Chapter 5 - Regulation of Securities and Issuers Flashcards
(39 cards)
Definition of “person” (same as 79)
Can’t be dead, incompetent or a minor
The Uniform Securities Act defines a “security” as
- stock
- bond
- mutual fund
- options
- oil and gas partnership
- ADRs and GDRs (certificates of deposit for a security)
- Voting trust certificate
- warrants or rights for a security
- investment contracts
- REITs
Non-securities are;
- fixed annuity or other insurance contracts that don’t have a “variable” feature that allows people to pick out their own investments
- commodities
- futures contracts on commodities
- precious metals
- currency such as rare coins
- real estate used as a personal residence
- collectibles such as antiques, art, wine
- retirement plans
Certificates of deposit issued by a bank ARE NOT ______
securities, most other “certificates” are
Registration statement must include:
- amount of securities being issued
- other states the security has been registered in
- any adverse regulatory actions taken against the firm
Incorporation by reference states that an issuer may
reference a previous filing about the same security or issuer in a new filing without having to include a copy of that file
The three methods of registration are:
1) registration by qualification
2) registration by coordination
3) registration by filing
All issuers of securities, when filing, must
1) provide a signed consent to service of process to the state
2) pay filing fees to the state
Registration by qualification (starting from scratch) must provide the following information
- basics about the company
- general nature of business, key assets
- summary of business environment
- relevant details about security being issued
- total proceeds from the offering
- total debt and stock outstanding
- BS no more than 4 months old
- 3 years of IS
- breakdown of any officer/director who owns more than 10% of the securities of the issuer
- pending lawsuits
- copies of all marketing lit (prospectuses, circulars, etc)
- same of the actual security
- legal opinion
- written consent for any professional reports
- intended use of the proceeds
- description of any stock options
- anything the admin requires
Registration by qualification becomes effective ________
when the administrator says so
A prospectus (as defined in the 79) must delivered to a purchaser of an issue by __________
the time the trade settles
Registration by coordination (coordinate both federal and state registrations - must file federal before state) and must submit
- three copies of latest prospectus
- copy of articles of incorporation and by-laws
- copy of agreement between issuer and underwriter
- copy of any instrument governing the issuance of securities
- copy of security itself
- anything the admin requests
- updates to the federal prospectus must be made at state level too
Registration by coordination becomes effective when ___________
The federal registration becomes effective (so long as it has been on file with the state for 10 days and offering prices/commissions have been on file for 2 days)
For registration by qualification or by coordination, admin may require them to be sold using a ______ and must be kept for up to _______ years
subscription form (sales contract form) and kept up to 3 years
Registration by filing (for issuers who have already registered a security federally - mostly established companies) requires:
- issuer is organized under US laws
- issuer has been in business in the US and has filed all materials with the SEC for last 36 months
- issuer has a security registered under the Exchange Act of 1934 held by at least 500 shareholders
- 4 market makers in the securities for at least 30 days during prior 3 months
- if a registered equity security, must have a value of at least $5 share
If using registration by filing for securities from a mutual fund or unit investment trust, must provide
- statement demonstrating eligibility for registration by filing
- name, address and form of organization of the issuer
- description of securities being registered
- copy of latest prospectus filed with the SEC
IF this information has been on file with Admin for 5 days and filing fee is paid, registration is effective when federal registration is effective
Notice filing is a heads up to the _____- that a federally covered security will be offered for sale in their jurisdiction
state admin
A notice filing requires the issuer to
- submit all documents that are used in federal registation to state admin prior to sale
- deliver copies of all amendments to the federal docs to state admin at same time as delivered to federal
- report on value of federal covered securities
- consent to service of process
- filing fees
State securities registrations and notice filings expire _____ after their _____ date
1 year after the effective date
Post-registration requirements for the issuer are minimal, usually just some _________
administrative reports that are usually required quarterly
Exemptions to the registration rules come in Sections ______ and ______
402(a) and 402(b)
Section 402(a) exemptions apply to _______
every transaction of a security
Section 402(b) exemptions must ________
must be granted individually for each transaction
Section 402(a) exemptions include:
- US gov’t and municipal securities
- foreign gov’t securities (usually bonds) with which the US gov’t maintains diplomatic ties
- depository securities (issued or guaranteed by a bank)
- loan association securities
- insurance company securities (NOT variable annuities)
- credit union securities
- public utility securities (US and Canada)
- exchange-traded securities
- non profit securities
- commercial paper (investment grade, matures in less than 9 months)
- employee benefit plan investment contracts
