Final 305

The Securities Act of 1933 regulates

sales of securities by businesses to investors.

The Howey test

defines a security as a “contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of a promoter or third party.” and was established by the United States Supreme Court.

Securities include

Notes, Stocks, Bonds, Every investment contract that gives notice of an indebtedness or participation in a business for profit.

(T or F) All sellers of securities must complete certain filing requirements before the securities may be sold unless an exemption applies.

True.

An issuer of securities meets which of the following qualifications for the intrastate offering exemption

The investors must all be residents of the same state, and The issuer has 80% of its assets in the state; 80% of operating income is from the state; and 80% of the proceeds of the sale are used on operations within the state.

Accredited investors include

A director, executive officer or general partner of the issuer., A person who purchases at least $150,000 of the securities being offered, Natural persons with a net worth over $1 million, A natural person with an individual income over $200,000 within the last 2 years or $300,000 per couple.

(T or F) The SEC reviews filings and if the security is a good investment, it may be issued.

False. The SEC only looks at whether the proper information has been disclosed, not whether the security will be a good investment.

The SEC must take action within this time period or the registration will be deemed to be accepted

20 Days

(T or F) Issuers who do not submit a registration or who make a false statement on their registration statements in violation of the 1933 Act are criminally and civilly liable

True.

(T or F) Any person who signs a registration can be held personally liable for violations of the 1933 Act

True. Directors and officers are joint and severally liable.

(T or F) The Public Company Accounting Oversight Board was implemented by the Sarbanes-Oxley Act

True

(T or F) The 1934 Securities Exchange Act regulates the secondary trading of securities after the initial sale by the business seeking funds

True.

(T or F) All securities traded on national exchanges are regulated under the Securities Act of 1933

False – it is the 1934 Securities Exchange Act that regulates securities on the secondary market. All securities traded on national stock exchanges must be registered.

(T or F) Withholding material information is not a violation of 10(b) of the Securities Exchange Act of 1934

False. See the “fair disclosure rule

Regulation FD

The rule that requires companies to release publicly any information that they disclose to analysts or institutional investors

Under section 10b of the Securities Exchange Act of 1934, material information that must be disclosed to the public includes

Possible lawsuits, Mergers or takeovers, Pending declaration of a large dividend, Drops in quarterly earning

(T or F) Tipees are people who get their information from corporate insiders

True.

A psychotherapist received insider information from a senior executive at Martin Marietta, that it was about to merge with Lockheed Martin. Notice of the merger was not yet public and the therapist bought call options

The therapist violated section 10(b

(T or F) When someone has insider information, he or she may not trade on it until the public has knowledge

True.

(T or F) The Securities Exchange Act of 1934 of 10 (b) can be violated negligently.

False