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Definition
| The first federal securities statute enacted, this "Truth in Securities" Act focuses on the initial offering context. It requires all securities offered for sale, unless otherwise exempted, to be registered with the SEC. The Act sets forth the requirements for registration of securities that are offered for sale to the public. The Act also contains exemptions from registration, private remedies, and antifraud provisions. Full disclosure, and not merit regulation, is the guiding principle. (Understanding Securities Law) |
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Term
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Definition
| Federal statute establishing the Securities and Exchange Commission (SEC) and setting forth provisions governing the public trading of securities. The Act, for example, contains antifraud provisions, extensive reporting as well as other requirements for certain issuers of securities, oversight of broker-dealers and national securities exchanges, requirements focusing on proxy solicitation, and provisions covering tender offers and going-private transactions. (Understanding Securities Law) |
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Term
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Definition
| banks, insurance companies, and knowledgeable persons who may receive private sale offerings of securities under Regulation D of the Securities and Exchange Commission. Barron's Business Law |
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Term
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Definition
| when a issuing company explicitly or implicitly endorses or approves third party information. page 859 |
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Term
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Definition
| includes officers, directors, and controlling shareholders. Any shareholder owning 10 percent or more of the issuer's stock is an affiliate. page 848. |
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Definition
| family, friends and wealthy individuals that entrepreneurs often turn to first. page 838 |
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Term
| automatic shelf registration offerings |
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Definition
| A more flexible version of shelf registration for offerings by well-known seasoned issuers whereby such issuers may register unspecified amount of securities on Form S-3 (or Form F-3) registration statements, which become effective immediately upon filing. See Understanding Securities Law |
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Term
| be speaks caution doctrine |
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Definition
| Provides that forward-looking statements included in a disclosure document (such as a registration statement or a Form 10-K) are not actionable as securities fraud, provided that such statements are accompanied by specific and meaningful cautionary language. (Understanding Securities Law) |
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Term
| best-efforts underwriting |
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Definition
| Type of underwriting arrangement where the underwriters agree to act as agents for the issuer and use their 'best efforts' in finding purchasers for the securities being offered. To the extent that the underwriters are unsuccessful in finding purchasers, the securities are not sold. (Understanding Securities Law) |
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Term
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Definition
| A developmental stage company that has (1) no specific business plan or purpose, or (2) the business plan of which is to merge with an unidentified company or companies. (Understanding Securities Law) |
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Term
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Definition
| Term used to refer to the body of state securities laws. Some states have statutes that only require disclosure of material information, while other states have merit regulation which requires, in addition to full disclosure, that the securities offered meet a test of substantive fairness. (Understanding Securities Law) |
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Term
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Definition
| a letter in which the accountant describes the review it has conducted of unaudited interim financial statements and of certain numbers in the prospectus. page 876. |
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Term
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Definition
| Under the 1933 Act, the sale of securities to the public by a controlling shareholder or other affiliate of an issuer is considered to be a transaction involving an underwriter. page 863. |
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Term
| controlling person liability |
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Definition
| Liaibility under Section 20(a) of the 1934 Act that provides for controlling- person liaibilty false statements and information but does provide a good faith defense. |
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Term
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Definition
| Orginally procurred by investors to guarantee the repayment of bonds in case the issuer defaulted, it became a popular vehicle for hedge funds and other traders betting on how close a firm was to insolvencey. page 882 |
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Term
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Definition
| in securities law,a person engaged in the business of buying and selling securities for his/her account as a principal. Barron's Business Law |
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Term
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Definition
| Permits shareholders to bring a state law class-action suit against a corporation and its directors for breach of preexisting common law fiduciary disclosure obligations. page 841 |
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Term
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Definition
| for accountants or financial officers, a defense to Section 11 violations of the 1933 Securities Act (material omissions or false statements related to a registration statement)-- essentially, the defense is that the accountant, financial officer acted reasonably (was not negligent). Barron's Business Law |
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Term
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Definition
