Securities Regulation

Question 1

Purpose of securities Act of 1933

Answer 1

Provide Investors with sufficient Investment information to make investment decison

Question 2

Sale activity steps

Answer 2

1. Before register with Sec, NO SALE activities is allowed
2. But prior to registration, Issuers can negotiate with Underwriter about securities
3. After registration, there is 20 DAYS WAITING PERIOD before y

Question 3

Securities Exemptions from Registration under 1933Act

BRINGS

Answer 3

Banks

Railroads

Insurance contract( NOT Insurance company’s Common stock)

Not for profit Organizations

Government

ST Commercial paper: Bonds, Notes

Question 4

Rule 504-Reg D

Answer 4

Not >$1million within 12month period

NO limitation on number of purchasers

Not require any specific disclosures to investors prior to sale

Question 5

Rule 505

Answer 5

Not >$5 million within 12 months

Sole to any accredited investors and

Question 6

Rule 506

Answer 6

Unlimited amount

Sold to ANY # of Accredited investor and

Question 7

Sec 11 liability under 1933 Act

Answer 7

Civil liability for misstatement whether or not intentional

Make people sign Registration stm liab for all damage cause in Regist stm: CPA, CFO, CEO, underwriter and Lawyer are held liab

Question 8

Plaintiff sue under Sec 11 of 1933 must show

LAMM

Answer 8

Loss suffered

Acquired stocks

Material misstatements

NO Prove of INTENT To Deceive, Scienter or Reckless or Negligence or Reliance are required

Question 9

Defendant can defense under Sec 11

Answer 9

Prove of use DUE DILIGENCE of Gaas & Gaap workpapers

Prove had reasonable grounds to believe the facts in the registration stm were true and no material facts were omitted

Prove that misstatement did not cause plaintiff any damage

Question 10

Sec 12 under 1933Act -Civil Anti-Fraud

Answer 10

Imposed if required registration was not made

And Prospectus was not given to all investor

Question 11

Sec 17 under 1933Act- Criminal Anti Fraud

Answer 11

Imposed if anyone uses any type of fraud in issuance of security

Endorsed by Sec and prosecuted by the Justice Department

Anti-fraud apply to Unregistered Exempt Securities

Question 12

Different between 1933Act and 1934 Act?

Answer 12

1933Act: concerned with ISSUANCE of securities

1934Act: concerned with SALE and PURCHASES of securities
It has Registration and reporting provision after issuance and ANTI FRAUD provision

Question 13

Who has to register with Sec under 1934 Act

Answer 13

Companies whose shares are traded on a “National exchange”

Companies who have more than $10million in assets and at least 2000shareholders and 500 accredited shareholders_Large private companies

Question 14

What should be reported under 1934 Act?

Answer 14

Form 10K- Annually within 60days for larg corp and 90days for small

Form 10Q-Quarterly in 40day L and 45day S must contain REVIEWs of interim FS

Form 8K- in 4days after a major change in company

5%or more owners must reports to SeC: 5%TIP
5% more company stock: background, source funds
Tender offer
Insider: officer, directors >10% shareholders
Proxy solicitation & stm

Question 15

If the issuer want to make an offer by using shelf registration (actual issuance takes a long period of time)

Answer 15

He must keep the original registration stm updated

No need to be first time issuer

Question 16

Under 1933Act, which securities are exempt?

Answer 16

Security of non profit organization
Guaranteed by domestic Government organizations

Sales/offers to sell by any person other than an issuer, underwriter ore dealer are exempt

Security issued by savings and loan associations
Security by Issuance and annuity contracts

Exchange securities by the same issuer with existing shareholders with no commission is paid

EXCEPT Securities issued by INSURANCE company are not exempt

Question 17

Reg D under 1933Act permit an exempt offering to be sold to

Answer 17

Both accredited and non-accredited investors

Question 18

Exempt from full registration requirements of Securities 1933Act is

Answer 18

All offerings made under Regulation A

Question 19

Purpose of Sec 10b of Securities 1934 Act

Answer 19

Deterring fraud in the security industries

Encouraging disclosure of relevant information so investors can make better decision

Question 20

Insiders under 1934 Act

Answer 20

Officer and directors and who owns more than 10%stock of corp

Accountant

Attorneys

Consultant

EXCEPT: creditors and owner of debentures

Question 21

Which forms must file to Sec?

Answer 21

Form 10K and 10Q must filed with SeC

10K must contain FS audited by independent public accountant

FS in 10Q must be reviewed by public accountant

Question 22

Registration is required under 1933 Act

Answer 22

National stock exchanges, brokers &dealers must register

Stock of reporting companies must be registered:
+ those sold on national stock exchanges or

+ those with >500shareholders & >$10million in assets

Question 23

Antifraud provision of 1934 Act

Answer 23

Apply to ALL transactions involving interstate commerce whether or not Corp involved has to register under 1934