SU 2 Law Flashcards
Purpose of ‘33
regulate IPO
require filing of registration statement w/ SEC before sale/offer to sell
Objectives of ‘33
disclosure to potential investors wrt all material info
prevent fraud
Issuer
individual or business org initially offering security for sale to public
includes controlling person (owns > 10% of stock)
underwriter
participates in original offering w/ intent to distribute
dealer
engaged in business of offering, selling, buying, dealing, trading securities issued by another
can be a broker- executes securities transactions for others
Nonreporting issuer
doesn’t have to file report under ‘34
uses Form S-1
Unseasoned issuer
reported for at least 3 consecutive years under ‘34
Form S-1
can refer to other ‘34 act reports
Seasoned issuer
filed for at least 1 year
mkt cap = at least 75M
Form S-3
Well Known Seasoned Issuer
filed for at least 1 year
worldwide mkt cap = at least 700M or issued 1B debt/preferred stock in last 3 years
Form S-3
Emerging Growth Co
issuer w/ annual gross rev 1B
- 5 years after IPO
- issued 1B in nonconvertible debt
- large accelerated filer (700M in public stock)
issuer must file
registration statement
prospectus
registration statement
effective on 20th day after filing
complete disclosure to SEC of all material info
includes prospectus
describes
-business, property, competition
-provisions of security to be offered for sale
-mgt, compensation of directors/officers, holdings of securities, material transaction w/ these indiv
material legal proceedings
principal purpose proceeds used
MD&A
signature of issuer, CEO, CFO, chief accounting officer, majority of directors
if public accountant has changed w/in last 2 fiscal years
prospectus
must give to any interested investor
purpose-supply facts to make informed decision
access= delivery
Regulation S-X
states form/content of for f/s filed under ‘33
Shelf registration under ‘33
after registration statement filed, put on shelf for max 3 years until best time for offering found
only for seasoned issuer & WKSI
Exempt Securities under ‘33
domestic govt NFP Bank S&L federally regulated common carriers receiver/trustee in bankruptcy w/ prior court approval state-regulated insurers corp in reorg stock div/stock split commercial paper to buy working cap if
Intrastate offerings
Rule 147
80% proceeds used in state
80% assets located in state
issuer does 80% business (gross rev) in state
all purchasers & offerees are residents of state
can’t sell to nonresident for at least 9 months after initial sale complete
Regulation A
max 5M in 12 months
unlimited investors
unrestricted resale
less detailed, time consuming, cheaper than full registration
offering statement w/ notification & offering circular filed to SEC (20 day waiting pd)
sell after SEC approved filing
broadcast/written ads (no oral comm)
Reg D
Rule 504
max 1M in 12 month
unlimited investors
general solicitation allowed if follows state law
resale unrestricted
Reg D
Rule 505
max 5M in 12 month
max 35 unaccredited investors
no general solicitation/ads
restricted resale
Reg D
Rule 506
No max $
max 35 unaccredited
no general solicitation/ads unless sales to accredited investors
restricted resale
Rule 4(6)
max 5M unlimited accredited investors no unaccredited no gen solicitation/ads restricted resale
Crowdfunding
max 1M
unlimited investors
restricted resale
investment limited based on income, net worth
main elements of ‘34
create SEC
periodic reporting
antifraud
insider liability for short swing
OTC issuer can terminate registration if
‘34 Registration discloses
corp org financial structure describe securities names of officers, directors, underwriter, holders > 10% equity describe nature of business financial statement describe bonus & profit-sharing
Annual reporting requirements
file w/in 60 days for large accelerated filers (at least 700M in public shares)
75 days for accelerated filers (75M-700M)
90 days for nonaccelerated filers (
10K contains
business activities securities stock price mgt related ppl disagreements about accounting & disclosure audited f/s
10Q
40 days after end of 1st 3 fiscal quarters for large accelerated filiers
45 days by nonaccelerated
Section 14(a) Proxy Solicitation
illegal to solicit proxy wrt registered security
10 days before mail proxy statement to sh co must file copy w/ SEC
Tender offer
invitation to sh of another corp to tender shares for specific price
ppl must file statement w/in 10 days (post acquisition tender) w/ SEC, issuer, securities exchange
-acquire > 5% of registered securities
-make tender offer for > 5% of securities
-issuer offer to buy its registered sec
-target of hostile tender offer
Insiders under ‘34
Section 16
directors
officers
own > 10% stock listed on national exchange
report on form 3 (initial), form 4 (changes), form 5 (annual)
-ownership w/in 10 days of becoming insider
-statement @ end of 2nd business day engaged in transaction w/ co.’s equity securities
-annual statement w/in 4 days after end of FY
16(a) failure to comply w/ SEC reporting rules
plaintiffs-govt admin
Penalties for certifying statements per of SOX
unknowing- 1M, 10 yrs jail
knowing- 5M, 20 yrs jail
Short Swing Section 16(b)
short swing-profits from sale & purchase (vice/versa) of stock w/in 6 mo pd.
plaintiff-issuer or sh suit if issuer doesn’t sue w/in 60 days after request
strict liability
insider doesn’t have to have material nonpublic info
Section 11 of ‘33
prohibits misstatement/omission in registration statement or prospectus
plaintiff-investors
defendants-everyone
liability- strict (issuer), negligence for others
Section 12(a)(1) of ‘33
no registration no deliver of current prospectus sale before registration plaintiff- purchaser defendant- seller liability-strict
Section 12(a)(2) of ‘33
material misstatement/omission about offer or sale of security
plaintiff-purchaser
defendant- seller
liability- negligence
Section 17(a) of ‘33
fraud, material misrepresentation, omission in sale
plaintiff-SEC (no private remedy)
defendant-offeror/seller
liability-civil or criminal
Section 18(a) of ‘34
mislead statement omission in any SEC filing plaintiff-purchaser/sellers who rely & incur loss defendant- filers defense-good faith, no knowledge
Section 14(a) of ‘34
misleading proxy
plaintiff- govt, sh
defendant- parties soliciting
Section 14(e) of ‘34
material misstatement/omission of fact/fraud wrt tender offer
plaintiff- govt, private suit by target or sh
defendant- tender offeror
Rule 10b-5 of ‘34
fraud wrt purchase/sale
plaintiff-govt, purchaser, seller
defendant-any person who commits fraud (prove scienter)
Section 20 of ‘34
insider trading
plaintiff- govt, contemporaneous purchaser/seller
defendant- insider w/ MNPI
Criminal liability of ‘34 for willfully & knowingly making materially false statement
indiv-max fine=5M or 20 years jail
corp-max fine=25M
reckless disregard = willful violation
compliance w/ pro stds isn’t absolute defense
404 of SOX- internal control
establish & document internal ctrl (annual report)
mkt cap
Dodd-Frank
auditors of broker-dealers are subject to inspection by PCAOB
-broker-dealers must be audited
Financial Stability Oversight Council
Investment advisors w/ 25-100M of assets must register w/ state regulators
-registered w/ at least 15 states must register w/ SEC
sh has right to nonbinding vote on compensation for corp officers 1x per 3 years
Liability to 3rd parties for fraud
reasonably foreseeable users of product
-should see would be injured by reliance
privity not needed
foreseeable user can sue
Contributory vs comparative negligence
contributory-plaintiff responsible for own injuries doesn’t get damages
-not applicable in most states
comparative-plaintiff responsible for own injuries may recover % damages caused by defendant
partial comparative negligence-if plaintiff> 50-51% fault, can’t recovery damages