| Specific securities or categories of securities which are never required to be registered under Section 5 of the 1933 Act. The exemption is predominantly due to the intrinsic character or nature of the issuer itself. Examples of exempt securities include certain short-term promissory notes or bills of exchange, securities issued or guaranteed by municipalities, state or federal governments, and securities issued by nonprofit, religious, educational or charitable organizations. (Understanding Securities Law) |
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Term
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Definition
| a transaction in which the issuance of securities is not subject to the registration requirements of the Securities Act of 1933. Barron's Business Law |
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Term
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Definition
| Test adopted by the U.S. Supreme Court in Reves to determine whether a note is a security. Beginning with the presumption that a note of greater than a nine-month duration is a security, the family resemblance test analyzes each not be examining four factors: (1) the motivations that would prompt a reasonable buyer and seller to enter into the transaction; (2) the plan of distribution; (3) the reasonable expectations of the investing public concerning the note in questions; and (4) any relevant risk reducing factors, such as the presence of a regulatory scheme or collateralization. (Understanding Securities Law) |
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Term
| firm commitment underwriting |
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Definition
| Type of underwriting arrangement whereby the underwriters agree to purchase from the issuer the securities being offered for the purpose of reselling them to participating dealers and the public. to the extent that the underwriters are not successful in finding purchasers, they must pay for and hold the securities for their own account. (Understanding Securities Law) |
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Term
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Definition
| Under the 1933 Act, securities offered in an IPO are registered in a registration statement that meet the requirements of this form. It must include a complete description of the securities being offered, the business of the issuer, the risk factors, the management, the major shareholders, and audited financial statements. Page 849. |
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Term
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Definition
| Under the 1933 Act, this is the form used by securities offered by companies that have timely filed periodic reports under the 1934 Act for at least 12 months and have a widespread following in the marketplace. Aggregate market value of the voting and nonvoting stock held by nonaffiliates must be $175 million or more. |
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Term
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Definition
| Under Rule 145, the forrm that must be used when securities holders are asked to approve a corporate reorganization or combination -- such as a reclassification of securities, a merger involving an exchange of securities, or a transfer of assets of one corporation in exchange for securities of another. |
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Term
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Definition
| A written communication that is deemed a Section 10 prospectus and constitutes an offer to sell the securities that are (or in the case of a well known seasoned issuer will be) the subject of a registration statement. A free writing prospectus is not a statutory prospectus. (Understanding Securities Law) |
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Term
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Definition
| Once a registration statement becomes effective with the SEC, sales of securities my be consummated. page 847, |
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Term
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Definition
| a violation of the securities laws that occurs when an issuer or underwriter conditions the market with a news article, press release, or speech about a company engaged in the registration of its securities. Barron's Business Law |
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Term
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Definition
| Occurs where the price of an offering of securities quickly rises to a substantial premium above the initial offering price. The demand for the securities offered may be accompanied by an investor stampede to purchase the coveted "hot" stock. (Understanding Securities Law) |
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Term
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Definition
| If an issuer makes successive sales within a limited period of time, the sales may be deemed to be part of a single sale if they are 1) part of a single plan of financing; 2) involve the issuance of the same class of securities; 3) are made at or about the same time; 4) involve the same type of consideration; and 5) are made for the same general purpose. page 858 |
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Term
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Definition
| a contract that may be a "security" if it requires an investment of money in a common enterprisewith the expectation of profits from the efforts solely of others. Barron's Business Law |
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Term
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Definition
| a person who issues securities, and any other persons or entitites acting under his/her control or as part of a plan of sale or distribution of the securities. Barron Business Law |
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Term
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Definition
| As defined by the Supreme Court, a fact that a reasonable investor would most likely have considered important in deciding whether to buy or sell -- that is, what a reasonable hypothetical investor would hav econsidered important, not necessarily what the actual investor considered important. page 872. |
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Term
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Definition
| Refers to state Blue Sky statutes that, in addition to requiring full and adequate disclosure, require that securities offerings be substantially fair, just, and equitable. (Understanding Securities Law) |
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Term
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Definition
| Under Rule 144, a person is not an underwriter if certain conditions are met. page 863 |
