R5 Securities Reg 3 (Th)

Question 0

Transaction Exemptions under 1933 Act

Answer 0

Casual sales exempt,

exchanges with existing holders and corporate reorganizations,

Intrastate sales,

Regulation A,

Private offerings exemption (Regulation D)

Question 1

Security Exemptions (BRINGS)

Answer 1

Securities issued by Banks and savings and loans

Securities of regulated common carriers (Railroads)

Insurance policies

Securities issued by Not-for-profit organizations

Securities issued by the government

Short-term commercial paper (nine months or less)

Question 2

Regulation A of 1933 Act

Answer 2

Partial exemption permitting a simplified form of registration that costs less to prepare than a ful registration

Issuer filings offering statement consisting of a notification and offering circular

Sales may not exceed $5 milion in a Requirements of Rule 505 of Regulation D of the 1933 Act 12 month period

Question 3

Private Offering Exemption Regulation D of the 1933 Act

Answer 3

Exempts private offerings

Prohibits general advertising of securities

The issuer must insure that purchasers hold the securities for two years or more

SEC must be informed of issuance of securities within 15 days of the first sale

Question 4

Requirements of Rule 504 of Regulation D of the 1933 Act

Answer 4

The issuance of securities may not exceed $1 milion within a 12 month period

Does not require any specific disclosure to investors prior to sale

Question 5

Requirements of Rule 505 of Regulation D of the 1933 Act

Answer 5

The issuance of securities may not exceed $5 milion within a 12 month period

May be sold to any number of accredited investors and 35 or fewer unaccredited investors

If only accredited investors purchase, no disclosure is required.

Question 6

Accredited Investors

Answer 6

One such as an institutional investor, a bank, a natural person with at least $1 milion in net worth or $200,000 in annual income

Question 7

Requirements of Rule 506 of Regulation D of the 1933 Act

Answer 7

No limit on the amount of stock that can be sold

May be sold to any number of accredited investors and fewer than 35 unaccredited investors

If only accredited investors, no disclosure required

Question 8

Section 11 of the 1933 Act

Answer 8

Imposes civil liability for misstatements, whether or not intentional, in registration statements

Question 9

Section 12 of the 1933 Act

Answer 9

Civil liability if a registration statement was not made; if a prospectus was not given to al investors or if materialy false statements were made or omitted in connection with sales and offers to sell

The immediate purchaser may sue for damages and need not prove reliance or sceinter

Question 10

Section 17 of the 1933 Act

Answer 10

Imposes criminal penalties against anyone who uses any type of fraud in connection with the issuance of a security

Enforced by the SEC and prosecuted by the Justice Department

Question 11

Elements of Section 11 of the 1933 Act Cause of Action (LAM)

Answer 11

A person wishing to sue must show

the plaintiff suffered a Loss
the plaintiff Acquired the stock
the registration statement contained a Material misstatement

The cause of action must be brought within one year after discovery and 3 years from the offering date. Need not prove scienter, negligence, or reliance

Question 12

Liability under Section 11 of the 1933 Act

Answer 12

Anyone who signs a registration statement

Question 13

Defenses to Section 11 of the 1933 Act

Answer 13

Defendants are not liable if they can prove they used due diligence

Misstatement did not cause plaintiff’s damages

Question 14

The Securities Exchange Act of 1934

Answer 14

Concerned with exchanges of securities after they are issued

Has registration and reporting provisions that apply only to certain companies and antifraud provisions that apply to al purchasers and sellers

Question 15

Registration Requirements under the 1934 Act

Answer 15

Only two types of companies must register their securities

Companies whose shares are traded on a national exchange

Companies that have more than
$10 milion in assets
At least 2,000 shareholders or 500 shareholders who are not accredited