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Flashcards in -Federal Securities Acts Deck (17)
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1
Q

What are the key points of the 1933 Securities Act?

A

The 1933 Securities Act does the following:

  • Governs Initial Public Offerings (not subsequent sales).
  • Covers registration statements and accompanying information filed with SEC.
  • Information must include audited financial statements & a prospectus.

Note: Even if a company is exempt from registering under the 1934 Act, they still must adhere to the anti-fraud provisions of the Act.

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2
Q

What entities are exempt from filing registration statements under the 1933 Securities Act?

A

The following entities are exempt from filing registration statements under the 1933 Securities Act:

  • Banks
  • Commercial Paper
  • Farmers
  • Co-ops
  • Charities
  • Governments

Also exempt are: Securities sold in ONE state; where investors are residents; 80% of business done in one state; and resales can’t occur within 9 months to interstate parties.

3
Q

What are the key points of the 1933 Securities Act - Regulation A?

A

An issuer can issue $50M of securities per year and be exempt if they file a notice with the SEC.

Non-issuers (AKA a private individual) can sell $1.5M per year and be exempt.

4
Q

Under the 1933 Securities Act, Regulation D; what are Rules 504 and 506?

A

Rule 504 - Max Amount per year: $5MM

Max Investors: Unlimited

Rule 506 - Max Amount per year: Unlimited

Investors must be Accredited

5
Q

What are the registration form options under the 1933 Securities Act?

A

The registration form options under the 1933 Securities Act are:

  • S-1 - Long Form or
  • S-2 and S-3 - Less Detailed and preferred by issuers
6
Q

Under the 1933 Securities Act - Regulation A, what is the exemption threshold for an issuer if they file a notice with the SEC?

A

$50MM

Non-Issuers can sell $1.5MM per year and also be exempt

7
Q

Name the securities registered under the Securities Act of 1933.

A

The following are securities registered under the Securities Act of 1933:

  • Stocks
  • Stock Options
  • Stock Warrants
  • Limited Partnership Interests - General Partnerships not allowed
  • Bonds
8
Q

Who can sue under the Securities Act of 1933?

A

Purchasers of securities only

9
Q

Name the Requirements for Accountant to be liable under the Securities Act of 1933.

A

Damages and Material Misstatements Only.

Reliance on financial statements is not a requirement unless purchased more than a year after the security is registered.

Proving negligence is not a requirement.

10
Q

Name the Defenses of an Accountant under the Securities Act of 1933.

A

Under the Securities Act of 1933, the defenses of an accountant are:

  • Accountant used Due Diligence.
  • Accountant followed GAAS.
  • Damages weren’t caused by the accountant’s work.
  • Plaintiff knew of the material misstatements.
11
Q

What does the Securities Act of 1934 govern?

A

The Securities Act of 1934 governs the trading/selling of securities after the IPO.

12
Q

What reports must be filed under the Securities Act of 1934?

A

The following reports must be filed under the Securities Act of 1934:

  • Form 10-K Annual Report - Must be audited
  • Form 10-Q Quarterly Report - Must be reviewed, but not audited
  • Form 8-K - A notice of a material event; Must be filed within four (4) days of the event
13
Q

Who can sue under the Securities Act of 1934?

A

Purchases and Sellers of Securities

14
Q

Name the Requirements for an Accountant to be liable for fraud under the Securities Act of 1934.

A
  1. Damages
  2. Material Misstatements
  3. Reliance on financial statements
  4. Scienter or reckless disregard for the truth
15
Q

What procedures must an Accountant have in place under the Securities Act of 1934?

A

The accountant must have procedures in place to:

  • Determine if Going Concern is an issue
  • Determine if any material related-party transactions occurred
  • Determine if material illegal acts occurred
16
Q

Insider trading rules under the Securities Act of 1934 apply to which individuals?

A

They apply to:

  • Officers
  • Directors and
  • 10% Owners
17
Q

What are the Proxy Solicitation Requirements under the Securities Act of 1934?

A

The proxy must give shareholders audited balance sheets from two (2) most recent years.

Requirement holds true even if one class of stock.