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REG > Federal Security Regulation > Flashcards

Federal Security Regulation Flashcards

1
Q

What is the SEC responsible for

A
  • administering federal security law
  • regulating brokers
  • issuing rules on details of retaining work papers
  • delisting issuers
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2
Q

What is a security

A

MY goal is to make money through the managerial efforts of others

common stock 
preferred stock 
options 
debentures ( unsecured)
warrants
Limited  partnership 
NO - general partnership
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3
Q

Can a general partnership be a security

A

No

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4
Q

Can a limited liability company be a security

A

Yes - passive you make money through the efforts of others

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5
Q

Is a CD a security

A

NO

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6
Q

What are the federal security regulation?

A

the 1933 act and the 1934 Act

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7
Q

if you exempt on one can you be exempt on another

A

no - they are separate

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8
Q

What did 1934 create

A

SEC

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9
Q

1933 act does what

A

it make sure that there is enough information for you to make decision - NOT whether it is a good buy or not

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10
Q

How much stock do you have to own to be considered an issuer

A

greater than 10%

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11
Q

What is a states own security law called

A

blue sky law

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12
Q

If you are a public company and an owner has more than 10% What do they have to do

A

THEy must register with the SEC AN d report every purchase and sale to the SEC

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13
Q

WHEN must a company file a registration statement

A

Under the 1933 any company that offers a future offering of common stock must file a registration IF Is does NOT meet one the the exemptions
ACID BRAIN

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14
Q

Who must report a tender offer

A

The party making the tender offer must report it to the SEC -

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15
Q

WHAT is a tender offer

A

This is an offer to purchase some or all of shareholder’s shares of a corporation - usually at a premium

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16
Q

Wha are short wing trades and who is required to report them to the SEC

A

This requires a company insider ( owns more than 10%) to return any profits o to the company from sales /purchase if they occur in a 6 month window

The inside is supposed to report this - not the company

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17
Q

Are securities of a a bank exempt from 1944 registration

A

Yes because they are regulated b someone else - the federal reserve system

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18
Q

Do promissory notes maturing in 12 months have to resister with SEC - 1933

A

Yes because longer than 9 months - if shorter than 9 month then do not have to register

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19
Q

What is a shelf registration and when can you use it

A

No available for first time registers
- allows various sales of securities over a long period of time

  • must be kept updated for changes in the company
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20
Q

IS an attorney considered an insider subject to 1934 registration

A

yes they are

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21
Q

do you have to register is you sell muni bonds across state line

A

no - they are exempt even across state lines

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22
Q

Under 1934 - what are the requirements

A
  • if you are listed on a national stock exchange
    assets of 10M or more
  • have 500 or mom non accredited stockholders
  • or over 2000 stockholders of any type
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23
Q

When can you start selling securities

A

You can so it once the registration statement become effective

This is normally 20 days after it is filed with the SEC

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24
Q

IS A CPA considered an insider

A

a c- level officer is ]
a controller is not necessarily unless that are made to be an insider through their responsibility and connect with CEO etc.

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25
Q

What is a tipped

A

someone who is tipped off about a co from an insider

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26
Q

What is 506

A
  • unlimited $
  • Unlimited time
  • yes general solicitation
  • but must have less that 35 non accredited
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27
Q

What is the limit with crowdfunding exemption

A

1M

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28
Q

What is the limit with Regulation D 504

A

5M

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29
Q

What is the limitation under regulation A

A

50M

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30
Q

IS the prospectus include din the registration statement

A

Yes

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31
Q

Who can make a private placement exemption

A

any corporation that can meet the conditions

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32
Q

What is an investment contract and does it qualify as a security

A

yes a security - it provides a return based on the results of investment

33
Q

What is a collateral trust certificate and is it a security

A

yes a security

  • issued by a trustee in bankruptcy

gives the buyer the ability to earn a return based on the proceeds from asset disposal;

