Federal Securities Acts Flashcards
Purpose of this act is to provide investors with full and fair disclosure of a security offering and to prevent fraud by ensuring that no sale of a security shall occur in interstate commerce without registration and without furnishing a prospectus to prospective purchasers unless the security or the transaction is exempt from registration
Securities Act of 1933
Purpose of ti act is the establishment of hte SEC to assure fairness in the trading of securities subsequent to their original issuance
Securities Exchange ACt of 1934
Any note, stock, bond, certificate of inteerset, debenture, investment contract, etc. in which the investor tries to make a profit on the investment through th eefforts of others
Security
An individual, corporation, partnership, unincorporated association, usiness trust, or government
person
Has power (direct/indirect) to influence the managmeent and/or policies of an issuer, whether by stock ownership, contract, position, or otherwise
Controlling person
Includes officers, directors, and owners of more than 10% of any class of an issuer’s equity securities (does not include debentures, because not equity securities)
Insiders
An owner of more than 10% of the equity stock of an issuer–includes equity owned by: (1) owner’s spouse (2) owner’s minor children (3) owner’s relative in same house (4) owne’rs equity stock held in trust in which owner is beneficiary
beneficial owner–considered an insider to avoid loopholes under 1934 act
Any person who has purchased from an inssuer with a view to the public distribution of any security or participates in such undertaking
underwriter
A statement required to be filed with the SEC before initial sale of securities in interstate commerce; includes financial statements and all other relevant information
Registration statement
Any notice, circular, advertisement, letter, or communication offering any security for sale (or merger)
Prospectus
When a registration statement becomes effective (waiting period)
20th day after filing
The basic long-form registration statement
Form S-1
Registration forms adopted by the SEC to ease much of the burden of disclosures required under federal securities regulation–typically used by firms already on file with the SEC
Forms S-2 and S-3
REgistration forms permitted for small businesses (less than $25 mil in rev)–redues amoutn of financial and nonfinancial information required
Forms SB-1 and SB-2
Commercial paper, intrastate issues, small issues (up to $5 mil in a 12-month period), securities of gov’ts and banks, stock splits, securitiies of non profit religious, educational, or charitable orgnaizations, certificates issued by the receiver or trustee in bankruptcy, and insurance annuity contracts
Exempt securities
SEC regulation that requires an offering circular for small issues (less than $5 mil) that do not need to be audited
Regulation A
Sale or offer to sell by any person other than an issuer, underwriter, or dealer
Exempt transactions
Establishes three important exemptions for exempt transations in Rules 504, 505, and 506 under thed 1933 act
REgulation D
Regluation D exemption rule that exempts an issuance of securities up to $1 mil sold in 12-month period to any number of ACCREDITED investors (banks, insurance companies, etc)–no disclusrues needed and can’t have any restrictions on right to resell
Rule 504
Regulation D rule that exempts issuances of up to $5 mil in 12-mo period for sale to bot accredited and nonaccredited investors–if sold to nonaccredited need to disclose and provide resell provisions
Rule 505
Regulation D rule that allows private placement of unlimited amounts of seucrities similar to Rule 505, but with the additional requirement that unaccredited investors must be sophisticated invesotrs or be respresented by indiviudals with such knowledge and experience
Rule 506
Requirements that must be met to NOT quality as an underwriter in the sale of securities, and thus be subject to the registration provisions
Rule 144
A preliminary prospectus that indicates that registration statement has been filed but has not become effective
Red-herring prospectus
Makes known the availability of a prospectus
Tombstone advertisement
A registration of a new issue which can be prepared up to two years in advance, so that the issue can be offered quickly as soon as funds are needed or market conditions are favorable–need to keep updated registration statement
Shelf registration
Quaterly reports that must be filed for each of first 3 fiscal quarters of each fiscal year–must be reviewed by CPA
10-Q
Event reports when material events occur such as change in corporate control, signfiicant cahnge or revaluation of assets–must be filed within 4 days of material event
8-K
An invitation by fuyer to shareholders of targeted company to tender shares they own for sale for price sepcified over a period of time
Tender offers
Prohibits discharge of any debts incurred in violation of securities laws
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
Antifraud provisions under Securities Exchange Act of 1934
Rule 10b-5
Act making it unlawful for any domestic company or its officers or employees or agents to offer or give to foreign officials or to political party something of value to influence decisions
Foreign Corrupt Practices Act
REquires corporations to disseminate its data equally among investors and analysts to help avoid conflicts of interest by analysts
REgulation Fair Disclosure (Reg FD)
Part of SOX that requires that each periodic report that contains financial reports of the issuer must be accompanied with written statement of CEO or CFO that certifies that reports comply fuly wiht relevant securities laws and also fairly present the financial condition of company in all material raspects
Section 906 of SOX
Section of SOX that makes officers responsible for maintaining effective internal controls and requires principal executive and financial officers to disclose all significant interanl control deficiencies to issuer’s auditors and audit committee
Section 302 of SOX
Created the Financial Stability Oversight Council
Dodd-Frank act
Council charged with identifying threats to the financial stability of the US, promoting market discipline, and responding to emerging risks
Financial Stablity Oversight Council
Regulates insurance companies–created by the Dodd-Frank act
Federal Insurance Office
Regulates the offering of consumer products and services under the federal consumer financial laws (ex. credit counseling, check-cashing, etc)
Bureau of Consumer Financial Protection
prohibits any “banking entity” from engaging in propietary trading, or sonposirng or investing in a hedge fund or private equity fund
The Volcher rule of Dodd-Frank
Regulates the derivatives markets, including the regulation of swap dealers and major swap participants
Commodity Futures Trading Commission–given authority under Dodd-Frank
State statutes regulating the issuance and sale of securities that contain antifraud and registration provisions
- -must be complied with IN ADDITION to federal laws
- -exemption from federal laws are not exemptions from state laws
“Blue-Sky” Laws
