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Reg > R7 Concepts > Flashcards

R7 Concepts Flashcards

1
Q

What are the duties of the agent to the principal?

A

Duty to abide by the contract
Duty of loyalty–Act soley in principals interest
Duty of obedience–Obey instructions
Duty of Reasonable care–Can’t be negligent
Duty to account–relay to principal

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2
Q

Define indemnify

A

Reimburse.

With agency contracts, the principal has the implied duty to indemnify the agent.

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3
Q

Who has the right to terminate an agency ?
Who has the power to terminate an agency?
What is the exception to the normal rule regarding right to terminate an agency?

A

Agents and principals don’t have the right to terminate the agency without getting sued for breach of contract.
Both the principal and the agent have the POWER to terminate the agency since it was formed under consent.
The exception to both of the agents and principals having the RIGHT to terminate the agency occurs when the agency is couple with an interest. Here, the Principal cannot terminate the agency under any condition. Even death by the principal, bankruptcy by the principal and incpaicity by the principal will make the agency enforceable.

-An example of this exceptuion is when P borrows $20,000 from A, promising to pay A within a year and appointing A as his agent to sell Blackacre if P fails to pay. A’s agency is couple with an interest.

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4
Q

When can agency power arise

A
  1. A grant of ACTUAL authority
    • Here the agent has the power and the right
  2. Apparent authority or estoppel
    • Here the agent has the pwoer, but not the right
  3. Ratification
    • Here the agent has the power, but not the right
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5
Q

When a principal secretly limits instructions, what effect will this have on an agent’s actual authority and apparent authority

A

Limit actual authority, not effective to limit the agent’s apparent authority UNLESS third party was given notice of the limit.

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6
Q

What are the two types of notices that are required to terminate apparent authoirty in an agency?

A

Actual notice to old customers

Constructive notice to new customers

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7
Q

How is actual authority of an agency relationship terminated automatically?

A

by operation of law:

  1. Death of either parties (agent/principal)
  2. Incpacity of the principal
  3. Discharge in bankruptcy of the principal.
    * 4. Agent fails to acquire a necessary license
  4. Destruction of the subject matter of the agency
  5. Subsequent illegaily

-Even though the actual authirty of gone, there may still be apparent authority until the principal notifies the third parties (either through actual notice to old customers or constructive notice to new customers.)

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8
Q

When do claims need to be filed by creditors to get some of the share of bankruptcy proceeds?

A

6 months after the first creditors’ meeting

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9
Q

How often is bankruptcy granted?

A

every 8 years

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10
Q

When dealing with the priority of claims in a bankruptcy preceding, what is the threshold for the wages/employee benefits

A

Earned wages within 6 months (180 days) prior to the filing of the peition. Limited to $11,725 / employee. The excess is a nonpriority claim

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11
Q

What does “Cram Down” relate to?

A

In Ch. 11 Reorganization plan when the court can still approve the debtors reorganization plan without the approval of ALL of the impaired classes.

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12
Q 
Ch. 7 bankruptcy filings:
Trustee appointed?
What happens?
Who is involved?
Voluntary/Involuntary?
Limits on the involuntary
Means test?
Limitations?
Automatic Stays?
A

Yes
LIquidation
Individuals, partnerships and corporations
Voluntary or involuntary
Involuntary: Less than 12 creditors-only 1 needs to come forward as long as debts > $14,425
More than 12 creditors - 3 or more need to come forward with an aggregate debt of > $14,425

Means test is used to make sure that consumer debt is not being abused.

