Chapter 20

Cap for Regulation A offerings

$50 million

Regulation A Offerings

-Allows issuer to raise up to $5M in 12 month period -No more than $1.5M offered or sold by selling shareholders -Allows smaller companies access to capital markets -Tier 1 - raise up to $20M no more than $6 offered by selling shareholders -Tier 2 - raise up to $50M, no more than $15M by selling shareholders

The Sarbanes-Oxley Act

A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate.

The Board of Directors

Aligns the interests of officers and shareholders

Prefilling period

Issuer normally cannot sell, or offer to sell the securities

Concurrent Regulation

Issuers must comply with both federal and state laws. Most duplicate regulations have been eliminated

Exempt Securities

Maintain their exempt status forever Are low-risk investments, or are regulated by other statutes Can be resold without being registered

Types of Security

Preferred and common stocks, treasury stocks, bonds, debentures, and stock warrants

Contents of the Registration Statement

Securities being offered for sale, including their relationship to issuer's other securities Corporation's properties and business Management of the corporation How the corporation intends to use proceeds of sale Any pending lawsuits or special risk factors

Required for State Securities Laws

State securities laws apply mainly to intrastate transactions

Post effective period

The issuer can offer, and sell the securities without restrictions.

Waiting Period

The securities can be offered for sale, but cannot legally be sold

Two types of public offerings

Tier 1 and Tier 2

misaprropriation theory

a person who wrongfully obtains inside information and trades on it for person gain is liable

Investment Contract

any transaction in which a person invests in a common enterprise, reasonably expecting profits derived primarily (or substantially) from others' managerial or entrepreneurial efforts

types of disclosure

fraudulent trading dividend change contract for sale of corparate assests new discovery, process, or product significant change in firm's financial condition potentional litigation against company

Tipper/Tippee Theory

liability for both true insiders and certain "outsiders" who trade on inside information

basic elements of a securities fraud actions

material representation scineter rellance by plantiff on material represenation economic loss causation

Registration Process

prefiling period, waiting period, posteffective period

Howey Test

the rule established by the Supreme Court to determine what a security is under the federal securities law: an investment of money in a common enterprise with the expectation that profits will be generated by the efforts of others.