Rescission Offers

A rescission offer is an attempt from a company to redress an error made in the offering of securities.  Contract law defines a rescission as the unmaking of a contract between parties.  The purpose of the rescission is to bring both parties back to where they were before the contract.

In the two most recent rescission offers filed with the Securities & Exchange Commission, previous offerings were found after the registration to be in violation of one or more laws.  The rescission offer gives purchasers of those securities and option to return them for the price they paid.  Often, if the purchaser refuses the rescission offer, the securities are re-registered with the legal ommissions/errors having been corrected.

Prosper Marketplace Inc., provider of a peer-to-peer online credit platform, had allowed its registration in Florida to offer and sell Borrower Payment Dependent Notes to expire.  The Florida Office of Financial Regulation informed the company that it was required to make a rescission offer to any Florida resident that purchased a Note from Prosper between July 10 and August 5, 2010.  The rescission offer was filed 1/24/11 on Form S-1, file no. 333-171837.  Purchasers that accept the offer will receive the price they paid for the notes plus 6% (per annum) interest.

Common shares of Brenham Oil & Gas Corp. were spun-off as a dividend distribution to shareholders of American International Industries, Inc. on July 21, 2010.  However, the registration statement pertaining to the Brenham shares was not filed until September 21 (Form S-1, file no. 333-169507).  Because the shares were issued prior to the registration being declared effective by the SEC, the distribution was not in compliance with federal and state securities laws.  The registration was converted to a rescission offer on the Amendment filed 1/6/11.

The Brenham rescission offer expires on January 31.  Individuals who accept the rescission offer will receive no consideration because the shares were issued as a dividend without any shareholder consideration.  If the offer is not accepted, the shares can be sold after the effective date of the registration without limitation as to the number or manner of sale, but remain subject to any of Brenham’s insider trading policy requirements.