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CPA: REG > Chapter 5 Section 5: Securities Regulation > Flashcards

Chapter 5 Section 5: Securities Regulation Flashcards

1
Q

What does the 1933 act regulate?

1934?

A

33: original issuance of securities
34: purchases and sales after issuance

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2
Q

Are CDs or general partnership interests securities?

A

No

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3
Q

What is a prospectus?

A

It’s provided by the issuer, containing material information regarding the securities to potential investors

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4
Q

Who has to register under 1934?

A

Issuers, underwriters, and dealers

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5
Q

What’s shelf registration, and how do you get it?

A

It lets you prepare one registration statement for all securities that will be offered in the future, and it must be continuously updated

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6
Q

When does the registration statement become effective?

A

20 days after filing?

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7
Q

What goes into the registration statement?

A

Prospectus
Audited financials
Material facts

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8
Q

What’s a Blue Sky Law?

A

State law governing stock sales

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9
Q

What is allowed 30 days before registration?

A

No sales activity

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10
Q

What is allowed after registration but before effectiveness?

A

Oral offers to sell
Tombstone ads
Preliminary prospectus

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11
Q

Who can make oral or written offers at any time and automatically gets shelf registration?

A

Seasoned and well-known issuers (WKSI)

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12
Q

Who is exempt from the 1933 registration requirements?

BRINGS

A 
Banks
Railroads
Insurance policies
NFP
Gov't
Short term commercial paper
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13
Q

What is regulation A?

A

A partial exemption permitting unaudited financials for small companies (less than $5 million in sales annually)

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14
Q

What is regulation D?

A

Private offerings

Rules 504, 505, and 506

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15
Q

What is Rule 504?

A

$1 million sales limit

Doesn’t require disclosure to investors prior to the sale

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16
Q

What is Rule 505?

A

$5 million sales limit
Any accredited and 35 or fewer unaccredited investors
If only accredited, no disclosure

17
Q

What is Rule 506?

A

No $ limit

Sophisticated investors only

18
Q

Is general advertising allowed under:
504
505
506

A

Sometimes
No
Sometimes

19
Q

What notice is required for the SEC under:
504
505
506

A

15 days
15 days
15 days

20
Q

Are reoffers to public prohibited under:
504
505
506

A

Yes
Yes
Yes

21
Q

What is the dollar limitation on:
504
505
506

A

$1 million
$5 million
none

22
Q

What is the limit on unaccredited buyers under:
504
505
506

A

None
Up to 35
Up to 35, must be sophisticated

23
Q

What is the limit on accredited buyers under:
504
505
506

A

None
None
None

24
Q

What is the liability under sections 11, 12, and 17 of 1933?

A

11: Civil for misstatements
12: Civil for not filing or lying
17: Criminal for fraud - enforced by SEC and prosecuted by Justice Department

25
Q

Who is liable under Section 11 of 1933?

A

Anyone who signs

26
Q

What is the defense for Section 11?

A

Due Diligence

27
Q

What are the two types of companies that need to register their securities under 1934?

A

Shares are traded on national exchange

More than $10m in assets and either 2,000 shareholders or 500 unaccredited shareholders

28
Q

Who must report under 1934?

A

All companies required to register, and anyone registered under 1933

29
Q

What are the three reports needed and when are they due?

A

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

30
Q

What owners need to file a report with the SEC?

A

Anyone owning more than 5% of a 1934 registered company, including their background

31
Q

Who else needs to file a report with the SEC under 1934?

TIP

A

Tender Offers by the one making the offer
Insiders
Proxy Solicitations

32
Q

Is scienter required for Section 11? Rule 10b-5?

A

No

Yes (it’s fraud)

CPA: REG (35 decks)

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