© 2004 west legal studies in business, a division of thomson learning 19.1 chapter 19 securities...
TRANSCRIPT
© 2004 West Legal Studies in Business, a Division of Thomson Learning
19.1
Chapter 19Chapter 19
Securities RegulationSecurities Regulation
19.2
Federal Securities LawsFederal Securities Laws
The Securities Act of 1933The Securities Act of 1933
The Securities Exchange Act of 1934 The Securities Exchange Act of 1934
The Public Utility Holding Company The Public Utility Holding Company Act of 1935 Act of 1935
The Trust Indenture Act of 1939 The Trust Indenture Act of 1939
The Investment Company Act of The Investment Company Act of 1940 1940
The Investment Advisers Act of The Investment Advisers Act of 19401940
19.3
Federal Securities LawsFederal Securities Laws
Williams Act of 1968 Williams Act of 1968
Securities Investor Protection Act Securities Investor Protection Act of 1970 of 1970
Foreign Corrupt Practices Act of Foreign Corrupt Practices Act of 1977 1977
Insider Trading Sanctions Act of Insider Trading Sanctions Act of 19841984
The Private Securities Litigation The Private Securities Litigation Reform Act of 1995 Reform Act of 1995
Sarbanes-0xley Act of 2002 Sarbanes-0xley Act of 2002
19.4
Definition of a SecurityDefinition of a Security
Definition set forth in the Definition set forth in the Securities Act of 1933Securities Act of 1933
Substance, not formSubstance, not form
Howey Case definitionHowey Case definition
Changing philosophy Changing philosophy regarding securities regarding securities protectionprotection
19.5
Process of Process of Registering SecuritiesRegistering SecuritiesRegistration statementRegistration statement
ProspectusProspectus
Prefiling periodPrefiling period
Waiting periodWaiting period
Tombstone adTombstone ad
Red herring prospectusRed herring prospectus
Posteffective periodPosteffective period
Shelf registrationShelf registration
19.6
Exemptions from Exemptions from the Securities Actthe Securities Act
Two typesTwo types
Exempt securitiesExempt securities
Exempt transactionExempt transaction
Exemption tradeoffsExemption tradeoffs
Costly to businessesCostly to businesses
Lower investor protectionLower investor protection
19.7
Exempt Transactions Exempt Transactions Under the Securities ActUnder the Securities ActSecondary tradingSecondary trading
Private placementPrivate placement
Intrastate offeringsIntrastate offerings
Regulation ARegulation A
Regulation DRegulation D
Rules 501 through 506Rules 501 through 506
Section 4(6)Section 4(6)
19.8
Exempt Securities Under Exempt Securities Under the Securities Actthe Securities Act
Those issued/guaranteed by Those issued/guaranteed by federal, state, or municipal federal, state, or municipal governmentsgovernments
Commercial paperCommercial paper
Bank, religious/charitable Bank, religious/charitable organizations, savings and loan organizations, savings and loan securitiessecurities
Bankruptcy certificatesBankruptcy certificates
Annuity contractsAnnuity contracts
Insurance policiesInsurance policies
19.9
Civil Liability UnderCivil Liability Underthe Securities Actthe Securities Act
Section 11 claimsSection 11 claims
Section 11 defendantsSection 11 defendants
Extent of liability and recent Extent of liability and recent changeschanges
Defenses to Section 11Defenses to Section 11
Due diligence, immateriality, Due diligence, immateriality, purchaser knowledge, no purchaser knowledge, no reliance, statute of limitation, reliance, statute of limitation, and other causes of damageand other causes of damage
19.10
Purposes of the Purposes of the SEA of 1934SEA of 1934
Regulate securities marketsRegulate securities markets
Regulate securities traded in Regulate securities traded in those marketsthose markets
Register and regulate those Register and regulate those who trade in securities marketswho trade in securities markets
Regulate publicly held Regulate publicly held companiescompanies
Require public disclosure Require public disclosure
19.11
Main Provisions Main Provisions of the SEA of 1934of the SEA of 1934
Creation of the SECCreation of the SEC
Registration requirementsRegistration requirements
Reporting requirementsReporting requirements
Proxy solicitation rulesProxy solicitation rules
Regulation of credit in marketsRegulation of credit in markets
Antifraud provisionsAntifraud provisions
Insider trading infoInsider trading info
Tender offer limitsTender offer limits
19.12
SEA Registration SEA Registration Requirements Requirements
Securities registrationSecurities registration
Reporting requirementsReporting requirements
10-K: annual report of 10-K: annual report of operations, must be audited by operations, must be audited by independent auditorsindependent auditors
10-Q: quarterly, unaudited 10-Q: quarterly, unaudited report of operationsreport of operations
8-K: current report8-K: current report
19.13
Short-Swing ProfitsShort-Swing Profits
Insiders (officers, directors, Insiders (officers, directors, major stockholders)major stockholders)
Section 16(b)Section 16(b)
Insider reportsInsider reports
ExceptionsExceptions
Straw people Straw people
19.14
Section 10(b) and Section 10(b) and Rule 10b-5Rule 10b-5
Aimed at preventing fraud in Aimed at preventing fraud in securities tradingsecurities trading
Can stop profit taking by Can stop profit taking by insiders who have inside insiders who have inside informationinformation
Rule 10b-5Rule 10b-5
Applies to all securitiesApplies to all securities
Makes illegal any act or untrue Makes illegal any act or untrue statement to defraudstatement to defraud
19.15
Insider TradingInsider TradingSanctions ActSanctions Act
Civil penaltiesCivil penalties
Triple damages Triple damages
Criminal penaltiesCriminal penalties
Stock optionsStock options
Aiders and abettorsAiders and abettors
Statute of limitationsStatute of limitations
No definitionNo definition
19.16
Takeover Bids Takeover Bids (Tender Offers)(Tender Offers)
DefinitionsDefinitions
When someone offers to buy stock at When someone offers to buy stock at a set pricea set price
Federal regulationFederal regulation
Purpose of regulating tender Purpose of regulating tender offersoffers
To prevent golden parachutesTo prevent golden parachutes
To help target shareholders get To help target shareholders get facts from both sidesfacts from both sides
MisstatementsMisstatements
19.17
Foreign CorruptForeign CorruptPractices ActPractices Act
Internal reportingInternal reporting
Section 102Section 102
Section 103Section 103
Section 104Section 104
PenaltiesPenalties
Federal felonies for convictionsFederal felonies for convictions
19.18
State Securities State Securities Regulation Regulation
Individual states have police Individual states have police power to regulate securitiespower to regulate securities
Blue-sky lawsBlue-sky laws
State regulation unevenState regulation uneven
Sarbanes-Oxley ActSarbanes-Oxley Act
19.19
Recap – Terms to KnowRecap – Terms to Know
Securities Act of 1933Securities Act of 1933
Securities Exchange Act of 1934Securities Exchange Act of 1934
Registration statementRegistration statement
ProspectusProspectus
Prefilling, waiting, and posteffective Prefilling, waiting, and posteffective periodsperiods
Exemptions and exempt transactionsExemptions and exempt transactions
Securities and Exchange CommissionSecurities and Exchange Commission
Short-swing profitsShort-swing profits