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REG > Part V: Federal Laws and Regulations > Flashcards

Part V: Federal Laws and Regulations Flashcards

1
Q

security (as defined by the ‘33 Act)

A

An investment that:

  1. Is an inv. of money.
  2. In a common enterprise.
  3. W/expectation of profit.
  4. To be earned primarily by the actions of others.
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2
Q

What type of securities offerings must be registered w/SEC?

A

initial public offering (IPO)

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3
Q

primary purpose of registration

A

to adequately and accurately disclose fin. and other info. that investors can use to make inv. decisions.

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4
Q

waiting period

A
  1. After a prospectus and registration statement have been filed w/SEC, there is a 20-day waiting period before the stocks can be issued.
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5
Q

preliminary/red herring prospectus

A
  1. During the 20-day waiting period btwn. filing statements and issuance of stocks, this can be issued to investors.
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6
Q

tombstone ad

A

During the 20 day waiting period, this restricted ad can be placed and it lets investors know a prospectus on the stock is available.

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7
Q

WKSI

A
  1. Well-Known Seasoned Issuers

2. Under the ‘33 Act, WKSI have fewer rules to follow than non-WKSI.

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8
Q

Under the ‘33 Act, a non-WKSI securities-registration statement must disclose:

A
  1. a description of the security
  2. how the corp. will use the sale proceeds
  3. description of the registrant’s bus. and mgmt.
  4. and an F/S, along w/ a prospectus
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9
Q

3 major types of transactions exempt from registering w/SEC:

A
  1. small offering exemption
  2. private placement exemption
  3. intrastate offering exemptions
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10
Q

small offering exemption

A

offering so small it poses a small threat to the public

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11
Q

private placement exemption

A

only involves accredited investors, and therefore does not need the protection of the ‘33 Act’s disclosure rules

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12
Q

intrastate offering exemptions

A

contained w/in one state and only subject to that state’s regulations

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13
Q

rule for exemption rules

A

the SEC must be notified w/in 15 days of the first sale of securities

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14
Q

Rule 504 of Regulation D

A
  1. For small companies
  2. Can only be used to raise $1 million in any 12 month period.
  3. Securities can be sold to anyone.
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15
Q

Rule 505 of Regulation D

A
  1. Can only be used to raise $5 million in any 12 month period.
  2. Securities can be sold to unlimited amount of accredited investors but no more than 35 unaccredited investors.
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16
Q

Rule 506 of Regulation D

A
  1. No limit on the amount.

2. Securities can be sold to unlimited amount of accredited investors but no more than 35 unaccredited investors.

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17
Q

Regulation A

A
  1. Can raise $50 million in any 12 month period.

2. Securities can be sold to anyone.

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18
Q

Rule 147: Intrastate Offering

A
  1. Issuer must be organized and doing business in the same state which the offering will be.
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19
Q

80% test for Rule 147

A

80% of assets, 80% of revenue and 80% of proceeds of the offering should be in state.

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20
Q

Is the resale of limited partnership interests generally limited?

A

Yes.

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21
Q

What securities are exempt from registration under the ‘33 Act?

A
  1. Govt. securities such as municipal bonds.

2. Securities issued by a charity.

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22
Q

purpose of JOBS Act

A

Securities law to make it easier for small companies to raise capital, and therefore create jobs.

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23
Q

5 main effect of JOBS Act

A
  1. Created emerging growth companies (EGCs).
  2. Encouraged crowdfunding.
  3. Increased Regulation A amount from $5 to $50 million.
  4. Allows firms doing private placements to use general solicitation and adv. not previously allowed.
  5. Changed the definition of a public company so private firms could grow larger before becoming public.
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24
Q

Under the JOBS act, when can a firm use general solicitation in an offering?

A

As long as they take reasonable steps to insure that they only sell to accredited investors.

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25
Q

What is the max. amount an individual can invest in crowdfunded ventures in one year?

A

$100,000.

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26
Q

emerging growth companies (EGCs)

A

can have an IPO to raise capital but also avoid most burdens of being a public company for 5 yrs.

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27
Q

requirements to be an EGC

A
  1. Have less than $1 billion in annual gross revenue during most recent fiscal year.
  2. Have been publicly traded for less than 5 years.
  3. Have a public float of less than $700 million.
  4. Have not issued $1 billion in non-convertible debt in prior 3-year period.
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28
Q

benefits of being an EGC (for the first 5 years after IPO)

A
  1. Registration statement confidentially reviewed by the SEC.
  2. They only need 2 yrs. of audited F/S instead of the usu. 3 yrs.
  3. Don’t need to comply w/SOX 404(b) requirements for IC audits.
  4. Don’t need to comply w/new PCAOB rules.
  5. Reduced disclosure requirements regarding executive compensation.
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29
Q

Liability Provisions of ‘33 Act

A

This mainly deals w/Section 11, which remedies misleading statements and omissions contained in registration statement.

