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28 Cards in this Set
- Front
- Back
SEC powers
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1) Rulemaking - same force and effect as laws enacted by Congress
2) Investigation - subpoena power, secret investigations 3) Civil enforcement - revoking registration of securities 4) Criminal enforcement - fines or jail sentences (through Justice Dept) |
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1933 Act: unlawful to
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Use interstate commerce or the mail to:
Sell securities w/o registration statement Sell securities not accompanied by a prospectus Make material misstatements surrounding original issue |
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Liable parties under 1933 Act
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Underwriters
Issuers Directors or partners Experts |
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Securities exempt from registration under 1933 Act
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Securities issued by:
Government agency Banks and S&Ls Farm co-ops Charities Railroads Bankruptcy trustees |
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Regulation A:
Benefit to issuer? Restrictions on offerings? |
Simplified registration
- Up to $5M in 12-month period - Must notify SEC - Must supply purchaser with offering circular |
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Casual sales:
Benefit to issuer? Restriction on offerings? |
Registration not required
-Offering by person other than issuer, underwriter, dealer, controlling person -Sale of over 50% of a controlling person's shares must be registered |
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Regulation D, Rule 504:
Benefit to issuer? Restriction on offerings? |
Registration not required
-Up to $1M in 12-month period -Must notify SEC within 15 days of first sale |
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Regulation D, Rule 505:
Benefit to issuer? Restriction on offerings? |
Registration not required
-Up to $5M in 12-month period -Must notify SEC within 15 days of first sale -Resale restricted for 2 years -Must supply audited balance sheets to nonaccredited investors -No general solicitation permitted |
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Regulation D, Rule 506:
Benefit to issuer? Restriction on offerings? |
Registration not required for private placement
-Up to $5M in 12-month period -Must notify SEC within 15 days of first sale -Resale restricted for 2 years -Must supply audited balance sheets to nonaccredited investors -No general solicitation permitted -All unaccredited investors must be "sophisticated" |
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Information required in registration statement
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Names of issuers, directors, officers, underwriters, shareholders over 10%
Description of property, business, capitalization Description of security to be offered Certified financials: B/S less than 90 days old, P&L statements for past 3 years |
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Registration statement:
When does it become effective? Restrictions on offers before and during waiting period? |
Effective automatically after 20 days if not refused
Before waiting period: offers not allowed During waiting period: no restrictions no oral offers; written offers must be accompanied by "red herring" prospectus |
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Fraud under 1933 Act: plaintiff must prove
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Material
Misstatement Damages |
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Fraud under 1933 Act: Civil liability
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Difference between price paid for securities and market value at time of suit
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1933 Act: Statute of limitations
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1 year after misstatement discovered (or should have been discovered)
Never more than 3 years after public offering |
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1933 Act: Due diligence defense
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For experts
Can avoid liability by proving exercise of due care |
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1933 Act: When must prospectus be delivered?
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New company: 90 days after initial offering
Existing company: 40 days after initial offering |
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1934 Act: Companies required to register
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National securities exchanges
Brokers/dealers working in interstate commerce Corporations traded on national securities exchange OR with at least $10M in assets and 500 or more equity security holders |
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1934 Act: Reporting requirements
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10K annual report
10Q quarterly report 8K report of material changes Officers/directors must file report of changes in ownership |
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2 types of insider trading
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Trading on inside information
Short swing trading |
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Trading on inside information is fraud if:
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Insiders or tippees trade
Exception: if information is disclosed to other party |
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Short swing trading: profit must be forfeited to corporation if
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Insider profits on trade made within 6-month period
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Insider trading:
Insider =? Exception? |
Officer
Director Beneficial owner of over 10% of stock Exception: transactions under $3K |
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1934 Act: conditions for fraud
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Material
Misstatement Intent (or reckless disregard) Reliance Damages |
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1934 Act anti-fraud provisions:
What securities are covered? What traders are covered? |
All securities and traders are covered under 1934 Act
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Foreign Corrupt Practices Act: 3 provisions
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Anti-bribe
Anti-fraud Accounting requirements |
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Foreign Corrupt Practices Act: Anti-bribe provisions apply to?
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All U.S. companies
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Foreign Corrupt Practices Act: Anti-fraud provisions apply to?
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1934 Act companies
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Foreign Corrupt Practices Act: Anti-fraud provisions are?
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Illegal to falsify accounting reports
Illegal to make false representation during audit |