New R5 - Securities Regulations

Question 1

1933 Act - Exemptions

Answer 1

two major types of exemptions:
1. Securities Exemptions (BRINGS)
B - securities issued by banks and savings and loans (CD)
R - Regulated common carriers (railroad securities)
I - insurance policy
N - non-for-profit
G - government (municipal bonds)
S - short term commercial papers ( 9 months or less)
S- under chap 11 bankruptcy
S - church plan

2. Transaction Exemptions
   **A transaction exemption applies only to the particular transaction. Subsequent sales must qualify for their own exemption, or they must be registered.
   - Causal sales from ordinary investors, just like you and me (not from an issuer, underwriter or dealer)
   - exchanges with existing shareholders (stock dividends - no commission is paid, not raise new capital)
   - Intra-State Sales (blue sky law)
   - Regulation A (partial exemption, simplified form of registration and cost less)
   - Regulation D (priviate offering)
   Reg D - 504
   Reg D - 505
   Reg D - 506

Question 2

1933 Act - Exemption - Regulation A (small offering)

Answer 2

Reg A (partial Exemption) - limit = 5 millions

1. permitted a simplified form of registration that costs less to prepare than full
2. need to file: offering statement (notification + offering circular)
3. under Reg A, sales <5 million in 12 months

Question 3

1933 Act - Exemption - Regulation D (private offering)

Answer 3

504 (limit = 1 million) , 505 (limit = 5 million), 506 (unlimited)

Common rule:

1. no advertising,
2. no immediate resale (must be long-term investment, 2+ years holding)
3. notify SEC within 15 days after 1st sale

504 - 1 millions limit, unlimited unaccredited investors, unlimited accredited investors

505 - 5 million limited, 35 unaccredited investors, unlimited accredited investors

506 - unlimited dollar, 35 unaccredited investors, unlimited accredited investors.

Question 4

1933 Act - Liability (overall)

Answer 4

Section 11 - Civil liability for misstatement, whether or not intentional, in registration statement.

Section 12 - Civil Anti-fraud

Section 17 - criminal anti-fraud