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Term
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Definition
| a proposal made by one person to another and intended to create a contract if the other party expresses his/her assent. Barron's Business Law |
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Term
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Definition
| information prepared by the issuer for distribtuion with a small public offering of securities under Regulation A of the Securities and Exchange Commission. Barron's Business Law |
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Term
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Definition
| Under Ruglation S, transactions in which no offer is made to a person in the United States and either (1) the buyer is outside the United States at the time the buy oder is originated; or (2) the transaction is one executed in, on, or thourgh the facilities of a designated offshore securities market. No directed selling efforts may be made in the United STates. page 865. |
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Term
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Definition
| an offering of securities to a limited number of investors. Barron's Business Law |
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Term
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Definition
| also known as a private offering, it is an offering directed to selected qualified investors, rather than to the public. page 856 |
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Term
| private placement memorandum |
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Definition
| a booklet offered by entrpreneurs seeking financing from private individual investors that furnishes information about themselves and their enterprise. Barron's Business Law |
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Term
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Definition
| a statement or document describing securities to be offered or being offered; a statutory prospectus meeting the requirements of the Securities Act of 1933 must be prepared and submitted to the Securities and Exchange Commission before securities subject to the act may be advertised or offered. Barron's Business Law |
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Term
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Definition
| a limited power of attorney whereby a shreholder names a proxy (agent or representative) to vote his/her shares. Barron's Business Law |
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Term
| qualified institutional buyer |
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Definition
| Under Rule 144A permits the resale of unregistered securities to qualified intitutional buyers -- institutional investors holding and managing $100 million or more or securities, if the securities are not of the same class as any securities of the issuer listed on a U.S. securities exchange or quoted on an automated interdealer quotation system. page 864. |
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Term
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Definition
| the time between filing of securities registration statement and the date the registration statement becomes effective. Barron's Business Law |
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Term
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Definition
| a preliminary prospectus, tenatatively reviewed by the Securities and Exchange Commission, designated in red ink as such, and required to accompany a written offer of securities during the waiting period befor ethe securities are formally offered for sale. Barron's Business Law |
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Term
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Definition
| a statement filed by an issuer with the SEC under the Securities Act of 1933 and containing all relevant information about the securities to be offered for sale. Barron's Business Law |
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Term
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Definition
| Allows U.S. and Canadian companies that are not required to report under the 1934 Act to offer and sell up to $5 million of securites in a 12 month period, of which up to $1.5 million may be sold by the selling scurity holders. Not available to investment companies, companies issuing oil and gas rights, or blank check companies. |
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Term
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Definition
| Provides a safe harbor for those seeking exemption from registrations. Three separate exemptions defined by Rules 504, 505, and 506. Under 504, up to $1 million within a 12 month period and unlimited number of investors. Under Rule 505, up to $5 million within 12 month period and not more that 35 unaccredited investors. Under Rule 506 no more than 35 unaccredited investors and unlimited number of accredited investors. page 858. |
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Term
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Definition
| Clarifies the general rule that any offer or sale outside of the United STates is not subject to the federal registration requirements. page 865 |
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Term
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Definition
| a company registered under Section 12 of the Securities Exchange Act of 1934 that subjects issuers to various reporting requirements and to certain rules and regulations concering proxies, tender offers, and insider trading. |
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Term
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Definition
| Under Rule 144, an issuer that has been subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act for at least minety days before the Rule 144 sale. page 863 |
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Term
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Definition
| Securities that have been issued under an exempted transaction, with further transfer being subject to limitations. |
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Term
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Definition
| Stock not acquired in a registered offering. page 842 |
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Term
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Definition
| Presentation by an issuer of securities to potential buyers about the merits of the issue. Management of the company issuing stocks or bonds doing a road show travels around the country presenting financial information and an outlook for the company and answering questions of anlysts, fund managers, and other potential investors. (Barrons page 524) |
