LEGL - Ch. 15 (Part I) - Securities Regulation Securities...

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Unformatted text preview: Securities Regulation Securities Regulation Chapter Fifteen Securities Regulation Securities Regulation Enron: The Smartest Guys in the Room Securities Regulation Securities Regulation What is a security? Any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit­sharing agreement, collateral­trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting­trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, 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. Securities Regulation Securities Regulation What is a security? Three relevant questions: Is the investment in a common business activity? Is the investment based on a reasonable expectation of profits? Will these profits be earned through the efforts of someone other than the investor? If yes to all three, then a security exists Securities Regulation Securities Regulation Securities and Exchange Commission (SEC) Responsible for administering federal securities laws Possesses both quasi­legislative and quasi­judicial powers Securities Regulation Securities Regulation Securities Act of 1933 Parties regulated – Anyone involved with or promoting the initial sale of securities Typically parties serve in one of four roles: Issuer Underwriter Controlling person Seller Securities Regulation Securities Regulation Securities Act of 1933 Required Documentation: Registration Statement Prospectus Securities Regulation Securities Regulation Securities Act of 1933 Liability Criminal Individuals – Fines up to $5,000,000 and/or 20 years in jail Corporations – Fines up to $25,000,000 Civil Outlaws fraud in both the registration statement and prospectus, as well as in any other statements relating to the initial sale of a security Securities Regulation Securities Regulation Securities Act of 1933 Defenses to Civil Liability Lack of Materiality Statute of Limitations Due Diligence Securities Regulation Securities Regulation Securities Exchange Act of 1934 Forbids the reselling of a security on a national exchange without an effective registration Securities Regulation Securities Regulation Securities Exchange Act of 1934 Section 10(b) and Rule 10b­5 Forbid fraud in connection with the resale of, or reporting relating to, any security Both criminal and civil liability Securities Regulation Securities Regulation Securities Exchange Act of 1934 Insider Transactions Insider = Owner of more than 10% of any security, a director, or an officer of the issuer of a security Securities Regulation Securities Regulation Securities Exchange Act of 1934 Nonpublic Information Employees of a company may not use inside, non­ public information to achieve profits in stock transactions Securities Regulation Securities Regulation Sarbanes­Oxley Act of 2002 Revitalization of the SEC Accounting Reforms Corporate Governance Financial Statements and Controls Securities Fraud ...
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This note was uploaded on 09/21/2011 for the course LEGL 2700 taught by Professor Reed during the Spring '07 term at University of Georgia Athens.

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