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30
Q

elements involved in a Section 11 claim

A
  1. A CPA who certifies F/S included in a registration statement is generally not liable to a securities purchaser if the CPA can prove due diligence.
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31
Q

due diligence defense

A

As long as the CPA/auditor acted carefully in performing the audit, the CPA will have a due diligence defense.

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32
Q

What must the plaintiff show to win a Section 11 claim?

A
  1. There was a material misstatement in the registration statement on the effective date.
  2. That they can trace their shares to that registration statement.
  3. They suffered damages.
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33
Q

What must the plaintiff show to win a Section 11 claim (basic)?

A

As long as the registration statement contained a material misstatement for whatever reason, and the plaintiff suffered a loss, the plaintiff will win.

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34
Q

entitlements of victims of fraudulent misstatements

A
  1. Can rescind the transaction.

2. OR recover their losses causes by their reliance on the false F/S.

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35
Q

scienter

A
  1. a “guilty mind;” intending to do something wrong.

2. If this is proven, the CPA can be punished criminally under the criminal provisions of the ‘33 and ‘34 Acts.

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36
Q

negligence

A

unintentional mistake

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37
Q

charges usu. brought in insider-trading cases

A
  1. SEC usu. brings civil charges.

2. Then, the DoJ usu. brings criminal charges.

38
Q

Dodd-Frank Act

A
  1. Mostly fin. services regulations after the 2008 mortgage crisis.
  2. Created the FSOC and CFPB.
  3. Authorized the PCAOB to regulate accountants who audit non-public broker-dealers.
  4. Implemented a major reward system for whistleblowing on fin. fraud, and also protection laws for whistleblowers.
39
Q

What agencies were created by the Dodd-Frank Act?

A
  1. Financial Stability Oversight Council (FSOC)

2. Consumer Financial Protection Bureau (CFPB)

40
Q

Title VII of the 1964 Civil Rights Act

A

No discrimination in employment based on race, color, natl. origin, sex, religion limitance

41
Q

natl. origin

A

includes discrimination based on accents

42
Q

religion limitance

A

A Lutheran church does not have to hire a Catholic priest, but an HR firm cannot discriminate against any candidates no matter their religion.

43
Q

Title VII rules apply to:

A
  1. Employers w/15+ employees.
  2. AND whose business affects interstate commerce.
  3. Federal, State, and local govt. employees.
44
Q

Who enforces Title VII rules?

A

The Equal Employment Opportunity Commission (EEOC).

45
Q

Age Discrimination in Employment Act (ADEA)

A
  1. Intended to supplement Title VII, which did not address age discrimination.
  2. Protects individuals 40+ yrs. old.
  3. Prohibits mandatory retirement.
46
Q

Americans w/Disabilities Act (ADA)

A
  1. Applies to employers w/15+ employees, all state and local govts., and most private businesses that serve the public.
47
Q

Soc. Sec. benefits

A

meant to partially replace income when a worker retires

48
Q

A fully insured worker is entitled to the following soc. sec. benefits:

A
  1. Survivor benefits for widow/widower and dependents.
  2. Disability benefits for worker and family.
  3. Old age retirement benefits to worker and dependents.
49
Q

To be a fully insured worker, one must accrue how many years of contributions?

A

A minimum of 10 years.

50
Q

A currently insured worker is eligible for the following soc. sec. benefits:

A
  1. Limited survivor benefits.
  2. Benefits for disabled workers and dependents.
  3. Lump-sum death benefits.
51
Q

Income that may reduce Soc. Sec. benefits:

A

Salaries, fees, or wages earned by working.

52
Q

Income that does not reduce Soc. Sec. benefits:

A

Inv. income and pension income.

53
Q

Medicare

A

covers portions of costs and hospitalization for insured workers and spouses 65 and older.

54
Q

Disability benefits

A

cover workers who suffer a severe physical or mental impairment that:

  1. prevents a person from working for 1+ yrs.
  2. OR, is expected to result in the victim’s death.
55
Q

Federal Insurance Contributions Act (FICA)

A
  1. Imposes soc. sec. tax on employers, employees, and the self-employed.
56
Q

Wages under FICA

A
  1. Contingent fees, bonuses, and commissions are considered wages.
57
Q

Not considered wages under FICA

A
  1. Reimbursed travel expenses.
58
Q

employer reimbursement under FICA

A

If an employer pays both the employer and employee FICA portions and fails to collect the employee’s portion, the employer has the right to be reimbursed by the employees for the employees’ share.

59
Q

federal unemp. taxes

A

paid by employers which go into fed. and state pools to compensate workers who have lost their jobs and can’t find new ones

60
Q

Who receives unemployment benefits?

