Securities Act of 1933 Flashcards
What does the securities act of 1933 apply to?
PRIMARY markets
- Non-exempt new issues
What are issues under SA 1933 required to have?
- They are required to have a prospectus BEFORE purchase. (this only applies to non-exempt issues)
- They are also required to have a Registration statement with the SEC
What is the 20 day cooling off period?
- Occurs once registration is filed (need full and fair disclosure)
- The issue can’t be sold during this period, but distribution of prelim. prospectus is allowed
- No orders or sales can be made, only indications of interest can be taken
What does the SEC do with registration statements for issues?
They do NOT approve or disapprove - they only say if there is sufficient disclosure
When must prospectus be delivered?
Primary non-exchange listed issue - 90 DAYS
Secondary for a non-exchange listed issue - 40 DAYS
- this applies when the issuer has outstanding stock and wants to issue more
Exchange listed issues - 25 DAYS
What is access equals deliver?
If the firm KNOWS the customer has internet access (proof of being online before via email, etc.) then electronic deliver of the prospectus is sufficient
What are E-Z registration rules?
Regulation A - small dollar amounts
Rule 415 - shelf registration
What is Regulation A?
Makes it easier/cheaper for smaller start up companies to raise capital. A simplified reg. statement is filed with SEC and 20 day cooling off period is required. There are 2 tiers of capital raising
What are the 2 tiers of regulation A?
Tier 1 - offerings up to $20MM within a 12 month cooling off period (no audited FS required)
Tier 2 - Offerings up to $50MM in 12 month period. Audited FS Required. There is also a limit of non-accredited investors that can buy in
What is the limit for which non-accredited investors can buy in to a Tier 2 Reg. A offering?
The greater of:
- 10 percent on net income
- 10 percent of net worth
What type of document is required for a Reg. A offering?
No prospectus is required, but a disclosure document called and Offering circular (Offering Memorandum) must be delivered to customers at least 48 hours prior to sale
What is the difference between the pre 20 day cooling off period and cooling period for a regular offering and a Reg. A offering?
Reg A offerings allow issuers to distribute promo materials to prospective purchasers PRIOR to registration statement and THROUGHOUT the cooling off period. This is prohibited for regular offerings
What is rule 415 - shelf registration?
This is for add on offerings for companies that have already registered with the SEC. Allows for “blanket” registration for 3 years, allowing company to sell whenever
When must the SEC be notified of a Rule 415 offering?
2 days in advance
What are the requirements to qualify for Rule 415 - self registration offerings?
- Public for at least 1 year
- Current in SEC filings
- Public float of at least $75MM
What does section 4(2) allow regarding private placements?
Private placements can be sold to INSTITUTIONS and ACCREDITED investors that can fend for themselves
What does section 4(6) exemption allow?
An offering (in which there is no advertising allowed) of no more than $5MM made ONLY to accredited investors are exempt
What are the Exempt issues under the SA 1933?
- US govt, agencies, Municipals, and Foreign govt
- Issuers ALREADY regulated under OTHER laws
What are the issuers that are exempt under the SA of 1933 because they are already regulated under other laws?
- Bank issues
- Insurance company offerings (except variable annuities)
- Common carrier issues (railroads, trucking co’s)
- Public utility issues
- Non-profit and charities
- Banker’s acceptances and Comm. Paper (270 mat. or less)
- Small Business Investment company issues (SBC)
What are Intrastate offerings?
These are exempt transactions under Rule 147. Feds have no authority if all activity is within the state. 100 percent of issue must be sold to state residents, and 80 percent of issuers sales and assets and proceeds in that state. Complies with state blue sky laws
How long before issues can be sold to people outside the state in a Rule 147 offering?
6 months after the sale
What is a Private Placement (Regulation D)?
- A max of 35 non-accredited investors and an unlimited amount of accredited investors are allowed
- Purchasers must sign an Investment Letter stating he knows issue is unregistered, etc.
What is a purchaser representative?
Can be used if a purchaser cannot fully evaluate a Reg. D (private placement issue). This is usually a lawyer or accountant
What qualifies a “wealthy” investor under Reg. D?
- Net worth 1 million OR
- Annual income of $200K OR
- Officer/director if issuer OR
- Institutional investor
