Federal Securities

Question 1

Rule 504

Answer 1

Offerings under $1 million may be offered to unlimited investors if not an investment company

• Offering can be made through general advertising if only accredited investors
• Must notify SEC within 15 days after first sale

Question 2

Rule 505, 506

Answer 2

Rule 506
-private placement of unlimited dollar amount
Exempt if offer to no more than 35 non-accredited investors
- Allowed general solicitation if sell to only accredited investors
-must notify the SEC within 15 days

Rule 505

• Exempts issuance up to 5,000,000
• Sales to 35 nonaccredited investors
• Sold during applicable 12 month period

Question 3

Exempt from registering

Answer 3

Municipalities, banks, railroads, farmer’s co-ops, charity

• If issuing is in home state and sold to residents of home state
• Any transactions made by other than issuer

Question 4

Section 10b, 11, & 18

Answer 4

• Plaintiff may prevail without proving reliance in Section 11 but not 10
• CPA not liable if can prove due diligence under 11, must also prove good faith under 10
• Section 11 is negligence, section 10b is fraud statute (intention or recklessness)
• Burden of persuasion is on defendant in section 11 however, plaintiff must only prove there was a material misstatement not negligence
• Good faith & lack of knowledge under section 18