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.
