Securities Regulation Powerpoint with 10b-5 update may 2010

Securities Regulation Powerpoint with 10b-5 update may 2010...

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Regulation of the Securities Markets Prepared by: Profs. Maria DiMeo Calvelli and Sandra J. Mullings October 2009
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Securities Market Regulation The Securities Act of 1933 and Securities Exchange Act of 1934 are designed to protect investors from deceptive, unfair and manipulative practices when buying or selling securities .
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3 What is Security? Securities are instruments such as corporate stock or limited partnership interests that evidence ownership or debt. In SEC v. Howey (1946), the U.S. Supreme Court held that a security exists in any transaction in which a person: (1) invests (2) in a common enterprise (3) reasonably expecting profits (4) derived primarily from others’ managerial or entrepreneurial efforts.
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Securities Market Regulation Section 5 of the Securities Act of 1933 prohibits the offer or sale of any security to the public prior to its registration with the Securities Exchange Commission ( http://www.sec.gov ) and state securities agencies……. . unless the security or the offer or sale is subject to an exemption. Corporation must file a registration statement and prospectus with the SEC. The Prospectus is later distributed to investors.
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Securities Market Regulation The Registration Statement The Registration Statement must describe: The securities being offered for sale, including their relationship to the registrant’s other capital securities. The registrant’s properties and business. The management of the registrant, remuneration, pension, stock offerings, executive interests and compensation. How the corporation intends to use the proceeds of the sale. Description of pending lawsuits or special risk factors
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Securities Market Regulation Registration Statement Registration statement does not become effective until after review and approval by SEC. Actual sales are prohibited prior to this approval.
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EXEMPTIONS
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Exempt Transactions Regulation A, small offering up to $5 million in a 12 month period to “test the waters”; but requires a circular. Small “Reg D” Offerings Rule 504: up to $1M during 12 months to accredited investors only . Rule 504a. Rule 505: up to $5M during 12 months to both accredited and unaccredited investors. Section 4(6): up to $5M solely to accredited investors.
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and Markets Private Offer and sales of securities made pursuant to an exemption from Section 5 of the Securities Act of 1933 = private placement transaction These securities are unregistered
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Securities Regulation Powerpoint with 10b-5 update may 2010...

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