  1. Average monthly income (6 months prior) * 12 >< state median income
  2. If average monthly income > state median income Chapter 13 UNLESS current NET income * 60 < $7,025, then debtor can file under Ch. 7
  3. If NET income * 60 > $11,725, then debtor has to file under Ch. 13 or dismiss the bankruptcy case. (Abuse is present)
  4. If NET income * 60 is between $7,025 & $11,725, then one last chance – if NET income * 60 < 25% of unsecured claims, then CH. 7
  • No RIBS “Railroads, insurance companies, banks, savings/loans”
  • Yes
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13
Q 
Ch 13 filings
Trustee appointed?
What happens?
Who is involved?
Voluntary/Involuntary?
Limits on the involuntary
Limitations?
Automatic stay?
Completion of plan...
A

Yes trustee is appointed by the court.
Adjustment of debts (3 yrs or 5 yrs if annual monthly income (6 months prior) * 12 > states median annual income
Individuals only
Voluntary only
None
None
Discharges the debts dischargeable by law.
Yes
Nondischargable debts are not discharged.

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14
Q 
Ch 11 filings 
Trustee appointed?
What happens?
Who is involved?
Voluntary/Involuntary?
Limitations?
Automatic stay?
Completion of plan...
A

Generally no, the shareholders & UNSECURED creditors committees are there to guide/consult the debtor. THE DEBTOR REMAINS IN POSSESSION OF THEIR ASSETS. Exception: When management of the business is shown fraud, dishonesty, incompetence or gross mismagement on the part of the debtor’s estate, then a trustee will be appointed.
-When there is hope, reorganization plan to save the business.
-Individuals, partnerships, propriatary and corporations
-Voluntary/involuntary
-Involuntary: Less than 12 creditors-only 1 needs to come forward as long as debts > $14,425
More than 12 creditors - 3 or more need to come forward with an aggregate debt of > $14,425
-No “BIBS” —railroads are okay now.
Brokers, insurance companies, banks and savings/loans corporations are not okay.
-Creditors are paid to the extent possible, discharges all pre-confirmation debts and business continues.

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15
Q

What is filed under chapter 15 bankruptcy?

A

Ancillary & other cross-border cases

-Model Law on Cross-Border insolvency–adopted to promote a uniform & coordinated way to handle bankruptcy cases overseas.

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16
Q

Which chapter of bankruptcy deals with preferential transfers and what are the time limits for these

A

Chapter 7. LIqudiation. If a transfer took place 90 days prior to the filing of the bankruptcy petition, the trustee can set the transaction aside. 1 year for insiders (not related parties)

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17
Q

What does reaffirmation mean in regards to bankruptcy?

A

When a debtor voluntarily choose to repay a det that otherwise would be fully discharged under the Bankruptcy code.

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18
Q

What is filed under Chapter 9 bankruptcy?

A

Municipal debt adjustment

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19
Q

What is filed under chapter 12 bankruptcy?

A

Family farmers with REGULAR INCOME

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20
Q

What does the W stand for in SAGWEGCTI

A

Wage claims up to $11,750 earned by employees within prior 6 months (180 days) from filing the petition.

  • Priority is limited to $11,725/employee. Any amount over that is a nonpriority claim (even if it earned longer than 6 months (180 days)) from filing of the petition.
21
Q

What is the threshold amount for priority claims “W”

A

$11,725/employee (6 months/180 days)

22
Q

What is the threshold amount for priority claimants “E”

A

$11,725/employee agregate with wages (6 months/180 days)

23
Q

What is the threshold amount for priority claimants “

G” for “Grain farmers’ and fishermens’ claims”

A

up to $5,775

24
Q

What is the “C” stand for in the SAG WEG CTI

A

Consumer deposits for goods paid but not delivered up to $2,600, of which the debtor hasn’t delivered the goods.

25
Q

What is the threshold amount for priority claimants “C”

A

Up to $2,600–the rest goes to the back of the line.

26
Q

What does cram down mean

A

A plan can still be confirmed by the court even if all of the impaired classes haven’t agreed.

27
Q

What is a WKSI well-known seasoned issuer ?

A

A WKSI is a company that has filed all annual, quarterly and current reports in a timely manner, and either has a greater than $700 million market capitalization or has issued $1 billion in registered debt offerings over the past three years.

Shelf registration is a registration of a new issue which can be prepared up to two years in advance, so that the issue can be offered quickly as soon as funds are needed or market conditions are favorable.

