D216 Unit 8

tippees

A person who receives inside information.

Regulation Z

A set of rules issued by the Federal Reserve Board of Governors to implement the provisions of the Truth-in- Lending Act.

puffery

Vague generalities and obvious exaggerations

SEC Rule 10b-5

A rule of the Securities and Exchange Commission that prohibits the commission of fraud in connection with the purchase or sale of any security.

Corporate governance

A set of policies specifying the rights and responsibilities of the various participants in a corporation and spelling out the rules and procedures for making corporate decisions.

prospectus

A written document required by securities laws when a security is being sold. The prospectus describes the security, the financial operations of the issuing corporation, and the risk attaching to the security.

free-writing prospectus

A written, electronic, or graphic communication associated with the offer to sell a security and used during the waiting period to supplement other information about the security

bait-and-switch advertising

Advertising a product at an attractive price and then telling the consumer that the advertised product is not available or is of poor quality and encouraging her or him to purchase a more expensive item.

deceptive advertising

Advertising that misleads consumers, either by making unjustified claims about a product's performance or by omitting a material fact concerning the product's composition or performance.

validation notice

An initial notice to a debtor from a collection agency informing the debtor that he or she has thirty days to challenge the debt and request verification.

multiple product order

An order requiring a firm that has engaged in deceptive advertising to cease and desist from false advertising in regard to all the firm's products.

investment contract

Howey test. In securities law, a transaction in which a person invests in a common enterprise reasonably expecting profits that are derived primarily from the efforts of others.

accredited investor

In the context of securities offerings, sophisticated investors, such as banks, insurance companies, investment companies, the issuer's executive officers and directors, and persons whose income or net worth exceeds certain limits.

Lanham Act successful claim elements (3)

Injury Causation Loss

"cooling-off" laws

Laws that allow buyers of goods sold in certain transactions to cancel their contracts within three business days.

counteradvertising

New advertising that is undertaken to correct earlier false claims that were made about a product.

short-swing profits

Profits earned by a purchase and sale, or sale and purchase, of the same security within a six-month period.

Exempt transactions Regulation D

Rule 504 Rule 506 Rule 147

Truth-in-Lending Act (TILA)

The TILA is basically a disclosure law. It is administered by the Federal Reserve Board and requires sellers and lenders to disclose credit terms and loan terms so that individuals can shop around for the best financing arrangements.

Federal Trade Commission Act.

The act created the Federal Trade Commission (FTC) to carry out the broadly stated goal of preventing unfair and deceptive trade practices, including deceptive advertising

insider trading

The purchase or sale of securities on the basis of information that has not been made available to the public.

Exempt transactions Regulation A

Tier 1—For securities offerings of up to $20 million in a twelve-month period. Tier 2—For securities offerings of up to $50 million in a twelve-month period.

well-known seasoned issuer (WKSI)

a firm that has issued at least $1 billion in securities in the last three years or has outstanding stock valued at $700 million or more in the hands of the public.

Fair and Accurate Credit Transactions Act (FACTA)

amended the TILA and established a national fraud alert system. requires the major credit reporting agencies to provide consumers with free copies of their own credit reports every twelve months.

The Equal Credit Opportunity Act (ECOA)

amended the TILA. The ECOA prohibits the denial of credit solely on the basis of race, religion, national origin, color, gender, marital status, or age. The act also prohibits credit discrimination on the basis of whether an individual receives certain forms of income, such as public-assistance benefits.

Fair Debt Collection Practices Act (FDCPA)

attempts to curb perceived abuses by collection agencies. The act applies only to specialized debt-collection agencies and attorneys who regularly attempt to collect debts on behalf of someone else, usually for a percentage of the amount owed.

The Sarbanes-Oxley Act

attempts to increase corporate accountability by imposing strict disclosure requirements and harsh penalties for violations of securities laws.

Securities Act of 1933

designed to prohibit various forms of fraud and to stabilize the securities industry by requiring that investors receive financial and other significant information concerning the securities being offered for public sale. Basically, the purpose of this act is to require disclosure.

Telemarketing and Consumer Fraud and Abuse Prevention Act

directed the FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers

Intrastate Offerings—Rule 147

exemption applies to most offerings that are restricted to residents of the state in which the issuing company is organized and doing business

Rule 504

exemption used by many small businesses. It provides that non investment company offerings up to $5 million in any twelve-month period are exempt.

Rule 506—Private Placement Exemption

exempts private, noninvestment company offerings that are not generally solicited or advertised. This exemption is often referred to as the private placement exemption because it exempts "transactions not involving any public offering.

SEC Rule 10b-5 elements of securities fraud

material misrepresentation Scienter Reliance by the plaintiff economic loss Causation

Telephone Consumer Protection Act (TCPA)

prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice

Fair Credit Reporting Act (FCRA)

protects consumers against inaccurate credit reporting and requires that lenders and other creditors report correct, relevant, and up-to-date information.

The Lanham Act

protects trademarks, and it also covers false advertising claims.

Section 16(b) of the 1934 act

provides for the recapture by the corporation of all profits realized by an insider on a purchase and sale, or sale and purchase, of the corporation's stock within any six-month period.

The Securities Exchange Act of 1934

provides for the regulation and registration of securities exchanges, brokers, dealers, and national securities associations. Applies to companies that have assets in excess of $10 million and five hundred or more shareholders. These corporations are referred to as Section 12 companies because they are required to register their securities under Section 12 of the 1934 act.

Section 14(a) of the Securities Exchange Act

regulates the solicitation of proxies from shareholders of Section 12 companies.

Telemarketing Sales Rule (TSR)

requires a telemarketer to identify the seller's name, describe the product being sold, and disclose all material facts related to the sale (such as the total cost).