R5 Securities Reg 2 (W) Flashcards
Exceptions to Workpaper Confidentiality
Subpoenaed
Shown to a prospective purchaser as long as the workpapers do not disclose confidential information
CPA society voluntary quality control review
Defense of a lawsuit
Official investigation by AICPA/state trial board
Workpapers
Belong to the accountant The accountant is prohibited from showing to anyone without the client’s permission
Security
If the investor is passive, the investment is most likely a security
Stocks, bonds, debentures, oil well interests, stock options, collateral trust certificates, warrants, andlimited partnerships
Certificates of deposit and general partnership interests are generally not deemed to be securities
The Securities Act of 1933
Assure that investors have sufficient information on which to make an informed investment decision
Requires most issuers to register new issues of securities with the SEC and provide prospectuses containing material information regarding the securities to prospective investors
The Securities Act of 1933 -Those Required to Register
Issuers
Underwriters
Dealers
The Registration Statement
Contains prospectus and detailed information regarding the securities to be issued
The Prospectus
A written offer to sell securities
Summarizes important information contained in part II
Each investor must receive a copy before or contemporaneous with every sale of the security
Information About the Security Being Issued Must Include
Audited balance sheet and profit and loss statement certified by a public accounting firm registered with the PCAOB
The names and addresses of the directors, officers, underwriters, and shareholders who own 10% or more of the company’s shares
The amount of stock and debt the issuer has outstanding and principal purpose of issuance
Shelf Registration
One registration statement for al securities an issuer wil offer in the future
Permitted if the issuer has continuously filed under the 1934 Act for one year and the information is continuously updated
When the Registration Statement becomes Effective
Twenty days after filing with the SEC
Blue Sky Laws
State laws governing stock sales
Timetable for Sales Activity
30 days before registration - no sales activity alowed.
However, an issuer may negotiate with an underwriter 0 - 20 days after filing registration statement
Oral offers to sel, tombstone ads, preliminary prospectus 20 days after filing - the securities may be sold
Tombstone Ads
Ad identifies the security, its price, and who will execute orders
Preliminary (Red Herring) Prospectus
Similar to statutory prospectus but contains a statement in red ink that is not yet final
Seasoned Issuers
Issuers that have been continuously reporting under the 1934 Act for at east 12 months, have not failed to pay a dividend or required payment on preferred stock, and have not defaulted on material debt or long-term rent obligation in the current fiscal year
