Federal Securities Regualtion Flashcards
Define “security”.
Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, etc.
Define “catch-all categories”.
Investment contracts and “any interest or instrumentality commonly known as a security.”
List the elements of an investment contract.
Investment of money;
In a common enterprise;
With an expectation of profit;
To be earned primarily by the actions of others.
Define “free writing”.
Written advertising material that is not permissible during the waiting period.
Define “free writing prospectus”.
Written literature, other than prospectus that Well-Known Seasoned Issuers and other big firms can use at any time to promote securities.
What does the acronym WKSI stand for?
Well-Known Seasoned Issuers.
Define “pre-filing period”.
Period before the registration statement is filed with the SEC.
What is the length of the waiting period for the Securities and Exchange Commissions approval of a registration?
20 business days (theoretically).
List some of the traditional do’s and don’ts relating to the registration process with the Securities and Exchange Commission.
Pre-filing period: no offers/no sales;
Waiting period: some offers/no sales;
Post-effective period: offers and sales ok
List the distribution process for securities.
Issuer-Underwriter-Broker-Investor.
What purpose does a company registration with the Securities and Exchange Commission serve?
This type of registration allows big firms like Well-Known Seasoned Issuers to file registration statement covering three years and sell whenever they want.
List the key Securities and Exchange Commission securities that are exempt .
Bank;
Common carrier;
Bankruptcy receivers;
Insurance policies/annuities.
List the requirements for an intrastate offering (Rule 147).
All offerees must be in the state;
80% of issuer’s assets in state;
80% of issuer’s revenues in state;
80% of proceeds used in state.
List the primary Securities and Exchange Commission transactions that are exempt.
Small Offerings;
Private Placements;
Intrastate transactions
True or false: State regulations can enforce antifraud rules and can regulate the merits of covered securities.
False.
State regulations can only enforce antifraud rules and require notice filings. However, state regulations cannot regulate merits or register “covered securities.”
List the “Regulation D” exemptions.
Rule 504 (small offering-$1m); Rule 505 (small offering-$5m); Rule 506 (private placement-unlimited).
List the Securities and Exchange Act §12(a)(1) remedies to violations of §5 of the Act.
Sale of unregistered securities;
Failure to deliver prospectus;
Use of inadequate prospectus;
Offer before filing registration statement.
What elements must a plaintiff prove to win a §11 claim under the Securities and Exchange Act?
A false statement or omission of fact appeared in a registration statement, The misstatement or omission was material, Plaintiff bought securities that were issued under the defective registration statement, Plaintiff suffered damages.
List the elements that a plaintiff must prove in a Securities Exchange Act §12(a)(2) lawsuit.
P must prove: Misrepresentation or omission; Materiality; Tracing; D is a "seller;" and Damages.
When is an accounting firm liable regarding securities with which it has done work?
Liable only for that part of the registration statement (financial statements) that it prepared.
When is an accounting firm liable regarding securities with which it has done work?
Liable only for that part of the registration statement (financial statements) that it prepared.
List the elements of a Securities Exchange Act §12(a)(1) lawsuit.
D violated Sec. 5;
D was a “seller;”
Damages.
What are the major provisions of the Securities Exchange Act of 1934?
Created SEC;
Created periodic reporting system;
Punishes fraud;
Regulates securities business.
List the elements of a Securities Exchange Act §18(a) claim.
False statement; In a "filed" document; Materiality; Purchase or sale; "Eyeball" Reliance; Causation; and Damages.
