Federal Securities Laws:

Question 1

Anti-Fraud (Rule 10(B)(5))

Answer 1

Elements
Interstate Commerce/Use of National Exchange; Scienter – intent to deceive;
Deception – material misrepresentation or misappropriation of material non-public info;
In connection w/ actual purchase or sale of securities.

Question 2

Insider Trading

Answer 2

Tipper: improper purpose + benefit. Tippee: tipper breach and tipee knew.

Misappropriation: government prosecution for trading on market info in breach of duty of trust/confidence owed to source of info.

Question 3

Section 16(B)

Answer 3

Short swing trading profits.

Req’ts: Reporting corp – listed on national exchange or > 500 SHs and $10 mil in assets. Defendant must be D&O or > 10% SHs. They may not buy then sell stock within a single 6 month period. In 6 months, look at highest sell and lowest buy price.

Effect: profits recoverable.

Question 4

Sarbanes Oxley

Answer 4

CEO/CFO of reporting corps must certify that filing doesn’t contain material misrepresentations or omissions & fairly presents financial position.

Question 5

Sarbanes Oxley (Consequence of filing a false report)

Answer 5

Willfully cert a false report - $5 mil fine and 20 yrs.

If false report restated, corp may recover CEO/CFO profits from trading w/in 12 months after filing + incentive based comp.

Recovery also from trades during “black out” of at least 3 days when 50% of employees are prohibited from trading in retirement plans.