Chapter 13:Security regulations Flashcards
Securities Law
Protect investors by requiring of the issuer or trader.
Primary ‘33 act
initial issuances – promotes disclosure of information & prohibits fraud and deceit in traditional or online initial public offerings (IPOs) or sales of new securities by established corporations
Secondary ‘34 Act
National securities markets – all traditional & online markets are protected by the ’34 acts anti-fraud provisions & continuous reporting requirements for IPOs or sales of new securities by established corporations
Security
interest or instrument that is common stock, preferred stock, a bond, a debenture, or a warrant
Howey Test
investment of money or other consideration in a common enterprise with the efforts in the business to come primarily from others, with the purpose of making a profit
Common Securities
interests or instruments that could be common stock, preferred stock, a bond, or a warrant.
Statutorily defined securities
interests or instruments that are expressly mentioned by statute
Registration statement
issuer of securities files with the SEC that contains required information about the issuer
Red Herring prospectus
preliminary written disclosure document for dissemination to potential investors during the filling period
Final Prospectus
must be submitted with registration statement
Pre-filing period 33’
time period when the issuer prepares all registration materials to be presented to the SEC
Filing period ‘33
time period during which the SEC reviews the registration material for sufficiency and accuracy
Post filing period 33’
the SEC gives final approval
Due Diligence Defense 33’
requires that after reasonable investigation the defendant has reasonable grounds to believe and did believe that the information is true and there was no omission of material fact: the defendant has to show he thought everything in the registration statement was true, nothing was untrue and nothing was false
Materiality
information that might have changed ones mind
Liabilty under the 1933 act
criminal
civil
Criminal – Department of Justice
Civil – SEC/ALJ, Federal district court, private parties
Exempt securities
securities that once have been deemed exempt, are exempt forever regardless of the # of times they are transferred
non-issuer exemptions
apply to avg. investors who do not have to file a registration statement prior to selling their securities. (Only issuers, underwriters or dealers must register)
intrastate offering exemptions
(rule 147) – sellers principle office 80% of assets, gross revenues & proceeds from sale must remain in the state to obtain/maintain the exemption.
Securities exchange act of 1933
Protect the public from fraudulent activity
Tipper
Person who discloses material, nonpublic info. to another person
Tippee
Person who receives material, nonpublic info. from a tipper
