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31

Regulation D

1. Purchasers sign an "Investment Letter'

-Indicates purchase is for investment purposes, not for immediate resale

-Generally 6 months

32

Regulation D

2. Shares are Restricted

- Bears a legend

-Stop transfer instructions remove requires an OPINION LETTER from the legal counsel

-May be sold to the public only if registered or sold in accordance with Rule 144

33

Rule 144

Permits the sale of restricted and control stock

34

Rule 144

Restricted stock

Acquired through private placements (unregistered with the SEC)

35

Rule 144

Control stock

registered stock purchased by officers, directors, or greater than 10% shareholders

36

Rule 144A

provides an exemption if restricted securities are sold to Qualified Institutional Buyers (QIBs)

37

Rule 144A
QIB (Qual Inst Buyer)

Institution with at least $100 million under management

-allows QIB NO holding period
-Regular -> 6 month holding period

38

Rule 144

Restricted

Holding Period -----
Volume ----
Paperwork -----
Time Limit ----

Holding Period ----- 6 months
Volume ---- Greater of : 1% of outstanding or Avg of last 4 wks of Trading Volume
Paperwork ----- File Form 144
Time LImit ---- 90 Days to execute sale

39

Rule 144

Control

Holding Period -----
Volume ----
Paperwork -----
Time Limit ----

All same as Restricted but

Holding period - No holding period

40

Rule 144

What is the difference between Restricted and Control

Control - no holding period

41

Securities Exchange Act of 1934

Secondary Market Regulation

-Creation of SEC
-Utilizes various Self Regulating Organizations (SROs)

-Reporting requirements for publicly-traded companies
-Form 10-K, 10-Q, and others

-Defines control persons:
-Any officer or director of issuer or any person who owns greater than 10% of the issuer's outstanding shares
-Accounts of Control Persons have special On-Boarding requirements

-Gave the Fed control over the extension of credit through Regulation T

-Fed controls the Margin

42

DK notice

A DK notice is used for a don't know trade. This occurs when one side does not recognize the trade or the firms disagree on the details.

43

1-1 The primary objective of FINRA is to

Adopt, administer, and enforce rules and regulations in the securities industry

44

1-2 The Code of Procedures pertains to

The handling of complaints and violations

45

1-4 (no3) Persons that serve as the conduit for bringing the issuer and potential buyer together are:

The day that the SEC receives the registration statement is known as the filling date. A 20 day cooling-off period follows.

46

1-5 After the registration statement is receive by the SEC, the following time called the:

Cooling-off period.

47

1-6 The herring is an

Cooling-off period, the issuer prepares a prelim prospectus(red herring). It has a red border on the cover page that informs potential investors that a registration statement has been filed with the SEC, but has not yet become effective

48

1-7 Blue-skying an issue refers to the:

Registration of securities where it will be sold

49

1-8 For securities that will be listed on a national exchange or quoted on Nasdaq, the final prospectus must be distributed to any purchaser for how many days from the effective date?

25 days

50

1-9 According to the Securities Act of 1933, a Regulation D exemption exists if the securities are offered to a maximum of

35 nonaccredited investors

51

1-10 The Securities Exchange Act of 1934 regulates the trading of securities:

Once they have been issued with the regulation of exchanges and broker-dealers