Term
| SECURITIES ACT OF 1933 - Purpose |
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Definition
The purpose of the 1933 act is to regulate the initial offering of securities by requiring
the filing of a registration statement with the SEC prior to sale or an offer to sell. |
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Definition
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Term
| SECURITIES ACT OF 1933 - Objectives |
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Definition
1) Disclosure to potential investors of all material information
2) Prevention of fraud |
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Term
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Definition
The test of whether something is a security requires analysis of whether
a) A person invests in a common enterprise,
b) With a reasonable expectation of profits,
c) To be derived solely from the efforts of a third party, such as management. |
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Term
| The 1934 act defines an exchange as... |
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Definition
an organization, association, or group (incorporated or not) that is, maintains, or provides a market or facility for uniting purchasers and
sellers of securities. |
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Term
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Definition
An
issuer
is the individual or the business organization initially offering a security
for sale to the public (generally, to raise money).
a) An issuer includes a controlling person, one who owns more than 10% of
the company’s stock. |
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Term
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Definition
| An underwriter is any person who participates in the original offering of securities from the issuer with the intention of distributing them. |
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Term
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Definition
A dealer is any person who is engaged in the business of offering, selling,
buying, dealing, or otherwise trading in securities issued by another.
a) A dealer also may be a broker , a person who executes securities transactions for others. |
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Term
| Categories of Issuers - nonreporting issuer |
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Definition
| A nonreporting issuer (one who need not file reports under the 1934 act) must use detailed Form S-1. |
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Term
| Categories of Issuers - unseasoned issuer |
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Definition
An unseasoned issuer has reported for at least 3 consecutive years under the
1934 act. It must use Form S-1 but provides less detailed information and may include some information by reference to other 1934 act reports. |
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Term
| Categories of Issuers - seasoned issuer |
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Definition
A seasoned issuer has filed for at least 1 year and has a market capitalization
of at least $75 million. It may use Form S-3 to report even less detail and may
include even more information by reference. |
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Term
| Categories of Issuers - well-known seasoned issuer |
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Definition
A well-known seasoned issuer has filed for at least 1 year and (a) has a
worldwide market capitalization of at least $700 million or (b) has issued for
cash in a registered offering at least $1 billion of debt or preferred stock in the past 3 years. Such an issuer also may use Form S-3. |
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Term
| Registration under the 1933 Act |
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Definition
To comply with the 1933 act, an issuer of securities must prepare and publicly file
1) A registration statement
2) A prospectus |
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Term
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Definition
| A registration statement is a complete disclosure to the SEC of all material information with respect to the issuance of the specific securities. It includes the prospectus that will be provided to each potential investor. |
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Term
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Definition
| The purpose of registration is to provide adequate and accurate public disclosure of financial and other pertinent information that potential investors may use to evaluate the merits of the securities. |
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Term
| When is a registration statement effective? |
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Definition
| The registration statement is effective on the 20th day after filing unless the SEC accelerates the effective date or requires an amendment. A new 20-day period begins after an amendment. |
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Term
| Shelf Registration under the 1933 Act |
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Definition
| After the registration statement is filed, the securities are put on the shelf for up to 3 years until the best time for an offering is determined. |
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Term
| Exempt Securities under the 1933 Act |
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Definition
1) Domestic governments if used for a governmental purpose
2) Not-for-profit organizations
3) Domestic banks and savings and loan associations
4) Issuers that are federally regulated common carriers
5) A receiver or trustee in bankruptcy with prior court approval
6) State-requested insurers (but only their insurance policies and annuity contracts are exempt)
7) A corporation in reorganization if approved by a court or other governmental body
8) An issuer that exchanges them with the issuer’s existing security holders if no commission or other consideration is paid |
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Term
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Definition
| permits certain issuers to offer up to $5 million of securities in any 12-month period without full registration. It imposes no limitations on the number and nature of investors, and resale is not restricted. |
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Term
| Regulation D establishes three separate exemptions related to small issues and small issuers. |
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Definition
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Term
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Definition
a) No general solicitation or advertising is permitted, for example, by placing information on a website.
b) The issuer must exercise reasonable care to ensure that the purchasers of
the securities are not underwriters and that such purchasers are purchasing strictly for their own investment purposes.
c) The SEC must be notified by filing Form D within 15 days of the first
offering.
d) The exemption is only for transactions in which securities are offered or sold by the issuer, not for the securities.
i) The securities are restricted. Resale must be after registration or
under some exemption.
ii) Immediate rollover of the securities is precluded.
e)Accredited investors include most institutional investors and individuals that meet income or net worth thresholds (excluding the value of a person’s primary residence). All other investors are nonaccredited. If the offer is to nonaccredited investors, they must be given material information about the issuer, its business, and the securities being offered prior to the sale. |
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Term
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Definition
| permits qualified issuers to sell up to $1 million of securities during a 12-month period to any number of purchasers. |
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Term
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Definition
| provides exemption from registration to all issuers other than investment companies for a limited offering of securities up to $5 million in any 12-month period. |
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Term
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Definition
| implements the private placement exemption from registration for “transactions by an issuer not involving any public offering.” |
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Term
| SECURITIES EXCHANGE ACT OF 1934 - purpose |
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Definition
| The 1934 act primarily addresses secondary distribution (resale) of securities. |
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Term
| Securities and Exchange Commission (SEC) |
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Definition
The SEC is an administrative agency created by the 1934 act to enforce the federal securities laws. It has the power to (1) issue rules,
(2) investigate violations, (3) conduct hearings to decide whether violations have occurred (adjudication), and (4) impose penalties. |
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Term
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Definition
Public Company Accounting Oversight Board
(PCAOB). |
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Term
| All regulated, publicly held companies must |
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Definition
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Term
| Registration under the 1934 Act is required of all companies that: |
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Definition
a) List securities on a national securities exchange (Section 12 of the 1934 act) or
b) Have at least 500 shareholders of equity securities and total gross assets
exceeding $10 million. |
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Term
| Annual reports certified by the CEO and CFO are filed on |
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Definition
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Term
| Quarterly reports certified by the CEO and CFO are filed on |
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Definition
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Term
Current reports must be promptly filed on _________. It describes certain
material events that must be disclosed within 4 calendar days. |
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Definition
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Term
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Definition
| A proxy is a power of attorney given by a shareholder to a third party authorizing the party to exercise the voting rights of the shares. |
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Term
| Tender Offers under the 1934 Act |
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Definition
A tender offer is a general invitation by an individual or a corporation to all
shareholders of another corporation to tender their shares for a specified price. |
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Term
| Insiders under the 1934 Act |
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Definition
| Under Section 16 of the 1934 act, insiders required to report to the SEC are (a) directors, (b) officers, and (c) any person beneficially owning more than 10% of the stock of a corporation listed on a national stock exchange or registered with the SEC. |
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Term
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Definition
Insider trading under Rule 10b-5 is the purchase or sale of any security by an
individual who (1) has access to material, nonpublic information; (2) has not disclosed it before trading; and (3) has a fiduciary obligation to the issuer, the shareholders, or any other source of the information. |
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Term
| examples of insiders for Rule 10b-5 purposes: |
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Definition
a) Corporate officers
b) Lawyers
c) Auditors
d) Other parties, such as tippees (recipients of information from insiders) and employees of government agencies entrusted with confidential corporate information |
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