34
Q

WHAt happens when you register for a sale of common stock

A

you must also provide a prospective

can make sales starting 20 days after filing

35
Q

What happens if you are exempt and then want to have a later resale

A

A resale must also qualify under one of the available exemptions

36
Q

When are the SEC’s continuous disclosure required

A

when a company has 10M in assets

500 or more non accredited

or 2000 shareholders or more

37
Q

Does having more than 1 class of stock make you subject to 1934

A

No

38
Q

What must you do if you acquire 5% or more of any class of shares under 1934

A

must report to the SEC under the tender offer rules

39
Q

What should be contained in the prospectus and registration statement

A

the intended use of the proceeds of the offering

40
Q

What happened if you fail to disclose all of the information in the prospectus - fail to meet the requirements

A

Under 1933 - you have a duty to disclose info to investors

if you fail to meet them then the purchaser can return the security an request a refund

41
Q

DO all securities need to register with SEC

A

NO - if you are small or meet one of the exceptions:

- small offering
commercial paper
intrastate offering
private placement offerings
brokerage transactions
already regulated industry
agencies of the government
insurance contracts
not for profit 
stock dividends and splits
42
Q

What are the rules with regards to advertising your security

A

They vary depending on the offering - can range from none to prospectus distribution

43
Q

Under 504 - D when must you notify the SEC

A

within 15 days of the offering up to 5M

you can sell to an unlimited number of investors

sell to accredited or non accredited

No financial info is required

Gen advertising is prohibited

44
Q

Under 1934 - what events must you report to the SEC

A
  • Tender offers of over 5% ( this is an offer to buy a lot of all of a company’s stock )
  • sales by insiders must be reported
  • any attempts to solicit the proxies of shareholders in connection with an upcoming shareholder meeting
45
Q

If you buy securities that where exempt because of regulation D what are the rules about subsequent trading

A

These are unregistered securities

If you have purchased them you can resell them later, but only if you follow the same restrictions and limitation as were used in the initial offering

46
Q

If you are a security that qualifies for exemption - what must you still follow from the 1934 Act

A

All of the antifraud provisions still apply

47
Q

What is included in the prospectus

A

info about controlling interests - large stock holders

SEC verifies to completeness - NOT Accuracy

Not guarantee it is free of risks - but just ensures that investors are aware of the risks

48
Q

It a CD a security

A

Nope - they are considered commercial paper - not a security

49
Q

If you are exempt do you need to fie a registration statement

A

Nope not if you are exempt

50
Q

What is a red herring prospectus and when do you issue one

A
  • this is a preliminary prospectus that is issued during the 20-day registration waiting period
51
Q

what are the advertising rules under Rule 605

A

General solicitation and advertising are prohibited UNLESS all purchasers are accredited investors

52
Q

If you are filling as an exemption under Regulation A - what are the requirements

A
  • Must file an offering circular
  • offer up to 50M
  • inside of 12 months
  • wait 20 day after you file

if 0-20M - must provide unaudited F/S

-if 20 - 40 - audited F/S

53
Q

CAN you offer debentures is a private placement under Reg D

A

Yes you can along with other types of securities

54
Q

Are these specifically exempt for the 1933:

one year notes issued to raise working capital

securities sold by a discount broker

pre incorporation stock subscriptions

A

NO - one year notes issued to raise working capital - this is longer than 9 months and therefore are not exempt even though they are commercial paper

NO - securities sold by a discount broker - not specifically exempt

No - pre incorporation stock subscriptions - not specifically exempt

55
Q

When does a registration statement become effective

A

20 days after it is filed if it is complete

56
Q

That are the rules with prospectus delivery

A

a prospectus must be delivered to each spectate investor without exception

57
Q

When can you begin selling your security

A

you can’t begin selling until the registration statement has been filed with the SEC

Actual sales can’t take place until the effective date

58
Q

What is the point of the securities act of 1933

A

It is to ensure that the truth - that adequate and accurate disclosure of material information to prospective investors

  • does not detect managerial fraud
59
Q

Does the SEC prosecute criminal cases

A

NO that is the job of the department of justice

60
Q

IS the SEC charged with Requiring disclosure of facts concerning offerings of securities listed on national securities exchanges.

A

Yes

61
Q

IS the SEC charged with Investigating securities fraud.

A

YEs

62
Q

Is the SEC charged with Regulating the activities of securities brokers.

