Term
Securities Act of 1933
(Securities Laws) |
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Definition
a law(Act) that regulates initial sales of new securities to the public
*Security
any stock
bond
note
preorganization subscription
investment contract
(however, there are many exemptions) |
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Term
Securities Exchange Act of 1934
(Securities Laws) |
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Definition
| a law (Act) that regulates resales of securities and public companies |
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Term
Sarbanes Oxley Act of 2002
(Securities Laws) |
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Definition
| a post-Enron law designed to tighten accounting standards |
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Term
*Investment Contract
(Securities Act of 1933) |
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Definition
| any investment of money or property made in expectation of receiving a financial return solely from the efforts of others |
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Term
*Registration of Securities
(Basic Rule) |
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Definition
| for public offerings of non-exempt securities the issuer must file registration statement disclosing accurate material information unless offering is an exempt transaction |
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Term
*Exempt Securities
(Definition) |
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Definition
| Those not subject to the registration requirements of the 1933 Act. |
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Term
*Unregistered Sales
(Exemptions Under the 1933 Act *Liability ) |
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Definition
| Section 12(a)(1) imposes absolute civil liability as there are no defenses. |
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Term
*False Registration Statements
(Exemptions Under the 1933 Act *Liability) |
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Definition
| Section 11 imposes liability on the issuer, all persons who signed the statement, every director or partner, experts who prepared or certified any part of the statement, and all underwriters; defendants other than issuer may assert the defense of due diligence |
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Term
*Antifraud Provisions
(Liability) |
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Definition
| Section 12(a)(2) imposes liability upon the seller to the immediate purchaser, provided the purchaser did not know of the untruth or omission, but the seller is not liable if he did not know and, in the exercise of reasonable care could not have known, of the untrue statement or omission; Section 17(a)¬broadly prohibits fraud in the sale of securities |
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Term
*Registration and Periodic Reporting Requirements
(*Securities Exchange Act of 1934* ) |
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Definition
| apply to all regulated publicly held companies and include one-time registration as well as annual, quarterly, and monthly reports |
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Term
Edgar
(*Securities Exchange Act of 1934*) |
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Definition
| this information is available online through the SEC’s Edgar database |
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Term
*Proxy (Definition)
(Proxy Solicitations) |
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Definition
| a signed writing by a shareholder authorizing a named person to vote her stock at a specified meeting of shareholders. |
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Term
*Proxy Statements
( Proxy Solicitations) |
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Definition
| proxy disclosure statements are required when proxies are solicited or an issuer submits a matter to a shareholder vote. |
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Term
*Tender Offers
(defination) |
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Definition
| A tender offer is an invitation to shareholders to purchase their shares at a specified price for a specified time. |
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Term
*Disclosure Requirements
(Tender Offers) |
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Definition
| a statement disclosing specified information must be filed with the SEC and furnished to each offeree. |
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Term
*Misleading Statements in Reports
(Liability) |
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Definition
| Section 18 imposes civil liability for any false or misleading statement made in a registration or report filed with the SEC. |
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Term
*Short-Swing Profits
(Liability) |
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Definition
| Section 16(b)¬imposes liability on certain insiders (directors, officers, and shareholders owning more than 10 percent of the stock of a corporation) for all profits made on sales and purchases within six months of each other, with recovery going to the issuer. |
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Term
*Rule 10b–5 makes it unlawful to
(10b-5 Fraud Provision) |
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Definition
(1)¬employ any device, scheme, or artifice to defraud; (2)¬make any untrue statement of a material fact
(3)¬omit to state a material fact (or)
4)¬engage in any act that operates as a fraud |
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Term
*Requisites of Rule 10b–5 recovery requires
(10b-5 Fraud Provision) |
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Definition
(1)¬a misstatement or omission
(2)¬materiality
(3)-scienter (intentional and knowing conduct)
(4)¬reliance
(5)¬connection with the purchase or sale of a security |
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Term
*Insider Trading
(10b-5 Fraud Provision) |
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Definition
| Insiders are liable under Rule 10b–5 for failing to disclose material, nonpublic information before trading on the information. |
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Term
*Express Insider Trading Liability
(10b-5 & Insider Trading) |
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Definition
| is imposed on any person who sells or buys a security while in possession of inside information. |
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Term
Civil Penalties for Insider Trading
(10b-5 & Insider Trading) |
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Definition
| may be imposed on inside traders in an amount up to three times the gains they made or losses they avoided. |
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Term
*Misleading Proxy Statements
(10b-5 & Misleading Statements) |
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Definition
| any person who distributes a false statement (statement made by someone representing another) is liable to injured investors. |
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Term
*Fraudulent Tender Offers
(10b-5 & Misleading Statements) |
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Definition
Section 14(e)¬imposes civil liability for
false and material statements or omissions or fraudulent, deceptive, or manipulative practices in connection with any tender offer.
i. This is an offer to buy shares in a corporation in false leads. |
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Term
*Antibribery Provision
(Foreign Corrupt Practices Act Sanctions) |
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Definition
an American business cannot pay or offer to pay bribes to officials in foreign countries, either directly or through affiliates or agents.
It result in fines and imprisonment. |
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Term
| Criminal Sanctions (Liability) |
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Definition
| individuals who willfully violate the 1934 Act are subject to a fine of not more than $1 million and/or imprisonment of not more than ten years. |
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Term
| *Sarbanes Oxley Act of 2002 |
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Definition
| passed in 2002 as a result of the series of major corporate accounting scandals. It includes a number of provisions relating to corporate governance, auditing standards, additional disclosure requirements in periodic reports. Increases importance of outside directors. |
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Term
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Definition
| Example: you put money in a software company. They receive vital starting capital and in return, they promise you a stake in the company so that you will make returns on your your input without doing any work. |
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Term
| Securities Exchange Act of 1934 |
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Definition
| a law that regulates resales of securities of public companies. |
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Term
| Types (Exempt securities) |
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Definition
short-term negotiable instruments
municipal bonds
securities of some banks
non-profit organization’s
certain insurance policies
annuity contracts. |
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Term
Exempt transactions for issuers
(Exempt Securities) |
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Definition
| only involve exempt securities |
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Term
Exempt transactions for non-issuers
(Exempt Securities) |
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Definition
| resales by persons other than the issuer are exempted from the registration requirements of the 1933 Act (they may be covered by the 1934 Act though). |
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Term
| Permissible Sales Activities (a) |
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Definition
| If no registration has been filed then no offers and no sales are permissible. However, there may be a notice of public offering. |
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Term
| Permissible Sales Activities (b) |
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Definition
| If registration is filed, then oral offers, certain written offers (like tombstone ads and preliminary prospectuses) are permissible as long as there are no sales. |
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Term
| Permissible Sales Activities (c) |
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Definition
| If registration is effective, then written offers with prospectuses and sales are permissible. |
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Term
| False Registration Statements (Due diligence) |
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Definition
| reasonable steps undertaken by a person in order to satisfy a legal obligation, especially to sell something. |
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Term
*Registration and Periodic Reporting Requirements
(*Securities Exchange Act of 1934* ) |
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Definition
| Requires a certain person to provide truthful information regarding offers to buy or sell securities on the secondary market. |
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Term
*Registration and Periodic Reporting Requirements
(*Securities Exchange Act of 1934* ) |
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Definition
| Prohibits a number of practices regarding purchase or sale of public securities, especially fraudulent activities. |
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Term
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Definition
| creates claims for civil liability for several types of wrongful behavior. |
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