A more thorough explanation:

A nonreporting issuer is a person or entity that issues securities, negotiable instruments, or letters of credit but is not subject to the reporting requirements of the Exchange Act. This means that they do not have to file regular reports with the Securities and Exchange Commission (SEC) like other issuers do.

There are three reasons why an issuer may be considered a nonreporting issuer:

1. They have not voluntarily become subject to the reporting requirements.
2. They have not had an effective registration statement under the Securities Act within the fiscal year.
3. They did not meet the shareholder or asset tests under the Exchange Act registration requirements at the end of their last fiscal year.

For example, a small startup company that has not yet gone public and does not have a large number of shareholders may be considered a nonreporting issuer. They may not have the resources or need to comply with the reporting requirements of the Exchange Act.

Another example could be a private equity firm that issues securities to a limited number of accredited investors. Since they are not offering their securities to the general public, they may not be subject to the reporting requirements.

These examples illustrate how a nonreporting issuer may operate differently from other issuers and may not have the same level of regulatory oversight.