A

People who lose their jobs and not fired for a reason (laid off).

61
Q

Can an employer take credits against Fed. unemp. taxes?

A

If they have paid into a state unemployment fund first, yes.

62
Q

Are fed. unemp. taxes paid deductible for the employer?

A

As a business expense, yes.

63
Q

Fair Labor Standards Act

A
  1. Non-exempt workers must be paid for all hours over 40.
  2. Employers are not allowed to average weekly hours.
  3. This act regulates min. wage, overtime, and the # of hours in the working week.
64
Q

Employee Retirement Income Security Act (ERISA)

A
  1. Act protects employees’ rights in existing pension plans.
  2. Supersedes state reg. w/fed. reg.
  3. Offers tax incentives to employers for setting up employee benefit plans under IRS requirements.
  4. Does not apply to govt. pension plans.
  5. Mandates that an employee offer a pension plan to new employees w/out undue delay.
65
Q

Federal Consolidated Budget Reconciliation Act (COBRA)

A

Provides health insurance in some circumstances after a worker loses their job.

66
Q

How long does COBRA cover employees under normal circumstances?

A

Covers employee for 18 months after job loss.

67
Q

How long does COBRA cover employees if the insured was disabled at the time of the qualify event

A
  1. 29-month coverage.
  2. Includes the employee’s spouse.
    1. If an employee is laid off, the spouse’s coverage lasts 18 months.
    2. If the spouse is disabled when the employee is laid off, spouse’s coverage is 29 months.
68
Q

Family and Medical Leave Act (FMLA)

A

Provides an employee w/ up to 12 wks. of unpaid leave w/out job loss for:

  1. Child birth
  2. Adoption
  3. Personal serious health condition
  4. Care of child, spouse, or parent w/serious health condition
  5. Impending order of active duty of an employee’s child, spouse, or parent.
69
Q

To be eligible for FMLA:

A
  1. The employee must have worked for the employer for 12+ months.
  2. AND at least 1,250 hrs. during the previous 12 months (avg. of 5 hrs./day for 250 days).
70
Q

employers & FMLA

A
  1. FMLA applies to employers w/over 50 employees w/in a 75 mile radius.
  2. State and local govt. agencies.
71
Q

Must employers offer FMLA leave to employees?

A

No, employees must request FMLA leave to be entitled to it.

72
Q

workers’ compensation act

A

Provides compensation for employees who have work-related injuries.

73
Q

What kind of liability does the employer have under workers’ comp?

A

Employer has str

74
Q

What kind of liability does the employer have under workers’ comp?

A

Strict liability. The employee does not have to prove employer negligence or fault by the employer.

75
Q

If a worker is killed in an accident on the job, then workers’ comp will…

A

make monthly payments to dependent children.

76
Q

Does workers’ comp pay burial expenses?

A

When a worker dies in a work-related accident.

77
Q

Does workers’ comp pay for prosthetic devices?

A

If the worker loses a limb while working.

78
Q

The worker will not receive workers’ comp. benefits if:

A
  1. The injury was self-inflicted.

2. The worker was intoxicated at work when the injury happened.

79
Q

OSHA

A

requires that the employer provides a workplace free from recognized hazards.

80
Q

authorization of OSHA

A

OSHA is authorized to establish standards that protect employees from harmful substances.

81
Q

OSHA and refusal to work

A
  1. A worker can refuse to work if there is a present safety violation that threatens danger.
  2. An employer can fire an employee for failing to comply w/OSHA rules.
82
Q

Where does OSHA not apply?

A

To fed. or state govts., or industries such as mining that are subject to other safety regs.

83
Q

If an employee wants to bring a union to his workplace, s/he needs to…

A

get 30% of eligible employees to sign authorization cards to require the employer to hold elections as to whether a union will be implemented.

84
Q

During upcoming collective bargaining, a company cannot lock out unionized employees in order to:

A
  1. destroy the union
  2. punish the workers for organizing
  3. avoid good-faith bargaining responsibilities
85
Q

When must mgmt. rehire striking workers?

A
  1. After an “unfair labor practice” strike.

2. If the strike was over wages, the company does not have to rehire the workers.

86
Q

How long does a copyright last?

A

The life of the author, plus 70 yrs.

87
Q

work for hire

A

You do something for me but I have the rights to it.

88
Q

How long does a work for hire last?

A

The shorter of 95 yrs. from the date of publication or 120 yrs. from the date of creation.

89
Q

When does a patent expire?

A

20 yrs. from the date of filing, not the date the patent is granted.

90
Q

An invention is patentable if it:

A
  1. Is a tangible (not abstract) application of a new idea.
  2. Useful
  3. Novel
  4. Nonobvious- you can’t patent a slightly different version of an already patented device.

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