Fed securities law

Question 1

10b-5: aimed at

Answer 1

deceit

Question 2

10b-5 prohibits

Answer 2

fraud or misrepresentation in connection with purchase or sale of securities (debt or equity)

Question 3

10b-5: at some point, deal must use

Answer 3

instrumentality of interstate commerce (mail, telephone, trade on national exchange)

Question 4

10b-5 types of transactions

Answer 4

1) material misrepresentation
2) insider trading
3) tipping

Question 5

insider trading

Answer 5

trading securities based in material inside info

only a problem for someone whose job gives access to secrets

insider has relationship of trust and confidence w/ SH

duty to abstain or disclose

Question 6

tipping

Answer 6

insider pass along material info for wrongful purpose

tipper: pass material inside info + benefit (can be gift or enhance rep)
tippee: traded on tip + knew or should have known info improperly passed

can be to tippee if no tipper!

Question 7

Ps in 10b-5

Answer 7

SEC

private plaintiff buyer or seller of securities (sue someone fro defrauding you)

MUST HAVE BOUGHT OR SOLD

Question 8

10b-5 require scienter

Answer 8

intent to deceive, manipulate, defraud

Question 9

Section 16b aimed at

Answer 9

speculation by director, officer, 10% SH

Question 10

who recovers under 16b?

Answer 10

corporation

Question 11

what does corp recover under 16b?

Answer 11

profits gained from insiders buying and selling company’s stock

Question 12

what kind of corp does 16b apply to?

Answer 12

reporting corp- listed on national exchange OR at least 500 SHs and $10m assets

Question 13

what type of transaction does 16b apply to?

Answer 13

short swing trading: buying and selling stock w/i single 6 mo period

Question 14

when is there a profit recoverable by corp under 16b?

Answer 14

if within 6 months before or after SALE by insider, INSIDER PURCHASED for lower price, there’s a profit