Federal Securities Acts Flashcards
What is the 1933 SECURITIES ACT?
- Governs the issuance of Initial Public Offerings (IPOs)
- Gives investors adequate information for investment decisions and assurance that financial statements and disclosures can be relied upon
- Gives investors recourse against accountants
Who can sue under the 1933 Act?
Purchasers of securities only
What are requirements for accountant to be liable related to the federal securities act?
o Damages & Material Misstatements Only
o Reliance on financial statements are not a requirement unless purchased more than a year after the security is registered
o Proving negligence is not a requirement
What are Defenses Accountant can use related to federal securities act?
o Accountant used Due Diligence
o Accountant followed GAAS
o Damages weren’t caused by accountant’s work
o Plaintiff knew of the material misstatements
What must be filed with and accepted by the SEC Registration Statements?
- Audited financial statements
2. Prospectus
Who is exempt from filing registration statements?
- Banks
* Commercial Paper -
Registered Securities include:
o Stocks o Stock Options o Stock Warrants o Limited Partnership Interests General Partnerships not allowed o Bonds
What are registration Form Options?
o S-1 – Long Form or
o S-2 and S-3 – Less Detailed and preferred by issuers
What is Regulation A?
o Issuer can issue $50M of securities per year and be exempt if they file a notice with the SEC
o Non-issuers (a.k.a. a private individual) can sell $1.5M per year and be exempt
What is REGULATION D Rule 504?
$1M/year max
Unlimited Investors
What is REGULATION D Rule 505?
$5M/year max
35 Unaccredited Investors
Unlimited Accredited Investors
What is REGULATION D Rule 506?
Unlimited $$$
New: Can solicit & advertise to Accredited Investors
1934 SECURITIES ACT
- Governs the trading/selling of securities after the IPO
- Registrants must file:
- Form 10-K Annual Report
Must be audited - Form 10-Q Quarterly Report
Must be reviewed, but not audited - Form 8-K
A notice of a material event
Filed within 4 days of event
Who can sue under the 1934 Act?
o Purchasers and Sellers of Securities
Requirements for accountant to be liable for Fraud?
o Damages
o Material Misstatements
o Reliance on financial statements
Under 1933, reliance is not required. Note this difference
o Scienter or reckless disregard for the truth
