Securities Regulation Flashcards
What is a security?
Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, investment contract, etc. The main characteristics being either a right to assets or a corporation’s indebtedness
What are the elements to an investment contract?
- Investment of money
- In a common enterprise
- With an expectation of profit
- To be earned primarily by the actions of others
What securities does the 1933 Act cover?
- Initial public offerings
- Seasoned offerings
- Secondary offerings
What is the distribution for securities?
Issuer - Underwriter - Broker - Investor
What are the three periods during the registration process?
Pre-filing period
Waiting period (20 days)
Post-effective period
What can and can not be done during the registration process?
Pre-filing - neither offer to sell securities nor sell them
Waiting - May make oral offers and certain types of written offers, but cannot sell securities
Post-effective - offer and sell the securities
What items are included in a registration statement?
Financial statements audited by a CPA
Names of issuer, directors, officers, underwriters, etc
risks
description of issuer’s business
description of security and intended use for proceeds
prospectus
What is the SEC review?
The SEC reviews the registration statement during a 20-day waiting period and the registration statement becomes effective on the 20th day after filing.
What does shelf-registration mean?
The SEC allows the largest 2,000 companies to file a single registration statement that would cover the securities they expected to sell during the next two years.
What is the Securities Offering Reform Program (SORP)?
Reforms in 2005 allow the largest companies to file a registration statement covering three-year periods.
What are WKSIs (wicksees)?
The SORP rules divide issuers into several categories, the largest called Well-Known Seasoned Issuers.
- Reporting regularly to SEC for over a year
- Eligible to use Form S-3 or F-3
- Have either $700 million of worldwide public common equity float or have issued $1 billion of registered debt in previous 3 years.
What is a “free writing prospectus” (FWP)?
Firms allowed to supplement the final prospectus with additional literature called “free writing” WKSIs are now allowed to use additional material (FWPs) at any time with few restrictions.
What is the purpose of a tombstone ad?
The tombstone ad makes known the availability of a prospectus.
What are exempt securities?
Securities which are exempt from SEC registration rules. Examples include:
- bank and government securities
- short-term notes (
What are nonexempt securities through exempt transactions?
The securities need not be registered with the SEC even though they are not exempt securities.
- “Small offering” exemptions
- private placement exemptions
- Intrastate offering exemptions
