J11 MGT 401 Securities Regulation

J11 MGT 401 Securities Regulation - SecuritiesRegulation...

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Securities Regulation MGT 401 Prof. Salzman
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Federal Statutes Securities Act of 1933  (Securities Act or  ‘33 Act) – registration and initial sales  ( primary offerings ) of securities Securities Exchange Act of 1934  (Exchange Act or ‘34 Act) – created the  Securities & Exchange Commission  (SEC); regulation of exchanges; periodic  reporting; insider trading Sarbanes-Oxley Act of 2002 (SOX)  –  corporate governance 2
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State Securities Laws Known as “Blue Sky” Laws National Securities Markets Improvement  Act of 1996 (NSMIA) Disclosure vs. Merit Review Coordination State Exemptions 3
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Securities & Exchange Commission  (SEC) 1. requires  disclosure  of facts concerning offerings  of securities to the public; 2. regulates  trading  in securities on national and  regional securities exchanges and in the over- the-counter (“OTC”) markets; 3. investigates securities  fraud ; 4. registers and regulates the activities of securities  brokers dealers , and  investment advisers ; 5. issues  rules releases  and  no action letters and 6. recommends administrative  sanctions injunctions , and  criminal prosecution  for  violations of federal securities laws. 4
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What is a “security”? [A]ny 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. From the Securities Act of 1933, Section  2(1). 5
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What is a “security”? (cont.) Investment Contract:  Any transaction in  which a person 1.invests 2.in a  common enterprise , 3.reasonably expecting  to earn a profit 4.primarily or substantially from the managerial or entrepreneurial  efforts of  others . 6
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What is a “security”? (cont.) Does  not  include a general partner’s  interest in a general or limited partnership,  or an interest in a limited liability  partnership. Why not? Other interests: - Limited partner’s interest in an LP? - Member’s interest in an LLC? 7
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Registration Required by Section 5 of the Securities  Act of 1933 unless an  exemption  applies Security must be  registered  before it is  offered for sale to the public either through  the mails or other facility of interstate  commerce, including stock exchanges Registration via a  Registration Statement Investors receive a  Prospectus 8
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Registration (cont.)  Securities Act of 1933 - Regulates Primary 
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J11 MGT 401 Securities Regulation - SecuritiesRegulation...

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