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Definition
| A rule adopted by the SEC to reduce the uncertainty associated with the definition of "underwriter." If the requirements of Rule 144 are met, then restricted and control securities may be sold publicly without registration. page 863 |
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Term
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Definition
| Defined under Section 2(3) of the 1933 Act to include "every contract of sale of disposition of a security interest in a security, for value. page 847 |
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Term
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Definition
| Under the Securities Exchange Act of 1934 and Rule 10b-5 refers to a mental state embracing intent to deceive, manipulate or defraud and which gives rise to an action for civil damages. (Blacks page 1345) |
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Term
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Definition
| a securities offering by a person other than the issuer |
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Term
| Section 4(1 1/2) exemption |
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Definition
| An offering that would qualify as a private placement under Section 4(2)if made by the issuer. Securities can only be offered to persons who are capable of bearing and understanding the risk of the investment and who acquire the securities for investment purposes only and not with a view to distributing. page 863. |
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Term
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Definition
| notes, stocks, bonds, debentures, evidence-of-debt or other documents, certificates, or interests that represent a share in a corporation, business, or venture, or a debt owed by a corporation, business, or venture; any instrument or interest commonly known as a security and regulated by the Securities Act of 1933. |
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Term
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Definition
| A court ordeer precluding defendants from voting their shares. page 868. |
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Term
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Definition
| a single registration statement covering the future sale of securities, permitted by an SEC rule so that the company can react quickly to changing market conditions. |
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Term
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Definition
| When underwriters allocated shares of IPO's that were in high demand to coproate executives in hopes of securing more investment banking business from the executive's firms. page 855 |
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Term
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Definition
| A prospectus meeting the requirements of Section 10 of the 1933 Act. page 847 |
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Term
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Definition
| A group of investment bankers that, operating under the agreement among underwriters, agrees to purchase a new issue of securities from the issuer for resale to the investment public (Barrons page 480) |
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Term
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Definition
| Offer to buy shares of a corporation, usually at a premium above the share's market price, for cash, securities, or both, often with the objective of taking control of the target company. The SEC requires any corporate suitor accumulating 5% or more of a target company to make diclosures to the SEC, the target company and the relevant exchange. (Barrons page 643) |
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Term
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Definition
| An advertisement placed in newspapers by investment bankers in a public offering of securities. It gives the basic details about the issue and lists the underwriting group members involved in the offering in alphabetically organized groupings according to the size of their participation. It is not "an offer to sell or a solicitation of an offer to buy" but rather calls attention to the prospectus, sometimes called an offering circular. (Barrons page 652) |
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Term
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Definition
| A type of derivative security whereby two counterparties agree to exchange cash flows on two financial instruments over a specific period of time. page 868 |
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Term
| traditional shelf offerings |
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Definition
| the registration of 1. securities offered pursuant to employee benefit plans; 2. securities offered or sold pursuant to dividend or interest reinvestment plans; 3. warrants, rights, or securities to be issued upon conversion of other outstanding securities; 4. mortgage-related securities; and 5. securities issued in connection with business combination transactions. |
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Term
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Definition
| Investment Banker who, singly or a a member of an Underwriting Group or syndicate, agrees to purchase a New Issue of securities from an issuer and distribute it to investors, making a profit on the underwriting spread. (Barrons page 672) |
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Term
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Definition
| When used in terms of the sale of a security, courts have defined this term very broadly -- more broadly that in state corporation statutes, which require that stock can be issued only for "value" in the form of cash, poperty, or compensation for past services. page 847 |
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Term
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Definition
| The period between the filing of registration statements and the time when securities may be offered for sale to the public. (Barrons page 694) |
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Term
| well-known seasoned issuers |
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Definition
| firms eligible to use Form S-3 with $700 million of public equity float, are permitted to make unrestricted oral and written offers before the registration statement is filed without violating the gun-jumpin provisions. page 855. |
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