Federal Securities Regulation

Question 1

The Securities Act of 1933 act regulates…

Answer 1

original issuances of securities

Question 2

The Securites Act of 1934 regulates…

Answer 2

purchases and sales after initial issuance

Question 3

What is the purpose of the Securities Act of 1933

Answer 3

Provide investors with sufficient investment information

• requires issuers to register new issues of securities with the SEC AND provide prospectuses
• SEC does not guarantee the accuracy of the information or provide assurance against loss

Question 4

A person suing under section 11 (1993) must only show

Answer 4

• they acquired the stock
• they suffered loss
• the registration statement contained a MM of fact

-does not have to prove intent to deceive or negligence etc.

Question 5

Who is liable under section 11 (1933)

Answer 5

anyone who signs a registration stayement

Question 6

Defenses for cpas being sued under section 11 (1993)

Answer 6

1) due dilligence defense (use workpapers to prove)

2) mistatement did not cause plaintiff’s damages

Question 7

The 1934 Act requires the following to register with the SEC:

Answer 7

1) any companies whoses shares are traded on a national exchange (OR)
2) companies that have more than 10 mill in assets and at least 2k shareholders (any class)
3) companies that have more than 10 mil in assets and at least 500 SHs who are not accredited (in any class)
4) National stock exchanges, brokers, and dealers

Question 8

Periodic reports required under 1933 n 1934

Answer 8

10-k, 10-q, and 8-k

Question 9

other required reports under 1933 n 1934

Answer 9

5% TIP (5 percent for 5% or more owners must report)

1) T- Tender offers must be reported
2) I- Insider trading must be reported
3) P - Proxy solicitations and Proxy statements must be reported

Question 10

What are the differences between an action under section 11 of 1933 act and under Rule 10b-5

Answer 10

• Section 11 requires no proof of scienter, reliance or negligence. The plaintiff need only show that he acquired the stock and suffered a loss, and that there was a MM in the registration statement
• Rule 10b-5 of 1934 act recquires proof of both scienter and reliance. The plaintiff must show that she bought or sold the stock, suffered a loss, a mm of fact scienter and reliance
• proof of negligence is insufficient under rule 10b-5