Term
| Characteristics of Stock as a Security |
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Definition
Test: Does the investment have characteristics usually associated with Stock?
Factors:
- Voting Rights
- Right to Receive Dividends
- Negotiability/Transferability
- Capital Appreciation |
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Term
| Characteristics of a Note as a Security |
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Definition
Reves Family Resemblance Factor Test:
- Motivations of Buyer/Seller
- More like a Security: make profit, finance operations, purchase capital asset
- Less Like a Security: Buy or Sell Consumer Good or correct short-term cash flow problem
- Plan of Distribution
- Large & Public or Small & Private?
- Reasonable Expectations of Investing Public
- Is it being marketed as a Security?
- Existence of Risk Reducing Factors
- Governed by other Regs, Collateral, Priority, Insured, Short Maturity Date |
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Term
| Characteristics of an Investment Contract as a Security |
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Definition
howey Test:
1. Invest Money
2. In a Common Enterprise
- horizontal
- vertical - broad or strict
3. Led to Expect Profits
4. Primarily from the Efforts of Others |
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Term
| Characteristics of Partnership Agreement as Investment Contract as a Security |
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Definition
Fourth Prong of howey test: Primarily from the Efforts of Others
Factors:
1. Executive or Management Title
2. Negotiated Agreement
3. Powers
4. Sophistication & Knowledge of Partner
5. Dependancy on Promoter
6. Removal Powers
General Partnerships - Williamson Factors:
1. Who has Control
- Who has power under agreement
2. Who has Ability to Control?
- General - no knowledge to exercise control
- Specific - dependent on skill of partner |
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Term
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Definition
Facts & Circumstances:
1. Content
- Name of Underwriter
- Amount of Offering
- Statements of Suspicion (FLS)
2. Purpose/Target Audience
- Conditioning the Market
- Target investors
3. Timing
- 30-Day Exception (R163A)
Exceptions:
R135 Notice of Proposed Offering
R168 Reporting, Regularly Released
R169 Non-Reporting, Regularly Released, Customers and Supplies |
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Term
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Definition
2(a)(10) - any communication, written or by TV or radio, which offers or confirms sale of any security
12(a)(2) - a 2(a)(10) Prospectus used in a public offering |
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Term
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Definition
Any prospectus that does not meet the requirements of §10
Must be accompanied by 10(b)P, Legend, and may have to be filed unless WKSI or Seasoned |
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Term
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Definition
Reporting Company
S-3 Eligible
$700M Public Float OR Offered $1B in Non-Convertible Securities over last 3 years |
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Term
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Definition
Reporting Company
S-3 Eligible |
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Term
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Definition
Reporting Company
Not S-3 Eligible |
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Term
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Definition
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Term
| Shelf Registration - Types of Securities |
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Definition
- Issued upon conversion
- Issued upon exercise of right/option
- Issued in Business Combination Transaction
- Use Form S-3 |
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Term
| Gun Jumping during Pre-Filing Period |
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Definition
Seasoned/Unseasoned/Non-Reporting:
- No Offers
- No Sales
WKSI's
- Offers:
Rule 163 exempts WKSI's from 5(c)
Rule 433 allows FWP w/o Prospectus
- No Sales |
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Term
| Gun Jumping during Waiting Period |
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Definition
Unseasoned/Non-Reporting Issuers
- No Sales
- Some Offers
10(b) Prospectus
R433 allows FWP w 10(b) Prospectus
Oral Offers
Seasoned Issuers:
Above plus
FWP w/o Prospectus
WKSI
Automatically effective registration - no WP |
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Term
| Gun Jumping during Post-Effective Period |
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Definition
All Issuers:
- R172: Delivery of Certificate & Confirmation of Sale are FWP, but access = delivery for 10(a) prospectus
Unseasoned/Non-Reporting Issuers
-Must deliver 10(a) prospectus with any other FWP |
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Term
| Broker's Prospectus Delivery Exemption |
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Definition
| Unsolicited Sales do not require Delivery |
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Term
| Dealer's Prospectus Delivery Exemption |
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Definition