A

Yes

63
Q

CAN someone who is not a n issuer, underwriter or dealer be exempt

A

YEs - - securities offered by otters partied are exempt

64
Q

WHAt does a tombstone advertisement tell you

A

tombstone advertisement is used to inform potential investors of the availability of a prospectus.

65
Q

WHEn can you offer to sell your securities

A

ANY time after you file your registration

But you can’t actually sell them until the effective date

66
Q

Can a company that is traded on a public stock exchange still offer a private placement offering

A

Yes

It does not prevent them from issuing securities

as long as they follow the rules

67
Q

True False

Shares sold under a Regulation D, Rule 506, exempt offering may be purchased by any number of investors provided there are no more than 35 non-accredited investors.

A

True

68
Q

True False

Shares sold under a Regulation D, Rule 506, exempt offering may only be purchased by accredited investors.

A

False

no more than 35 non accredited

69
Q

True false

An exempt offering under Regulation D, Rule 506, must not be for more than $10,000,000.

A

False

70
Q

true false

An exempt offering under Regulation D, Rule 506, has no dollar limit.

A

true

Shares sold under Rule 506 may be sold to an unlimited number of accredited investors and up to 35 unaccredited investors.

71
Q

An exempt offering under Regulation D, Rule 506, must not be for more than $10,000,000.

A

False

Have no dollar limit

72
Q

An exempt offering under Regulation D, Rule 506, has no dollar limit.

A

true

A private placement that meets the requirements of Rule 506 of Regulation D has no dollar limit.

73
Q

True False
Regulation D, Rule 506, requires that all investors in the exempt offering be notified that for nine months after the last sale no resale may be made to a nonresident.

A

False

There is no specific requirement that indicates that investors must be notified that no resale may be made to a nonresident for nine months after the last sale.

74
Q

True False

Regulation D, Rule 506, requires that the issuer exercise reasonable care to assure that purchasers of the exempt offering are buying for investment and are not underwriters.

A

True

under 506 the issuer must use reasonable care to make certain that buyer are acquiring the securities for investment purposes and are not underwriters

75
Q

true false

The SEC must be notified by Coffee Corp. within 5 days of the first sale of the exempt offering securities.

A

False

15 days

76
Q

true false

Coffee Corp. must include an SEC notification of the first sale of the exempt offering securities in Coffee’s next filed Quarterly Report (Form 10-Q).

A

FAlse

10Q is NOT required to include notification of the first sale of the exempt securities

77
Q

June 20X2—Butler made a $450,000 unregistered offering of Class B nonvoting common stock under Rule 504 of Regulation D of the Securities Act of 1933. This offering was sold over one year to 20 accredited investors with no general solicitation. The SEC was notified eight days after the first sale of this offering.

Did the offering comply with the dollar limitation of Rule 504?

Did the offering comply with the method of sale restrictions?

Was the offering sold during the applicable time limit?

Was the SEC notified timely of the first sale of the securities?

Was the SEC correct in claiming that this offering was not exempt from registration?

A

Yes

YEs

yes

yes

no

78
Q

November 20X2—Butler made a $6,000,000 unregistered offering of preferred stock under Rule 504 of Regulation D of the Securities Act of 1933. This offering was sold during a one-year period to 40 non-accredited investors by private placement. The SEC was notified 18 days after the first sale of this offering.

Did the offering comply with the dollar limitation of Rule 504?

Was the offering sold during the applicable time limit?

Was the offering sold to the correct number of investors?

Was the SEC notified timely of the first sale of the securities?

Was the SEC correct in claiming that this offering was not exempt from registration?

A

No

Yes

YEs

No

Yes

79
Q

September 20X2—Butler made a $10,000,000 unregistered offering of Class A voting common stock under Rule 506 of Regulation D of the Securities Act of 1933. This offering was sold over one year to 200 accredited investors and 30 non-accredited investors through a private placement. The SEC was notified 14 days after the first sale of this offering.

Did the offering comply with the dollar limitation of Rule 506?

Did the offering comply with the method of sale restrictions?

Was the offering sold to the correct number of investors?

Was the SEC notified timely of the first sale of the securities?

Was the SEC correct in claiming that this offering was not exempt from registration?

A

Yes

Yes

Yes

Yes

NO

REG (31 decks)

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