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Business Law 302 Exam 2 > Securities Regulations > Flashcards

Flashcards in Securities Regulations Deck (23)
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1
Q

What are the two types of securities?

A
  • New securities (IPO, new securities)

- buy/sell on stock exchange

2
Q

Are securities governed by the federal or state law?

A

Regulated, but we only discuss the federal level (state law varies by state)

3
Q

What is the definition of a security?

A

Includes any note, stock, bond, pre-organization subscription, or investment contract

4
Q

What is the story of Howey and the pig/cow of real estate?

A

Howey sold you an orchard and leased it back, said he would only pay you if there was a good harvest. There was a bad harvest and he didn’t pay.
Howey made a pig look like a cow; he sold you a security, not real estate.
Since it’s a security, you get a recission.

5
Q

What do you have to disclose when you register?

A

All accurate material information, describe company

6
Q

What is integrated disclosure?

A

Permits simplified filings and shelf registration (gives opportunity to sell at different times)

7
Q

When can you make sales of securities?

A

Before registration - can’t make offers or sales
After reg, before effective - advertise, no sales
After effective - Make sales

8
Q

What are types of exempt securities and why?

A
  • Short term commercial paper, municipal bonds, insurance policies, annuity contracts.
    Why? Because they’re regulated in other ways
9
Q

What is Rule 147?

A

If 80% business is in state and none outside, don’t need to register in other states

10
Q

What defines an accredited investor?

A

Wealthy (re unregulated.

11
Q

What are key factors for exempt transactions (issuers)?

A
  • no general advertising
  • amount of securities - the higher the more likely that registration is necessary
  • number of investors - key numbers are 15 and 35
12
Q

What is Country-wide?

A

A non-bank bank that sold mortgages and it was a scam

13
Q

What are exempt transactions for non-issuers?

A

Resale by persons other than issuers that are exempt.

14
Q

What is the liability for unregistered sales?

A

No defenses, but defendants OTHER than the issuer company can use the defense of due diligence “I did my best”

15
Q

What is the Anti-fraud Provision for securities?

A

Any time a security is sold, seller must be honest to the buyer and disclose information independent of registration.

16
Q

Do exempt securities have unrestricted resales?

A

YES, but only IN STATE

17
Q

Do exempt transactions have unrestricted resales?

A

NO, THEY ARE RESTRICTED

18
Q

What must registered securities do?

A
  • They must register and periodically report
  • Must comply with SOX
  • Must comply with anti-fraud provisions (federal law)
19
Q

What is insider trading?

A

Can’t buy/sellf securities when you have material, undisclosed information (doesn’t matter if you’re an “insider” or related party

20
Q

What are short swing profits? How do you avoid them?

A
  • Imposes liability on certain insiders owning more than 10% of stock for all profits made on sales and purchases within six months of each other, with any recovery going to the issuer.
  • To avoid, must liquidate on a regular basis, independent of good/bad news.
  • Imposes liabilities on owners who sell stock based on info they know
21
Q

What is a proxy?

A

Authorizing someone to vote your stock, but you must tell why

22
Q

What is a tender offer?

A

A general invitation to shareholders to purchase their shares at a specific price for a specific time. This is material information and must be disclosed

23
Q

What is the Foreign Corrupt Practices Act?

A

prohibits making payments to foreign officials to obtain business.