Chapter 5 Section 5: Securities Regulation Flashcards
What does the 1933 act regulate?
1934?
33: original issuance of securities
34: purchases and sales after issuance
Are CDs or general partnership interests securities?
No
What is a prospectus?
It’s provided by the issuer, containing material information regarding the securities to potential investors
Who has to register under 1934?
Issuers, underwriters, and dealers
What’s shelf registration, and how do you get it?
It lets you prepare one registration statement for all securities that will be offered in the future, and it must be continuously updated
When does the registration statement become effective?
20 days after filing?
What goes into the registration statement?
Prospectus
Audited financials
Material facts
What’s a Blue Sky Law?
State law governing stock sales
What is allowed 30 days before registration?
No sales activity
What is allowed after registration but before effectiveness?
Oral offers to sell
Tombstone ads
Preliminary prospectus
Who can make oral or written offers at any time and automatically gets shelf registration?
Seasoned and well-known issuers (WKSI)
Who is exempt from the 1933 registration requirements?
BRINGS
Banks Railroads Insurance policies NFP Gov't Short term commercial paper
What is regulation A?
A partial exemption permitting unaudited financials for small companies (less than $5 million in sales annually)
What is regulation D?
Private offerings
Rules 504, 505, and 506
What is Rule 504?
$1 million sales limit
Doesn’t require disclosure to investors prior to the sale
What is Rule 505?
$5 million sales limit
Any accredited and 35 or fewer unaccredited investors
If only accredited, no disclosure
What is Rule 506?
No $ limit
Sophisticated investors only
Is general advertising allowed under:
504
505
506
Sometimes
No
Sometimes
What notice is required for the SEC under:
504
505
506
15 days
15 days
15 days
Are reoffers to public prohibited under:
504
505
506
Yes
Yes
Yes
What is the dollar limitation on:
504
505
506
$1 million
$5 million
none
What is the limit on unaccredited buyers under:
504
505
506
None
Up to 35
Up to 35, must be sophisticated
What is the limit on accredited buyers under:
504
505
506
None
None
None
What is the liability under sections 11, 12, and 17 of 1933?
11: Civil for misstatements
12: Civil for not filing or lying
17: Criminal for fraud - enforced by SEC and prosecuted by Justice Department
Who is liable under Section 11 of 1933?
Anyone who signs
What is the defense for Section 11?
Due Diligence
What are the two types of companies that need to register their securities under 1934?
Shares are traded on national exchange
More than $10m in assets and either 2,000 shareholders or 500 unaccredited shareholders
Who must report under 1934?
All companies required to register, and anyone registered under 1933
What are the three reports needed and when are they due?
Form 10-K annually within 60 days (large, 90 small) with audits
Form 10-Q quarterly within 40 days (large, 45 small) with reviews
Form 8-K within 4 days of major corporate events
What owners need to file a report with the SEC?
Anyone owning more than 5% of a 1934 registered company, including their background
Who else needs to file a report with the SEC under 1934?
TIP
Tender Offers by the one making the offer
Insiders
Proxy Solicitations
Is scienter required for Section 11? Rule 10b-5?
No
Yes (it’s fraud)
