Brian Lee - Laws, Regulations, Ethics Flashcards
Underwriters and investment banker
Means broker dealer - think about mom and pop shop example who want to IPO –> underwriter and investment banker are known in the primary market (I.e. IPO)
Securities act of 1933
“Full & Fair Disclosure Act”
“New Issues Act”
“Prospectus Act”
Requires full and fair disclosure of all NEW issues, through use of prospectus.
20 day cooling off period
Tombstone ad
Red herring
Final prospectus vs prelim
Indication of interest
Full & Fair Disclosure Act mean?
Means we have to register the securities with SEC.
What is the ‘cooling off period’ from Securities Act 1933
20 days prohibited from soliciting
What is red herring
Pre lim prospectus
Tombstone ad
Generic notice of sale, not advertising
What is allowed during cooling off
Red herring and tombstone to take indication of interest
What is indication of interest
No commitment upon customer or broker dealer
What if we don’t hear back SEC 20 days
Good to go, reg has been CLEARED by SEC
NEVER USE WORDS guarantee OR APPROVES - they don’t approve dis approve or guarantee
Final prospectus vs prelim
Offer price is the only difference
Securities exchange act of 34
Regulates 2nd market
Prevent lying, cheating, stealing
SCAMS
S - SEC
C - REDIT (federal reserve oversees)
A - NTI FRUAD PROVISION
M - ANIPULATION
33 1st market
34 second market
Who oversees extension of CREDIT in market?
What regulation?
Federal Reserve Bank (RFB)
Specifically the FRB - REG T
Who is exempt from Anti Fraud act
No one
Insider trading enforcement act ‘86 & what are the criminal penalties
In ‘86 expanded rules - who may be held liable? ALL of them instead of just the person taking the action who acted upon it, but EVEN though who information provided. (TIPPER TIPPEE)
These are CIVIL PENALTIES - $1M or 3x profits made, GREATER OF THE TWO.
CHINESE WALL
Still is liable for insider trading, cannot provide material notification even within the firm.
6 main persons
Broker Dealer - person - effects securities transactions for benefits of others or for themselves.
Broker charge a commission.
Dealer part of it (not many firms do this only largest of large) will buy & sell from their OWN inventory. Dealer transaction / principal transaction, MARK UP for $$.
What is ABC
Agency Broker Commission (how they’re paid)
USA Uniform Securities Act
Created in 50’s to standardize definition.
When does a broker deal have to register in the state?
Office in state or has a RETAIL client in that state. Doesn’t matter what type of client.
What kind of entity typically means Non exempt
Company
When does a broker deal not have to register in the state?
No office or no client in state. Snowbirds. If your clients are not residents but traveling somewhere. Or if clients or institutions or issuers only.
Office and clients - registor
No office and no clients - no register
Who works for broker dealers & what do they do.
Agents - they accept or places orders for securities. Solicits is the same thing.
When do Agents have to register or not register
Placing orders.
To not register - sales assistant, or intern, and the test will ask you WHERE do they cross the line.
When they accept or placing an order for SECURITIES. Remember it has to be a security. Futures aren’t a security, so if they order a future, they did not cross a line.
Agents can be working for
Broker dealer or issuer. You have to register as an Agent. Files as U10 for issuer and U4 for Broker Dealer.