don't believe will happen is not.
Joel Arberman, Meraki Partners · Reviewed October 2026. Based on 17 companies taken public since 1999: 11 by direct listing, 4 by reverse merger and 2 by IPO.
Why is paid stock promotion a problem?
Anyone paid to promote a stock must disclose that they were paid, how much and by whom, under Section 17(b) of the Securities Act. Undisclosed promotion is one of the fastest ways for a small public company to get into trouble with the SEC, FINRA and OTC Markets. We advise against paid promotion, and never without full disclosure.
What can the company say about the future?
Forward-looking statements are allowed when they are what management truly believes, are identified as forward-looking, and come with meaningful cautionary language. They are protected only if they are made in good faith. Never say something you don't believe will actually happen.
What is Regulation FD?
Regulation FD requires that material information be shared with the public at the same time as, or before, it is shared with investors or analysts. Telling a few investors news before a press release is selective disclosure, and it is a common mistake for founders used to talking freely with their shareholders.
What does Rule 10b-5 cover?
Rule 10b-5 prohibits misleading statements and omissions in connection with buying or selling securities, and it is the basis for insider-trading cases. It applies to press releases, social media posts, investor calls and anything else the company or its officers say publicly.
How do founders stay out of trouble?
- File every report on time.
- Say only what is factually based or what you truly believe, with forward-looking cautions where needed.
- Put material news out publicly before discussing it with anyone.
- Don't trade while you know material news the market doesn't.
- Have securities counsel review press releases and investor materials.
See personal liability.
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