o Privately negotiated sales of securities to large institutional investors and

O privately negotiated sales of securities to large

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o Privately negotiated sales of securities to large institutional investors and the promotion of business ventures by a few closely related persons o Sellers may not engage in general advertising, but may raise money through an unlimited amount of accredited investors and no more than 35 unaccredited investors Accredited investors = millionaires, individuals making $200k+, couples making $300k+, and banks/pension funds Small Offerings o Exempt if SEC finds “registration is not necessary in public interest and for protection of investors by reason of the small amount involved or limited character of public offering” Up to $5 mil in a 12 month period No need for accredited investors o Tier 1 = $20 mil in 12 months, no investor qualifications o Tier 2 = $50 mil in 12 months, but unaccredited investors may not buy more than 10% of their income or net worth o Regulation crowdfunding = $1 mil in 12 months, but a single investor cannot invest greater than $2k or 5% of income or net worth if both are less than 100k, 10% of annual income not to exceed 100k if investors annual income is more than 100k Intrastate Offerings Excemption o No SEC registration if company only sells securities in only that state o Must get 80% of revenue, 80% of assets located in state, uses 80% of the proceeds of the offering in Texas or majority of employees are located in Texas SEC powers o Refusal order = if SEC believes that registration statement is incomplete or inaccurate they may prevent statement from becoming effective until they are satisfied o Stop order = if SEC discovers inaccuracies after effective date they may suspend effectiveness of statement to investigate Private suit o May file a civil action if: Any part of registration statement which became effective, contained an untrue statement of a material fact or omitted to state a material fact 37
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required to be stated or necessary to make the state not misleading to any person acquiring the security o Defendants can be: Any person that signed registration statement Every person who was a director or about to become one Every accountant Every appraiser or expert who helped prepare statement Every underwriter o If P proves statement contained false statements then burden of proff shifts to D to prove other factors other than inaccuracies were cause of P’s losses o P doesn’t have to prove fraudulent intent o P must trace their shares to false registration statement Insider Trading o Must submit monthly reports showing when a director or officer takes office or when a stockholder first obtains 10% holding o Any insider (as stated above) who buys shares and sells any of them within 6 months is liable to forfeit any profit o Strict liablity under Section 16b on only time not intent or anything else o Unlawful to use any manipulative or deceptive device in contradiction of rules and regulations the SEC may dictate Requires proof of actual insider info to establish violation, info must be nonpublic Punishment of Insider Trading o
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