Non-Issuer Transaction

A non-issuer transaction is the purchase or sale of a security that does not involve the issuing company — in other words, the issuer neither benefits from nor participates in the trade. Most ordinary secondary-market trades (for example, stock trades on an exchange) are non-issuer transactions. Transactions that do involve the issuer include secondary offerings and share buybacks.

Key takeaways
* Non-issuer transactions are trades in which the issuer is not a party and does not receive proceeds.
* Simple private transfers between parties (isolated transactions) are generally exempt from SEC registration.
* Many secondary-market trades in outstanding securities are treated as non-issuer transactions and are not subject to issuer registration requirements.
* Auditors of non-issuer broker-dealers must meet certain PCAOB registration and independence requirements, though some rules (e.g., partner-rotation) may not apply.

How non-issuer transactions work
* Isolated private transfers: A non-recurring sale of securities between private parties — for example, one individual selling stock certificates to a neighbor — is typically exempt from registration as an “isolated” non-issuer transaction. States may define “isolated” differently, but the common feature is non-recurrence.
* Secondary-market trades: Most trades executed among counterparties on organized exchanges or over-the-counter markets are non-issuer transactions because the issuer is not part of the transaction and does not receive proceeds.

Non-issuer broker-dealers
A person or firm that buys and sells securities for its own account or on behalf of customers, but that does not issue securities, can be a non-issuer broker-dealer. Regulation of such entities is generally lighter than for issuers, but they remain subject to limits on activities that would change their status and to specific reporting and compliance obligations applicable to broker-dealers.

Auditor requirements
* Auditors of non-issuer broker-dealers must be registered with the Public Company Accounting Oversight Board (PCAOB) as of the date of the auditor’s report.
* Auditors must meet independence requirements consistent with Exchange Act rules (e.g., independence under applicable standards).
* Some PCAOB-related requirements — such as certain partner-rotation and compensation rules — may not apply to auditors of non-issuer broker-dealers, but auditors should confirm applicable obligations and consider consulting the SEC’s Division of Trading and Markets for unusual situations.

Types of exempt non-issuer transactions
1. Isolated non-issuer transactions
* Non-recurring, private transfers between parties.
* Exempt from registration when not part of an ongoing distribution.
* Example: Selling a small block of stock certificates to a neighbor after moving to a new state.
2. Non-issuer transactions in outstanding securities (“manual exemption”)
* Applies when the security being traded is from an issuer that is current in its SEC reporting, not financially distressed, and not a shell or blind-pool issuer.
* Typically requires the securities to have been publicly held for a minimum period (commonly 90 days) before the trade.

Conclusion
Non-issuer transactions cover the bulk of routine secondary-market trading and private, one-off transfers of securities. They are generally exempt from the SEC registration requirements that apply to initial distributions by issuers, but parties and intermediaries (including broker-dealers and auditors) must understand and comply with the specific regulatory conditions and independence rules that apply to their roles.