Chapter_21a_Notes

Chapter_21a_Notes - DEFINING SECURITY Both the Securities...

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DEFINING “SECURITY” Both the Securities Act of 1933 and the Securities Exchange Act of 1934 define a “security” as: any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, … investment contract , … option, … or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. Investment Contract: A transaction in which a person (1) invests (by purchasing stock, a bond, or other security) in, or otherwise contributes capital to, (2) a common enterprise (3) from which she reasonably expects to earn profits Ch. 21: Investor Protection, Insider Trading, and Corporate Governance - No. 1 Business Law Today: The Essentials (9th ed.)
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(4) primarily or substantially as a result of someone else’s managerial or entrepreneurial efforts . Ch. 21: Investor Protection, Insider Trading, and Corporate Governance - No. 2 Business Law Today: The Essentials (9th ed.)
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REGISTRATION Subject to certain exemptions, an issuer or its agent must register any security before offering it for public sale and must provide all potential investors a prospectus describing the security, the issuer, and any risks associated with investing in the security. The issuer of a nonexempt security – unless the issuing transaction itself is exempt – must file with the Securities and Exchange Commission (SEC) a registration statement , which must describe (1) the security’s significant characteristics, including its relationship to the issuer’s other outstanding securities , and how the issuer intends to use the proceeds from the sale of the offered security, (2) the issuer’s properties and business activities (including a financial statement certified by an independent accounting firm), (3) the issuer’s directors and officers , their compensation, securities holdings, and other benefits, and any interest in any material transactions, and (4) any pending lawsuits or other special risk factors. Ch. 21: Investor Protection, Insider Trading, and Corporate Governance - No. 3 Business Law Today: The Essentials (9th ed.)
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REGISTRATION PROCESS The 1933 Securities Act restricts an issuer’s activities until the SEC has approved the registration statement. Prefiling (a.k.a. “Quiet”) Period: Before the issuer files its registration statement, neither it nor anyone acting on its behalf can advertise, offer to sell, or sell any securities that will be the subject of the as-yet unfiled registration statement. Postfiling
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This note was uploaded on 12/12/2010 for the course BUS 86595 taught by Professor Lou during the Spring '09 term at West Valley.

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Chapter_21a_Notes - DEFINING SECURITY Both the Securities...

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