For example, current market conditions in the housing market are not favorable for a specific firm to issue a public offering. In this case, it may not be a good time for a firm in the sector (e.g. a home builder) to come out with its second offering because many investors will be pessimistic about companies working in that sector. By using shelf registration, the firm can fulfill all registration-related procedures beforehand and go to market quickly when conditions become more favorable.

28
Q

what are the requirements for a WKSI?

A

At least $700 million in equity outstanding worldwide in the hands of persons not affiliated with the issuer

-Most issuers that have issued at least $1 billion in nonconvertible securities in the last 3 years

29
Q 
Under Rule 504:
Is general advertising allowed?
When is notice required to SEC?
Reoffers to public prohibited?
Dollar limitation
Limits on unaccredited buyers?
Limits on accredited buyers
A 
-Generally no
15 days AFTER first sale
-Yes bc it's a private offering
-$1 million within a 12 month period
-None
-None
30
Q 
Under Rule 505:
Is general advertising allowed?
When is notice required to SEC?
Reoffers to public prohibited?
Dollar limitation
Limits on unaccredited buyers?
Limits on accredited buyers
A

No

  • 15 days AFTER first sale
  • Yes bc it’s a private offering
  • $5 million within a 12 month period
  • Up to 35
  • Unlimited
31
Q 
Under Rule 506:
Is general advertising allowed?
When is notice required to SEC?
Reoffers to public prohibited?
Dollar limitation
Limits on unaccredited buyers?
Limits on accredited buyers
A 
No
15 days AFTER first sale
-Yes because it's a private offering
-unlimited amount
-35 but have to be sophisticated
-None
32
Q

Who is required to register under the Act of 1934

A
  1. Publically traded companies on the national exchange (IPOs)
  2. Companies with at least 500 shareholders in any outstanding class and more than $10 million in ASSETS, NOT REVENUES(widely, privately-held securities-non IPOs)
  3. National stock exchanges
  4. Brokers and dealers
33
Q

What is statutory prospectus and where is it found?

A

Found in part one of Act 1933. It summarizes important information contained in Part II.

34
Q

When should the form 10-K/10-KSB be filed?

A

within 60 days of end of fiscal year/90 days for small businesses

35
Q

When should the form 10-Q/10-QSB be filed?

A

Within 40 days at the end of the quarters/45 for small businesses

36
Q

When should the form 8-K be filed?

A

within 4 days after a major change in the company

Ex: Change in control, disposition of major assets, change in officers or directors, resignation of directors etc

37
Q

What is the Rule 10(b)-5 under the 1934 Act?

A

Antifraud provision that limits fraud in connection with the purchase/sale of any security.

  • Applies even if registration is not required
  • Plaintiff must prove fraud under MAIDS
38
Q

What does privity mean?

A

Contractual relationship

39
Q

If a CPA breaches their duty, who are they liable to?

A

Client & named (intended) third party beneficiaries

40
Q

If a CPA commits negligence, who are they liable to?

A 
Client & under the majority rule
-Majority rule: Any person or limited foreseeable class of persons whom the CPA knows will be relying on the CPA's work
41
Q

What is the Ultramares decision

A

Minority view that some states hold. Limits the CPA’s negligence liability to privity of contract rules (client & named 3rd party)

42
Q

If a CPA commits fraud who are they liable to?

A

Anyone who can prove MAIDS, the general public.

43
Q

Under the Sarbanes Oxley Act, how many years are auditors required to keep workpapers of public companies?

A

7 years

44
Q

Which securities will be exempt from registration under Act of 1933?
Will insurance companies securities be exempt?

A

No, just insurance policies

45
Q

Which securities will be exempt from registration under Act of 1933?
Will insurance companies policies be exempt?

A

Yes

46
Q

What is Regulation A of the Securities Act of 1933?

A

It allows the issuer to file a less costly & less time-consuming offering circular (statement) instead of a prospectus.

47
Q

What percentage of stock do you need to own to become an “insider”?

A

10% equitiy holders

Note: 10% of debentures holders are not insiders bc debentures are “debt holders”

48
Q

Is a warrant a security?

A

Yes

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