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Flashcards in Chapter 41 Deck (24):
1

Security

(1) An interest or instrument that is common stock, preferred stock, a bond, a debenture, or a warrant; (2) an interest or instrument that is expressly mentioned in securities acts; and (3) an investment contract.

2

Securities and Exchange Commission (SEC)

The federal administrative agency that is empowered to administer federal securities laws. The SEC can adopt rules and regulations to interpret and implement federal securities laws.

3

Intrastate Offering Exemption

An exemption from registration that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.

4

Private Placement Exemption

An exemption from registration that permits issuers to raise capital from an unlimited number of accredited investors and no more than 35 non accredited investors without having to register the offering with the SEC.

5

Small Offering Exemption

An exemption from registration that permits the sale of securities not exceeding $1 million during a 12-month period.

6

Securities Act of 1933

A federal statute that primarily regulates the issuance of securities by corporations, partnerships, associations, and individuals.

7

Registration Statement

A document that an issuer of securities files with the SEC that contains required information about the issuer, the securities to be issued, and other relevant information.

8

Prospectus

A written disclosure document that must be submitted to the SEC along with the registration statement and given to prospective purchases of the securities.

9

Prefiling Period

A period of time that begins when the issuer first contemplates issuing securities and ends when the registration statement is filed. The issuer may not condition the market during this period.

10

Regulation A

A regulation that permits the issuer to sell securities pursuant to a simplified registration process.

11

Section 12

A provision of the Securities Act of 1933 that imposes civil liability on any person who violates the provisions of Section 5 of the act.

12

Section 11

A provision of the Securities Act of 1933 that imposes civil liability on person who intentionally defraud investors by making misrepresentations or omissions of material facts in the registration statement or who are negligent for not discovering the fraud.

13

Due Diligence Defense

A defense to a Section 11 action that, if proven, makes the defendant not liable.

14

Section 21

A provision of the Securities Act of 1933 that imposes criminal liability on any person who willfully violates the 1933 act or the rules or regulations adopted thereunder.

15

Securities Exchange Act of 1934

A federal statute that primarily regulates the trading in securities.

16

Section 10(b)

A provision of the Securities Exchange Act of 1934 that prohibits the use of manipulative and deceptive devices in the purchase or sale of securities in contravention of the rules and regulations prescribed by the SEC.

17

Rule 10b-5

A rule adopted by the SEC to clarify the reach of Section 10(b) against deceptive and fraudulent activities in the purchase and sale of securities.

18

Scienter

Intentional conduct. Scienter is required for there to be a violation of Section 10(b) and Rule 10b-5.

19

Insider Trading Sanctions Act

A federal statute that permits the SEC to obtain a civil penalty of up to three times the illegal benefits received from insider trading.

20

Section 32

A provision of the Securities Exchange Act of 1934 that imposes criminal liability on any person who willfully violates the 1934 act or the rules or regulations adopted thereunder.

21

Insider Trading

A situation in which an insider makes a profit by personally purchasing shares of the corporation prior to public release of favorable information or by selling shares of the corporation prior to the public disclosure of unfavorable information.

22

Tipper

A person who discloses material nonpublic information to another person.

23

Tippee

A person who receives material nonpublic information from a tipper.

24

Section 16(b)

A section of the Securities Exchange Act of 1934 that requires that any profits made by a statutory insider on transactions involving short-swing profits belong to the corporation.