Term
| Case that defined an investment contract |
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Definition
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Term
| Investment Contract defined as a security if it meets 4 conditions: |
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Definition
1. Investment of Money
2. In a common enterprise (pooling)
3. With an expectation of profits
4. Results solely from the efforts of others |
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Term
| Security is any of the following: |
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Definition
| Stock, bond, debenture, right, warrant, note, put option, call option, other options, limited partnership interests, certificate of interest in profit sharing arrangement |
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Term
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Definition
| broadly defined as an individual, a corporation, a partnership, an association, joint stock company, trust, any unincorporated organization, or gov't or political subdivision thereof. |
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Term
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Definition
| contract for sale or the disposition of a security for value |
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Term
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Definition
| any attempt or offer to dispose of a security or an interest in a security for value or a solicitation of an offer to buy a security for value |
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Term
| Exempt securities under the Securities Act of 1933 |
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Definition
1. Federal gov't issues
2. Municipal securities
3. Commercial paper < 9 months to maturity
4. Any security of a non-profit
5. Interest in railroad equipment trust
6. Security issued by federal or state bank, savings or loan association, building and loan association, etc.
7. Rule 147 |
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Term
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Definition
- Exempt under Securities Act of 1933
- NOT exempt under Uniform Sec. Act
- Likely have to register w/state
- Offered and sold exclusively to residents of a single state
- If sold to non-state residents, no longer exempt |
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Term
| Conditions to have an interstate offering exempt from federal registration (Rule 147) |
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Definition
- offered or sold exclusively to state residents
- 9 months from last sale by issuer to only sell to state residents
- >= 80% gross rev comes from ops in state
- >= 80% proceeds used for business purposes within the state
- >= 80% assets located w/in state |
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Term
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Definition
Applies to rule 147... at least 80%...
Gross revenues are from ops in state
Proceeds used for business in state
Assets located within the state |
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Term
| Exempt transactions under Securities Act of 1933 |
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Definition
- transactions by anyone other than an issuer, underwriter, or dealer
- transactions by an issuer that don't involve a public offering (private placement under Reg. D) |
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Term
| Registration statement must be signed by... |
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Definition
Principal Executive Officer (CEO)
Principal Financial Officer (CFO)
Majority of Board of Directors |
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Term
| Registration statement to include |
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Definition
- purpose of issue
- public offering price range
- underwriter's commissions or discounts
- promotion expenses
- expected use of net proceeds
- balance sheet
- earnings statements for the last 3 yr
- names, addresses, bios for officers, directors, underwriters, and control persons
- copy of underwriting agreements
- copy of articles of incorporation |
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Term
| Three Phases of an Underwriting |
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Definition
1. Issuer files registration w/SEC
2. Cooling-off period of at least 20 days
3. Effective date - offering period may begin |
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Term
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Definition
All underwriting stops
Can be issued after effective date
SEC can subpoena records to determine if a stop order is necessary |
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Term
| Preliminary Prospectus (Red Herring) |
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Definition
Made available to prospective purchaser
Acquaints investors w/new issue
States expected number of shares and estimate of price range per share
Doesn't include offering price of effective date |
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Term
| During Cooling-Off Period, underwriters cannot... |
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Definition
| Make offers to sell securities, take orders or distribute sales or advertising materials |
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Term
| During the cooling-off period, underwriters CAN... |
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Definition
take indications of interest
distribute preliminary prospectuses
publish tombstone ads |
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Term
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Definition
Summarizes info in registration stmt
Given to purchases no later than confirmation of sale
Provide adequate info to analyze investment merits of securities |
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Term
| Rule 482 (Omitting) Prospectus |
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Definition
Describes mutual fund ads
Meet conditions:
- info in ad mostly from prospectus
- state conspicuously from whom a prospectus may be obtained
- urge investors to read prospectus
- past performance data accompanied by disclaimers and disclosures
- ad cannot be used to purchase shares; purchase may be made only via an application found in prospectus |
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Term
| Sales literature distribute on or after the effective date |
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Definition
| Must be preceded or accompanied by a prospectus |
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Term
| When underwriters pay for publication of any description of securities other than a tombstone ad... |
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Definition
| Publisher discloses payment that was made and the amount of said payment |
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Term
| A purchaser of a security who's registration statement contains a false statement of a material fact or omission of a material fact can SUE... |
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Definition
- every person who signed the registration form
- all directors of the issuer
- attorneys
- accountants
- appraisers or other experts
- underwriters
- parent companies |
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Term
| Statute of Limitations on misstatement in Registration Statement |
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Definition
| Earlier of 1 year after discovery of violation or 3 years after date of action |
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Term
| Found guilty in court for false or misleading statements in registration statement |
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Definition
- substantial fine
- barred from serving as officer or director of public corporation for a time period
- if criminal charges, it could be a fine and/or prison term |
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Term
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Definition
Exemption for offers and sales to no more than 35 purchasers
Accredited investors do not count toward the limit
Sophisticated investors represented by accountant, lawyer, or financial adviser can participate
Law prohibits general solicitation and advertising |
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Term
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Definition
| Classifies an accredited investor for purposes of Regulation D into separate categories |
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Term
| Under SEC Rule 501 and investor is considered accredited if included in one of the following... |
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Definition
- bank, insurance company, registered investment company
- an employee benefit plan if one of the above makes investment decisions or if the plan assets are > 5 million
- charitable org, corp, or partnership w/assets > 5 million
- natural person or couple w/net worth (net of primary residence) is >$1 million
- natural person with income > 200k in the two most recent years or 300K for a couple
- entities made up of accredited investors |
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Term
| Favorite phrase of the regulators |
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Definition
| "eligibility does not equal suitability" |
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Term
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Definition
Filed w/SEC by issuer that is issuing securities in reliance on Regulation D.
