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Flashcards in Federal Securities Acts Deck (16)
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1
Q

REG

What are the key points of the 1933 Securities Act?

A

Governs Initial Public Offerings (not subsequent sales). Covers registration statements and accompanying information filed with SEC. Information must include audited financial statements & a prospectus. Note: Even if a company is exempt from registering under the 1934 Act; they still must adhere to the anti-fraud provisions of the Act

2
Q

REG

What entities are exempt from filing registration statements under the 1933 Securities Act?

A

Banks; Commercial Paper; Farmers; Co-ops; Charities; Governments

Also exempt: Securities sold in ONE state; where investors are residents; 80% of business done in one state; and resales can’t occur within 9 months to interstate parties.

3
Q

REG

What are the key points of the 1933 Securities Act; Regulation A?

A

Issuer can issue $5M of securities per year and be exempt if they file a notice with the SEC

Non-issuers (AKA a private individual) can sell $1.5M per year and be exempt

4
Q

REG

Under the 1933 Securities Act; Regulation D; what are Rules 504; 505 and 506?

A

Rule 504- Max Amount per year: $1M; Max Investors: Unlimited

Rule 505 - Max Amount per year: $5M; Max Investors: 35 Unaccredited or Unlimited Accredited

Rule 506 - Max Amount per year: Unlimited; Same as 505; but Unaccredited investors must be sophisticated

5
Q

REG

What are the registration form options under the 1933 Securities Act?

A

S-1 - Long Form or

S-2 and S-3 - Less Detailed and preferred by issuers

6
Q

REG

Name the securities registered under the Securities Act of 1933.

A
Stocks
Stock Options
Stock Warrants
Limited Partnership Interests - General Partnerships not allowed
Bonds
7
Q

REG

Who can sue under the Securities Act of 1933?

A

Purchasers of securities only

8
Q

REG

Name the Requirements for Accountant to be liable under the Securities Act of 1933.

A

Damages & Material Misstatements Only

o Reliance on financial statements are not a requirement unless purchased more than a year after the security is registered

Proving negligence is not a requirement

9
Q

REG

Name the Defenses of an Accountant under the Securities Act of 1933.

A

Accountant used Due Diligence

Accountant followed GAAP

Damages weren’t caused by accountant’s work

Plaintiff knew of the material misstatements

10
Q

REG

What does the Securities Act of 1934 govern?

A

The trading/selling of securities after the IPO

11
Q

REG

What reports must be filed under the Securities Act of 1934?

A

Form 10-K Annual Report - Must be audited

Form 10-Q Quarterly Report - Must be reviewed; but not audited

Form 8-K - A notice of a material event; Must be filed within 4 days of event

12
Q

REG

Who can sue under the Securities Act of 1934?

A

Purchases and Sellers of Securities

13
Q

REG

Name the Requirements for an Accountant to be liable for fraud under the Securities Act of 1934.

A

Damages

Material Misstatements

Reliance on financial statements

Scienter or reckless disregard for the truth

14
Q

REG

What procedures must an Accountant have in place under the Securities Act of 1934?

A

Accountant must have procedures in place to:
Determine if Going Concern is an issue
Determine if any material related party transactions occurred

Determine if material illegal acts occurred

15
Q

REG

Insider trading rules under the Securities Act of 1934 apply to which individuals?

A

Officers; Directors and 10% Owners

16
Q

REG

What are the Proxy Solicitation Requirements under the Securities Act of 1934?

A

Proxy must give shareholders audited balance sheets from 2 most recent years

o Requirement holds true even if one class of stock