THATS THPROPOSED 506C WHICH HAS NOT BEEN ADOPTED YET 793 PROPOSED 506C SAYS IF

Thats thproposed 506c which has not been adopted yet

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CONGRESS DIRECTED SEC TO AMEND 506 TO ALLOW GENERAL SOLICITATION. THAT’S THE PROPOSED 506(C) WHICH HAS NOT BEEN ADOPTED YET................................................................................................793.PROPOSED 506(C) SAYS IF YOU WANT TO GENERALLY SOLICIT, THERE IS A SPECIAL RULE THAT TELLS YOU CAN ONLY SELL TO ACCREDITED INVESTORS AND YOU MUST AFFIRMATIVELY VET/ENSURE THAT INVESTORS REALLY ARE ACCREDITED. THE 35 UNACCREDITED ALLOWED UNDER REGULAR 506 ARE ELIMINATED.................................................................................................................................................................................79F.SECTION 12 OF ‘34 ACT..........................................................................................................................................................................791.IT USED TO BE THAT UNDER SECTION 12 IF $10MM AND 500 SHAREHOLDERS YOU WERE REQUIRED TO BE A REPORTING COMPANY. NOW IT’S 2000 SHAREHOLDERS SO LONG AS NO MORE THAN 500 NONACCREDITED ONES IN THAT POOL. A HUGE BENEFICIARY OF THIS CHANGE WILL BE HEDGEFUNDS.79G.MISC................................................................................................................................................................................................................791.EMERGING GROWTH COMPANIES WILL HAVE DIFFERENT REPORTING S1 AND S2S AND DIFFERENT PROXY REQUIREMENTS....................................................................................................................................................................792.REMEMBER UNDER SARBOX CEO AND CFO HAD TO CERTIFY THAT INTERNAL CONTROLS WERE ADEQUATE? ON THEORY THAT ISSUERS WERE RELUCTANT TO TAKE ON THIS LIABILITY, THE REQUIREMENT WAS RELAXED FOR EMERGING GROWTH COMPANIES TO REMOVE THE ALLEGED CHILLING EFFECT. THIS UNDOES A SIGNIFICANT COMPONENT OF SARBOX............................................................793.TITLE 2 ACCESS TO CAPITAL THE JOB CREATORS........................................................................................................794.A LOT OF WHAT WE JUST TALKED ABOUT RE JOBS ACT REQUIRES SEC ACTION. IT’S A GREAT TIME TOBE A SEC LAWYER NOW B/C IT’S ALL IN FLUX........................................................................................................................79 9
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BACKGROUND I. BACKGROUND A. HISTORICAL BACKGROUND: LABOR + CAPITAL = WEALTH. 1. Merchants/Shippers a. Began to form corporations to help spread the risk. Investors bought part of ship’s inventory (stock). 2. Civil War = First Public Issuance a. SecTreas Chase financed war by asking CITIZENS for money sell war bonds capital raised by the PEOPLE. Confederacy did the same, but bonds became worthless and Southern investors lost capital plunging South into 100yr depression. 3. Industrial Revolution = Fraud a. During the industrial revolution, companies went to the public to raise money for railroads, steel mills. There began to appear fraudulent schemes – the only remedy for these schemes was the common law tort action for fraud. 4. Blue Sky Laws a. States began to enact their own securities laws, but the public soon lost faith in the securities markets, which culminated in the stock market crash. 5. Great Depression a. Need capital to jump-start the market needed investor confidence Disclosure. b. In his first 100 days, FDR rushed to enact the Securities Act of 1933, which required material disclosure and provided remedies. c. The essence of securities law is DISCLOSURE . d. If a given instrument/arrangement/thing is classified as a security, the entire weight of the securities laws is available B. THE BIG FOUR SECURITIES LAWS 1. Securities Act of 1933 (‘33 Act): a Consumer Protection Statute. a. Deals with primary/secondary offerings. b. Primary Purpose as Consumer Protection Statute: mandate disclosure to the investing public. (1) And if disclosure is inadequate, it is easier to seek damages (don’t have to prove elements of CL fraud). (2) Theory: If you tell an investor the truth about a company, the investor will make a smart, informed, full, faith decision. c. Secondary Purpose: forced disclosure to the SEC. d. Aggrieved investors have significant rights & remedies under the '33 Act. Also imposes fines &
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