2.2 - Securities Exchange Act of 1934 Flashcards
Securities Exchange Act of 1934
What does the Securities Exchange Act of 1934 address?
HINT: DAI
- Disclosures
- Anti-fraud reporting
- Insider trading
Securities Exchange Act of 1934
Who or what governing body created the Securities Exchange Commission or SEC?
Securities Exchange Act of 1934
Securities Exchange Act of 1934
What powers do the SEC have?
HINT: (6) DSIICI
- Deny, suspend or revoke registration
- Suspend trading
- Issue rules
- Investigate violations
- Conduct hearings to decide whether violations have occurred
- Impose penalties
Securities Exchange Act of 1934
What does the 1933 Act do?
- Regulates initial offerings
Securities Exchange Act of 1934
What does the 1934 Act do?
- Regulates ongoing reporting
Securities Exchange Act of 1934
What companies are required to register under the 1934 Act?
HINT: (5)
- All regulated, public held companies
- Companies with listed securities
- Shareholder > 500 and assets > $10 million
- Any 1933 registered companies must register under the 1934 Act as well
- National Securities Exchanges
Securities Exchange Act of 1934
Identify the organizations exempt from the 1934 Act
- Charitable organizations
- Investment companies
- Savings & Loans
Securities Exchange Act of 1934
What are the registration filing requirements under the Securities Exchange Act of 1934?
HINT: 7 FCFSIDD
- Financial statements
- Corporate organization
- Financial structure
- Security description
- Important individuals
- Description of business
- Description of bonus / profit sharing arrangement
Securities Exchange Act of 1934
Define “important individuals” who are required to be listed on the registration documents under the Securities Exchange Act of 1934.
- Names of officers, directors & large shareholders over 10% of firms outstanding stock
Securities Exchange Act of 1934
Identify the reporting forms required of listed companies under the Securities Exchange Act of 1934
- Form 10-K – annual report
- Form 10-Q – quarterly report
- Form 8-K – current report
Securities Exchange Act of 1934
What forms or reports must be included in the Form 10-k annual report?
- Financial statements,
- Business reports including stock prices & management analysis
Securities Exchange Act of 1934
When is the Form 10-k annual report required to be filed?
- Must be filed 60-90 days after year end
Securities Exchange Act of 1934
What information must be included in the quarterly Form 10-Q report and when is it due?
- Reviewed financial statements,
- key changes during the quarter
- Due 40-45 days after quarter end
Securities Exchange Act of 1934
What information must be included in the Form 8-k current report and when is it due?
HINT: CABCC
- Control change
- Acquisition
- Bankruptcy
- Change of director
- Change in auditor
- must be filed within 4 days of key events
Securities Exchange Act of 1934
Define “insiders”
- Officers, directors and beneficial owners of 10% or greater of the stock of a corporation
Securities Exchange Act of 1934
What is a proxy?
power of attorney given by a shareholder to a 3rd party authorizing the party to exercise the voting rights of the shares
Securities Exchange Act of 1934
When must an issuing company file a copy of the proxy with the SEC?
10 days prior to mailing a proxy statement to shareholders
Securities Exchange Act of 1934
What is a tender offer?
general invitation by an individual or a corporation to all shareholders of another corproation to tender their shares for a specified price
Securities Exchange Act of 1934
What are the repercussions of insiders for noncompliance under the 1934 Act?
criminal penalties
Securities Exchange Act of 1934
What form are insiders required to file with the SEC under the 1934 Act?
- Form 3 – initial filing
- Form 4 – changes
- Form 5 – annual statement
Securities Exchange Act of 1934
When are insider forms required to be filed with the SEC?
- Form 5 - annual statement
- within 45 days after the company’s fiscal year end
- On the 2nd business day following the day on which the insider engaged in a transaction in the company’s equity securities
- All other forms
- within 10 days of becoming an insider
Securities Exchange Act of 1934
Define “insider trading” under Rule 10B-5 Antifraud Provisions
- the purchase or sale of any security by an individual who:
- Has access to material, nonpublic information
- Has not disclosed it before trading
- Has a fiduciary obligation to the issuer, shareholders or any other source of the information
Securities Exchange Act of 1934
Provide examples of “insiders” for 10B-5 purposes
- Corporate officers
- Lawyers
- Auditors
- Other parties
- Tippers, recipients of info from insiders & employees of government agencies entrusted with confidential corporate information)
Securities Exchange Act of 1934
What are “short-swing” profits?
- Profits from sale or purchase of issuer stock within 6-month period
Securities Exchange Act of 1934
Define “profit” per share in the case of short-swing profits under the 1934 act
the excess of the highest sales price over the lowest purchase price during the period
Securities Exchange Act of 1934
True or False >>>
Under Section 16(b) of the 1934 Act, insiders may be sued for short-swing profits on registered equity securities by the issuer or a shareholder suing on behalf of the corporation if the issuer does not sue within 60 days after a request
True
Securities Exchange Act of 1934
Is strict liability imposed on insiders for short-swing profits?
Yes - proof is not necessary
Securities Exchange Act of 1934
Define strict liability
- liability that does not depend on actual negligence or intent to harm
