Pg 22

Question 1

What are the things that the SEC requires under SEC 14?

Answer 1

– mandatory disclosure documents must be given to shareholders
– rules about the permissible form and content of a proxy
– prohibition against using fraud when soliciting proxies

Question 2

What does the SEC 14 require for mandatory disclosure documents to shareholders?

Answer 2

There must be a detailed disclosure document that gets sent to the shareholders about the proxy solicitor, the issues to be acted on, and a corporate annual report of audited financial statements

Question 3

What is an MDMA?

Answer 3

A management discussion and analysis of management conditions and operations

Question 4

Corporate insiders are required to do what with relation to MDMAs?

Answer 4

Fully and completely disclose all relevant financial information including forecasts done by the corporation. The goal is transparency so the investors get the opportunity to look at things through the eyes of management by giving them both a short term and long term analysis. If something is important enough for the board to be notified about it, it should be in the MDMA so that the shareholders can know about it too. This is the most important part of the disclosure documents that are required to be given to shareholders.

Question 5

What is a voting trust?

Answer 5

This is a long-term agreement where a shareholder assigns his right to vote his shares to someone else, according to stated guidelines. The trustee is then a fiduciary to the shareholder.

Question 6

How long do voting trusts last?

Answer 6

Usually for years. There is a 10 year limit on how long a voting trust can last, but then it can be renewed or extended multiple times

Question 7

What is involved in the process of a voting trust?

Answer 7

• shareholder assigns shares to the trust
• he stays the beneficial owner and is entitled to the beneficial interest in the shares (like distributions), but the trustee votes the shares according to a fiduciary obligation.
• a written copy of the voting trust agreement if filed with the corporation, which allows the trustee to vote as the owner and not just an agent (the shares have actually been transferred to the trustee).

Question 8

When is the voting trust effective?

Answer 8

The date that the first shares are registered in the trustee’s name.