Federal Regulation chapter 6 Flashcards
Securities Act of 1933
AN ACT To provide full and fair disclosure of the character of securities sold in interstate and foreign commerce and through the mails, and to prevent frauds in the sale thereof, and for other purposes. (NEW ISSUES)
Equity Securities- preferred and common stock
Debt securities – bonds
Mutual Funds
Unit Investment Trusts
Real Estate Limited partnerships
Variable Annuity Contracts
EXEMPT SECURTIES of 1933
1.U.S. Government Securities
2.Municipal Securities
3.Intrastate Offering
4.Regulation A+ Offering two tiers 20m and 75M
5. Small business investment companies
6. Regulation D offering ( private placements)
7. Building and loan associations
8.Benevolent associates
9. Banks and saving and loans
10. Commercial paper with terms of 270 days or less
11. Bankers acceptances with terms of 180 days or less
12. Variable Annuities are NOT exempt from registration
The Securities Exchange Act of 1934
Designed to protect the public against unfair and inequitable practices in secondary market securities transactions
Established the Securities Exchange Commission(SEC)
Requires all securities listed on a national exchange to be registered with SEC
Requires disclosure of information about all listed securities
Requires stock exchanges to be registered with the SEC
Requires credit regulation for securities transactions
Shelf Registration
Using a single registration statement (FORM S-3), a corporation can register all securities it intends to issue in the upcoming three-year period, then issue them without filing again with the SEC.
33 Act regulates PRIMARY Market, 34 regulates SECONDARY Market
Regulation M
The SEC adopted Regulation M to ensure that securities should not be distributed in a market manipulated by the activities of persons having an interest in the distribution.
Intended to prevent persons having an interest in an offering from artificially conditioning the market in order to influence the distribution
Rule 101- covers the activities of underwriters, broker-dealers and other participating in a distribution
Rule 102- governs the activities of issuers and selling security holders
Rule 103- pertains to NASDAQ passive market making
Rule 104- governs stabilization transactions and certain post-offering activities by the underwriters.
Rule 105- governs short selling in anticipation of a public offering
Regulation D Offering
Private Placement rules- provision under the ’33 act for exempting private companies from filing requirement under certain conditions
Rule 504
cannot exceed $5,000,000
Rule 506(b) offering
issuers can continue to conduct quiet private placements without using general solicitation/ advertising
New Rule 506(c)
offering- issuers may now use general solicitation/advertising, but all purchasers must be accredited investors.
Issuers may use general solicitation/advertising( internet, Tv, etc)
All purchasers must be accredited investors
Issuer must reasonably believe investors are accredited, taking reasonable steps to verify they are accredited investors
Required disclosure will be driven by market demands
SEC Rule 144
Sets forth conditions under which a holder of unregistered securities( Reg D) may make a public sale without filing a registration statement with the SEC.
Covers resale of Restricted and Control Stock
1. Restricted securities must be fully paid for and owned for at least six months prior to sale
- Register Representatives may not solicit persons who have owned restricted shares for less than six months
- Adequate public information concerning the issuer must be available
- Sales by affiliates may be made through broker transactions or the market maker may take shares into inventory
- Sales in any 90 day period are limited to either:
a. 1% of the outstanding stock or the average trading volume for the previous 4 weeks, whichever is greater. NEED TO KNOW
- Form 144 Notice of Offering is effective for 90 days
- Transactions must be reported to the SEC at the time of the sale.
Restricted shares are shares that have been acquired through a private placement and NOT registered
SEC Rule 145-
Applies to the registration of transactions where an offer to sell or Offer to Sale would be considered to have been made as part of a merger, consolidation or stock reclassification
SEC Rule 147
Covers Intrastate
For a period of 6 months from the date of the last sale by the issuer- all sales and resales may be made only to residents of the same state
Blue Sky Laws
State securities laws that prohibit misrepresentations, misleading statements, and sales by persons not registered or licensed in the state, but do not prohibit sales of securities of non-U.S. issuers
Basic Knowledge of Books and Records
SEC Rules 17 a-3 and 17a-4- every broker dealer is required to maintain books and records in accordance with SEC Rules 17a-3 and 17a-4 either in electronic form or hard copy or may use an external service such as depository bank.
3 years
Customer Confirmation
Copies of orders given or received on behalf of the broker-dealer or customers
Names and addresses of beneficial owners of all accounts
Fingerprints for all persons associated with a broker-dealer, transfer agent or clearing firm
4 years
CUSTOMER COMPLAINTS- maintained at the office of Supervisory Jurisdiction(OSJ)
note muni complaints 6 years
5 years
Monetary instruments sales records and must be available upon request
6 years
Blotters of Original Entry
Customer and General Ledgers
Customer Account Information
Securities Records
MAINTAIN FOR LIFE
Articles of Incorporation
Articles of Partnership
Supporting entity documents such as Minutes and stock certificate Books