Dealer does not have to deliver unless still acting as an underwriter. 4(3)
No longer an underwriter if:
Allotment sold and -
- Reporting company R174, OR
- Non-Reporting, Publicly traded company and 25 days since effective date R174
- Non-Reporting, not publicly traded company and 90 days have passed 4(3) |
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Term
| §3(a)(11) - Intra-State Exemption |
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Definition
| Securities Offered & Sold as part of an issue (R147 5 Factors), within a single state, to persons resident (principal residence/office), where the Issuer is incorporated and doing business (Triple 80% in state - Revenues, Assets, Use of Proceeds), are exempt from §5 requirements |
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Term
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Definition
| Ralston Purina Test: 1. Information - Effective Access, or - Actual Disclosure 2. Sophistication - Factors: Career, Education, Investment history & knowledge, wealth, age, use of investment advisors, etc. |
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Term
| Regulation D - Limited Offering Exemptions |
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Definition
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Term
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Definition
➢ Financial Institutions
➢ Venture Capital Firms
➢ Corporations with Assets Exceeding $5M
➢ Insiders of Issuer (i.e. CEO, Board of Directors, etc.)
➢ Wealthy Individuals
• Net worth exceeding $1M, or
• Individual with income in excess of $200K per year, or spouse with income in excess of $300K per year, for preceding 2 years and reasonably expected in current year |
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Term
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Definition
Covered Securities issued during or 12 months prior may be aggregated.
Covered Securities: §3(b) & violations of §5 |
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Term
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Definition
Multiple Offerings issued close in time by the same issuer may be integrated.
Rule 147 5 Factor Test
6-Month Safe harbor |
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Term
| Blue Sky Laws - Preemption |
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Definition
§18 Preempts State Law & exempts covered securities from state law registration requirements
• Covered Securities:
• Nationally Traded Securities (i.e. on NYSE)
• Securities Offered by Investment Companies (i.e. Mutual Funds)
• Securities Sold to Qualified Purchasers (not yet defined by SEC)
• Securities Offered Pursuant to Listed Exemption [4(2)] |
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Term
| Blue Sky Laws - State Exemptions |
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Definition
Uniform Limited Offering Exemption
• Similar to Reg D, but some states have additional requirements
Other Typical Exemptions
• Marketplace exemption
• Limited # of purchasers
• Accredited/institutional investor exemptions |
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Term
| Blue Sky Laws - Registration |
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Definition
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Term
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Definition
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Any Person who has purchased from an issuer with a view to distribute -
View - Investment Intent
Distribute - Blows Issuer's Exemption
Offers or sells for an issuer in connection with a distribution;
Issuer = Control Person
Broker may be Underwriter |
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Term
| Resales - Rule 144 Safe harbor |
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Definition
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Term
| Resales - Rule 144 Restricted Securities |
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Definition
Restricted: Issued pursuant to 4(2), Reg D, 144A, Reg S, etc.
Non-Restricted: Issued pursuant to registration statement or 3(a)(11) |
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Term
| Resales - Rule 144A Safe harbor |
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Definition
Where a non-publicly traded security is resold by a non-issuer/dealer, to a QIB ($100M invested in securities)
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Term
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Definition
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Exempts Trading Transactions: §5 shall not apply to ‘transactions by any person other than an issuer, underwriter or dealer’ |
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Term
| Resales - 4(1.5) Exemption |
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Definition
Exempts Brokers from being underwriters for control persons if purchaser meets Ralston-Purina
Broker underwriter if not a distribution;
A distribution is a public offering;
Not a public offering if a private placement
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Term
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Definition
Every contract for sale and disposition of a security for value
'For Value' does not include:
Right/Privilege to convert in the future
Stock Dividend
Gift |
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