Federal Securities Acts

Question 1

Purpose of this act is to provide investors with full and fair disclosure of a security offering and to prevent fraud by ensuring that no sale of a security shall occur in interstate commerce without registration and without furnishing a prospectus to prospective purchasers unless the security or the transaction is exempt from registration

Answer 1

Securities Act of 1933

Question 2

Purpose of ti act is the establishment of hte SEC to assure fairness in the trading of securities subsequent to their original issuance

Answer 2

Securities Exchange ACt of 1934

Question 3

Any note, stock, bond, certificate of inteerset, debenture, investment contract, etc. in which the investor tries to make a profit on the investment through th eefforts of others

Answer 3

Security

Question 4

An individual, corporation, partnership, unincorporated association, usiness trust, or government

Answer 4

person

Question 5

Has power (direct/indirect) to influence the managmeent and/or policies of an issuer, whether by stock ownership, contract, position, or otherwise

Answer 5

Controlling person

Question 6

Includes officers, directors, and owners of more than 10% of any class of an issuer’s equity securities (does not include debentures, because not equity securities)

Answer 6

Insiders

Question 7

An owner of more than 10% of the equity stock of an issuer–includes equity owned by: (1) owner’s spouse (2) owner’s minor children (3) owner’s relative in same house (4) owne’rs equity stock held in trust in which owner is beneficiary

Answer 7

beneficial owner–considered an insider to avoid loopholes under 1934 act

Question 8

Any person who has purchased from an inssuer with a view to the public distribution of any security or participates in such undertaking

Answer 8

underwriter

Question 9

A statement required to be filed with the SEC before initial sale of securities in interstate commerce; includes financial statements and all other relevant information

Answer 9

Registration statement

Question 10

Any notice, circular, advertisement, letter, or communication offering any security for sale (or merger)

Answer 10

Prospectus

Question 11

When a registration statement becomes effective (waiting period)

Answer 11

20th day after filing

Question 12

The basic long-form registration statement

Answer 12

Form S-1

Question 13

Registration forms adopted by the SEC to ease much of the burden of disclosures required under federal securities regulation–typically used by firms already on file with the SEC

Answer 13

Forms S-2 and S-3

Question 14

REgistration forms permitted for small businesses (less than $25 mil in rev)–redues amoutn of financial and nonfinancial information required

Answer 14

Forms SB-1 and SB-2

Question 15

Commercial paper, intrastate issues, small issues (up to $5 mil in a 12-month period), securities of gov’ts and banks, stock splits, securitiies of non profit religious, educational, or charitable orgnaizations, certificates issued by the receiver or trustee in bankruptcy, and insurance annuity contracts

Answer 15

Exempt securities

Question 16

SEC regulation that requires an offering circular for small issues (less than $5 mil) that do not need to be audited

Answer 16

Regulation A

Question 17

Sale or offer to sell by any person other than an issuer, underwriter, or dealer

Answer 17

Exempt transactions

Question 18

Establishes three important exemptions for exempt transations in Rules 504, 505, and 506 under thed 1933 act

Answer 18

REgulation D

Question 19

Regluation D exemption rule that exempts an issuance of securities up to $1 mil sold in 12-month period to any number of ACCREDITED investors (banks, insurance companies, etc)–no disclusrues needed and can’t have any restrictions on right to resell

Answer 19

Rule 504

Question 20

Regulation D rule that exempts issuances of up to $5 mil in 12-mo period for sale to bot accredited and nonaccredited investors–if sold to nonaccredited need to disclose and provide resell provisions

Answer 20

Rule 505

Question 21

Regulation D rule that allows private placement of unlimited amounts of seucrities similar to Rule 505, but with the additional requirement that unaccredited investors must be sophisticated invesotrs or be respresented by indiviudals with such knowledge and experience

Answer 21

Rule 506

Question 22

Requirements that must be met to NOT quality as an underwriter in the sale of securities, and thus be subject to the registration provisions

Answer 22

Rule 144

Question 23

A preliminary prospectus that indicates that registration statement has been filed but has not become effective

Answer 23

Red-herring prospectus

Question 24

Makes known the availability of a prospectus

Answer 24

Tombstone advertisement

Question 25

A registration of a new issue which can be prepared up to two years in advance, so that the issue can be offered quickly as soon as funds are needed or market conditions are favorable–need to keep updated registration statement

Answer 25

Shelf registration

Question 26

Quaterly reports that must be filed for each of first 3 fiscal quarters of each fiscal year–must be reviewed by CPA

Answer 26

10-Q

Question 27

Event reports when material events occur such as change in corporate control, signfiicant cahnge or revaluation of assets–must be filed within 4 days of material event

Answer 27

8-K

Question 28

An invitation by fuyer to shareholders of targeted company to tender shares they own for sale for price sepcified over a period of time

Answer 28

Tender offers

Question 29

Prohibits discharge of any debts incurred in violation of securities laws

Answer 29

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Question 30

Antifraud provisions under Securities Exchange Act of 1934

Answer 30

Rule 10b-5

Question 31

Act making it unlawful for any domestic company or its officers or employees or agents to offer or give to foreign officials or to political party something of value to influence decisions

Answer 31

Foreign Corrupt Practices Act

Question 32

REquires corporations to disseminate its data equally among investors and analysts to help avoid conflicts of interest by analysts

Answer 32

REgulation Fair Disclosure (Reg FD)

Question 33

Part of SOX that requires that each periodic report that contains financial reports of the issuer must be accompanied with written statement of CEO or CFO that certifies that reports comply fuly wiht relevant securities laws and also fairly present the financial condition of company in all material raspects

Answer 33

Section 906 of SOX

Question 34

Section of SOX that makes officers responsible for maintaining effective internal controls and requires principal executive and financial officers to disclose all significant interanl control deficiencies to issuer’s auditors and audit committee

Answer 34

Section 302 of SOX

Question 35

Created the Financial Stability Oversight Council

Answer 35

Dodd-Frank act

Question 36

Council charged with identifying threats to the financial stability of the US, promoting market discipline, and responding to emerging risks

Answer 36

Financial Stablity Oversight Council

Question 37

Regulates insurance companies–created by the Dodd-Frank act

Answer 37

Federal Insurance Office

Question 38

Regulates the offering of consumer products and services under the federal consumer financial laws (ex. credit counseling, check-cashing, etc)

Answer 38

Bureau of Consumer Financial Protection

Question 39

prohibits any “banking entity” from engaging in propietary trading, or sonposirng or investing in a hedge fund or private equity fund

Answer 39

The Volcher rule of Dodd-Frank

Question 40

Regulates the derivatives markets, including the regulation of swap dealers and major swap participants

Answer 40

Commodity Futures Trading Commission–given authority under Dodd-Frank

Question 41

State statutes regulating the issuance and sale of securities that contain antifraud and registration provisions

• -must be complied with IN ADDITION to federal laws
• -exemption from federal laws are not exemptions from state laws

Answer 41

“Blue-Sky” Laws