Filed no later than 15 days after the first sale of securities in offering |
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Term
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Definition
total size of offering
amount sold to date
use of proceeds
names of any persons paid commissions |
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Term
| Jumpstart Our Business Startups Act of 2012 (JOBS Act) |
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Definition
Changed regulation D in Sept. 2013
Section 506(c) permits ads on private placements |
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Term
| 506(c) of Regulation D's JOBS Act |
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Definition
To advertise private placement...
1. all purchasers are accredited investors
2. issuer verifies that all purchasers are accredited investors |
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Term
| An offering under Rule 506 may not take place if... |
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Definition
the issuer or relevant persons (underwriters, directors, officers, or significant shareholders) have been convicted of securities fraud or certain other securities violations
"bad actor" "bad dog" |
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Term
| Form D filing for offerings under 506(c) |
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Definition
| Filed 15 days PRIOR to first sale for 506(c) offerings |
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Term
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Definition
unregistered securities purchased by investor in private placement
aka "Letter securities" or "legend securities"
purchasers sign investment letter attesting to understanding restriction upon resale and to the legend placed on the certificates indicating restriction upon resale |
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Term
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Definition
| Corporate director, officer, greater than 10% voting stockholder, or spouse of any of the preceding |
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Term
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Definition
| stock held by control person |
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Term
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Definition
| investor who is not a control person and has no other affiliation with the issuer other than as an owner of securities |
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Term
| SEC Rule 144 (Sale of Restricted & Controlled Securities) |
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Definition
Certain resales of already existing securities could be made without filing complete registration statement w/SEC.
time and money involved in having to file such a registration so prohibitive so that the seller finds it uneconomical |
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Term
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Definition
1 chairman (appointed by president)
4 others
administers all federal laws regulating securities industry except regulating extension of credit
commissioners appointed for 5 yr terms
no more than 3/5 of commissioners from the same party
Commissioners can not engage in personal securities transactions other than US gov't issues. All existing securities in blind trust. |
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Term
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Definition
| person engaged in business of effecting transactions in securities for accounts of others (doesn't include banks!) |
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Term
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Definition
| buys and sells regularly for his own account |
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Term
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Definition
| partner, officer, or director of the broker/dealer OR any person directly or indirectly controlling or controlled by the BD (includes employee) |
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Term
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Definition
| dealer who holds him/herself responsible to buy and sell a particular security for his own account and on a regular basis |
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Term
| securities information processor |
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Definition
any person engaged in the business of:
- collecting, processing, or preparing for distribution or publication information w/respect to transactions in or quotes for nonexempt securities
- distributing or publishing on a current and continuing basis info w/respect to the above |
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Term
| Examples of Securities Info Processors |
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Definition
- Consolidated ticker tape
- OPRA (Options Price Reporting Authority)
- SIAC (Securities Industry Automation Corp)
- OTC Market Group Inc. (Owners of OTC link, aka Pink Sheets) |
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Term
| Securities Exchange Act of 1934 prohibits |
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Definition
the use of credit to purchase new issues
simultaneous purchase and sale of a security to create the appearance of trading
the spread of false rumors to induce others to trade |
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Term
| Cause for statutory disqualification from association with a FINRA member B/D... |
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Definition
- administrative sanctions
- findings of criminal wrongdoing
- court injunctions |
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Term
| the power to regulate margin requirements belongs to... |
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Definition
| The Board of Governors of the Federal Reserve System |
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Term
| Sale of stock of a state bank is exempt from |
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Definition
Prospectus requirements
Registration requirements |
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Term
| Responsible for administration of the Bank Secrecy Act |
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Definition
| The Financial Crimes Enforcement Network (FinCEN) |
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Term
| Required to file a Form 13F |
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Definition
| Institutional money manager, w/at least $100 million in 13(f) securities under discretionary management |
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Term
| Length and renewal of initial contract between funds and their advisers |
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Definition
| 2 years for the initial contract; renewed annually |
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Term
| Contracts between funds and their advisers may not be terminated with more than... |
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Definition
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Term
| A vote of majority of outstanding shares of an investment company may approve... |
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Definition
Borrowing money from a bank
Changing the investment objectives of the fund
Decide to no long be an investment company |
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Term
| SEC may investigate any situation it believes may have violated... |
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Definition
Federal Securities Laws
Its own rules
Rules of the SROs |
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Term
| SEC may suspend trading on an exchange... |
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Definition
| Only with prior notification to the President of the US |
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