Class 8 Disclosure/accuracy

Question 1

General policy of securities law:

Answer 1

to facilitate capital formation, requires some trust in markets

Question 2

Four arguments favoring disclosure

Answer 2

1. Facilitates comparable disclosures by different companies
2. Reduces agency costs within firm
3. Overcomes an externality problem for firms disclosing info
4. reduces duplicative research by professional investors and analysts

Question 3

What is a public company?

Answer 3

Public company status-Exchange Act
1. listing on a national exchange 12a
- registration permitted under 12b
2. Over the counter stocks 12g1A
- total assets exceeding 10 million
-class of equity securities held by at least 2,000 persons (or 500 investors who are not accredited)
3. Filing a registration statement under Securities Act 15d
-makes private placement more attractive
-periodic filings, but not subject to proxy solicitation, tender offer, or short-swing profit provisions of the exchange act

Question 4

termination of public company status

Answer 4

based on number of shareholder/ assets for an amount of time

Question 5

What is a public company Rule 12g5-1(b)

Answer 5

if the issuer knows ohrtk that the form of holding securities or record is used primarily to circumvent the provisions of section 12g or 15d of the act, THE BENEFICIAL OWNERS of such securities shall be deemed to be the RECORD OWNERS

Question 6

requirements of public company status. section 12g5 jobs act of 2012

Answer 6

for determining whether an issuer is required to register a security with the commission, the definition of held of record shall not include securities held by persons who received the securities pursuant to an employee compensation plan in transactions exempted from the registration requirements of section 5 of the Securities Act of 1933.

Question 7

Disclosure requirements Form 8-K

Answer 7

1. registrants business and operations: contracts outside the ordinary course of business or filing of bankruptcy or receivership
2. Financial info: assets over 10% of the total assets, operations results and financial condition, off-balance sheet arrangement, costs associated with exit or disposal activities, including termination benefits for employees, contract termination costs and other associated costs, impairments to assets
3. Securities & Trading Markets: Receipt of a notice of delisting or a transfer of listing, unregistered sale of equity securities, material modifications to the rights of security holders.
4. Matters related to accountants and financial statements: changes to company’s outside auditor, notice that previously issued financial statements or audits should not be relied upon
5. Corporate Governance and Management
   - a change in control of the registrant, the departure or election/appointment of directors and principal officers, suspension of trading under employee benefit plans, info related to voting matters
6. asset backed securities ABS: changes of servicer or trustee, or change in credit enhancement for the ABS
7. Regulation RD
   - any disclosure required to comply with Regulation FD
8. Other Events: anything the issuer thinks would be of importance to its security holders
9. F in. Statements and exhibits: for businesses acquired by the registrant

Question 8

In the Matter of Hewlett-Packard Co.

Facts: SEC brought cease and desist order under 21C of Exchange act
one director leaking info to the press
A different director resigned because he didn’t like the handling of the situation. (he wanted a quiet discussion not a full meeting and resignation request)
8-k requires disclosure of disagreements with a board member resignation.
HP argued the disagreement was with the chairman, not operations, policies, and practices.

I: should the reason for the disagreement have been disclosed in the company’s 8-K?

Answer 8

HPs arguments:
this was not about operations, policies, or practices, it was personal

H: the information should have been disclosed

Reasoning: the disagreement implicated the firms corporate governance and the firms policies on handling of sensitive info by directors. This is operations, policies or practices.

Question 9

are disclosures regarding resignations required?

Answer 9

yes if a director has resigned or won’t stand for re-election because of an disagreement with the registrant on any matter regarding to operations, policies or practices.

Question 10

What to disclose of form 10-k?

Answer 10

business
properties
financial statements
legal proceedings
market for common stock
management discussion and analysis financial condition and results of operation MD & A
Directors and officers
executive compensation
security ownership of certain beneficial owners and management
certain relationships and related transactions
principal accounting fees and services

Question 11

what are the differences between 10-k and 10-Q?

Answer 11

10-Q has less disclosure
10-k is annual
10-Q is quarterly
Not audited
there are accounting differences