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West's Business Law with Online Research Guide, 9th Edition

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SECURITIES AND EXCHANGE COMMISSION Securities and Exchange Commission (SEC): An independent regulatory agency, created by the Securities Exchange Act of 1934, and empowered to enforce the various federal securities laws and to promulgate regulations to aid in their enforcement. Basic Functions of the SEC: (1) requiring disclosure of facts concerning offerings of securities to the public; (2) regulating the trade in securities on national and regional securities exchanges and in the over-the- counter (“OTC”) markets; (3) investigating securities fraud ; (4) registering and regulating the activities of securities brokers , dealers , and investment advisers ; (5) supervising mutual funds ; and (6) recommending administrative sanctions , injunctions , and criminal prosecution for violations of federal securities laws. Ch. 40: Investor Protection and Online Securities Offerings - No. 1 West’s Business Law (9th ed.)
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SARBANES-OXLEY The most significant statutory change to the federal securities regulatory regime was the passage in 2002 of the Sarbanes-Oxley Act, a far-reaching attempt to increase corporate accountability – and, in turn, restore investor confidence shaken by a series of major scandals – by imposing stricter disclosure requirements and harsher penalties for violations of federal securities law. For example: Chief corporate executives are now personally responsible for the accuracy of financial statements and reports filed with the SEC; Certain financial and stock transaction reports must be filed with the SEC earlier than before; The Act created the Public Company Accounting Oversight Board to regulate public accounting firms. Ch. 40: Investor Protection and Online Securities Offerings - No. 2 West’s Business Law (9th ed.)
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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: Any transaction in which a person (1) invests (by purchasing stock, a bond, or other security) (2) in a common enterprise , (3) from which she reasonably expects to earn profits Ch. 40: Investor Protection and Online Securities Offerings - No. 3 West’s Business Law (9th ed.)
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(4) primarily or substantially as a result of the managerial or entrepreneurial efforts of others . Ch. 40: Investor Protection and Online Securities Offerings - No. 4 West’s Business Law (9th ed.)
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REGISTRATION Section 5 of the Securities Act requires that, subject to certain exemptions , a security must be registered before it is offered for sale to the public either through the mails or
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