FEDERAL LAWS & REGS Flashcards
What does 1933 Act apply to?
Sales, stocks, bonds & notes for period over 9 months
After registering with SEC, how long is the waiting period and what actions can be made?
20 days
preliminary or “red herring” prospectus can be issued
Tombstone ad can be placed
3 periods when filing with SEC
pre-filing - no offer or sales
waiting period - oral offers, some written, no sales
post - effective - offer and sales
Under 1933 Act, what must be disclosed in registration statement?
- description of the security
- how the corp will use the proceeds from the sale
- descriptions of registrant’s business and managemen
- financial statement & prospectus
3 types of exempt securities
- small offer - pose small threat to public
- private placement - accredited investors only
- interstate offerings - contained within one state and only subject to that states rules
Regulation D
permits exempt offerings to be sold to both accredited and non-accredited investors (without having to file with the SEC)
Still must be notified within 15 days of first sale
Rule 504 Regulation D
small companies
raise up to $1 million in 12 months
can be sold to anyone - no limit
Rule 505 Regulation D
Raise no more then $5 million
unlimited accredited investors, only 35 unaccredited
If only accredited - do not have to provide audited financials
If includes non-accredited provide at least audited balance sheet
Rule 506 Regulation D
No limit on amount
unlimited accredited investors, only 35 unaccredited
Regulation A
can raise $50 million in 12 months and sold to anyone
Rule 147
Intrastate offering
must be organized and doing business in state where offering will be 80% proceeds test
What are exempt from registration under 1933 Act
governmental securities i.e. municipal bonds
charitable organizations
What is the idea of the JOBS act?
securities law that would make it easier for small companies to raise capital and create jobs
What did JOBS act create?
- Emerging growth companies - can have an IPO but avoids burdens of being a public company
- Encouraged crowdfunding
- Increased Regulation A amount from $5m to $50m
- Allow firms who do private placement to advertise
- public company definition changed so firms could grow before being called that
Requirements to be an EGC
- less than $1 billion annual gross revenue
- publicly traded for less than 5 years
- public float of less than $700million
- not issued $1billion in non-convertible debt in prior 3 year period
Benefits of being EGC
- registration statement is confidential reviewed by SEC
- only need 2 years of audited f/s instead of 3
- do not need to comply with SOX 404(b) for internal controls
- Do not need to comply with new PCAOB rules
- reduced disclosure for executive compensation
What is the crowdfunding limit
100,000 per year in total
Section 11 of Liabilities Provision 1933 Act
remedies misleading statements and omissions contained in the registration statement
What must a plaintiff prove to win under Section 11?
- Material misstatements in registration statement
- trace their shares to the RS
- suffered damages - don’t need to prove reliance or fraud
Section 12(a)(1) what does it remedy?
- sale of unregistered securities
- failure to deliver prospectus
- use of inadequate prospectus
- offer before RS is filed
Section 12(a)(2) what does it remedy?
false statements and omissions in oral or free writing
What is Section 10(b) Rule 10b-5
intent to defraud - omission or fraudulent statements
What is the 1934 Act?
- punishes fraud in secondary markets
- regulates the securities industry
- created the sec
- created periodic disclosure system for co. with 500 shareholders and $10m assets
Under 1934 Act, in terms of statute of limitations, when must a plaintiff bring his lawsuit?
Within 2 years of when he/she should have discovered the fraud AND within 5 years of the fraud.
