Unit 5 Flashcards
offer/offer to sell:
is every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value
Any security given as a bonus with a purchase of securities or anything else (a car, jewelry, etc.) is considered:
to constitute part of the subject of the purchase
What is assessable stock?
stock issued below par for which the issuer or creditors have the right to assess shareholders for the balance of unpaid par
A purported gift of assessable stock is considered:
to involve an offer and a sale
A sale/ offer of a warrant or right to purchase another security is considered:
to include an offer of the other security
If a car dealer offers $1,000 in corporate bonds as an incentive,
this now becomes a securities sale and falls under the jurisdiction of the state securities Admin. As a result, to do this, the car dealer would have to register with the state as a BD.
Sale/sell
is every contact of sale, contract to sell, and disposition of a security or interest in a security for value. This means that any transfer of a security in which money or some other valuable consideration is involved is covered by this definition and subject to the act.
Offer –>
Sale –>
Offer –> the attempt
Sale –> the actual transaction
One must be properly registered to both make the offer and then the sale
When assessable stock is given as a gift,
the Admin has jurisdiction over the transaction because there is a potential future obligation in that either the issuer or creditors can demand payment for the balance of par value
If an individual owner of assessable stock felt that the issuer was on the verge of bankruptcy, that person could give the stock as a present. If the bankruptcy occurred,
the new owner would then be subject to the assessment
Regarding assessable stock, remember that:
it no longer exists, but the exam may ask about it. Look for this direct quote from the USA: “A purported gift of assessable stock is considered to involve an offer and sale.”
What are all stock today?
Nonassessable stock
The terms sale or sell and offer or offer to sell do NOT include any:
- Pledge or loans
- Gift of non assessable stock
- Stock dividends/splits
- Class votes by stockholders
- Reorganization in which a security if issued as part of the deal
Remember: If non assessable stock is given free as a bonus with the purchase of something else,
this would NOT be a gift and would be an offer or a sale
The Admin would NOT have jurisdiction if the offer were made under any of the following circumstances:
- TV or radio broadcast that originated outside of the state
- Bona fide newspaper or periodical published outside of the state
- Newspaper or periodical published inside the state but with more than two-thirds (66.67%) of its circulation outside the state in the last year
Newspaper of general interest and circulation, such as the New York Times. Private investment advisory newsletter, usually distributed by subscription, are:
not bona fide newspapers and are NOT included in the publishing exception.
A radio or TV program is considered to originate:
in the state where the microphone or TV camera is located.
The 4 broad powers the Admin has to enforce:
- Make, amend, or rescind rules and orders and require the use of specific forms
- Conduct investigations and issue subpoenas
- Issue cease and desist orders and seek injections
- Deny, suspend, cancel, or revoke registration and licenses
All rules and forms must be:
published
What is the difference between a rule and an order?
A rule applies to everyone and an order applies to a specific instance
Investigations may be:
public or private and maybe occur within or outside of the Admin’s state
Contumacy
If refusal to cooperate, the Admin may ask the court for help. Failure to obey the order of said court may be punished by the court as a contempt of court.
The issuance of cease and desist orders and seek injections were granted to:
to prevent violations before they occur
Cease and desist orders are directed to persons, requiring them to cease activities
