BLAW 3310 - Final Exam Miller

What is the personal liability for the cardholder whose credit card is stolen and they report the theft?

$50 if reported within 2 days

what is a prospectus?

(called Schedule A) condenses the longer registration statement provided to the SEC and helps investors evaluate a security

churning

(illegal) occurs when a broker who has control of a client's account buys and sells an excessive amount of stock to make money from the commission earned on transaction

Scalping

(illegal) when a professional buys stock for personal benefit, then urges investors to buy the stock so that the price rises to the benefit of the professional

Force Majeure Clause

- "superior or irresistible force" - protects contracting parties from problems beyond their control

If you're victim of deception under DTPA, how long does deceiver have to pay you back? What if they do it after?

- 60 days from the day they get the notice - 3x the charges if over 60 days

Transparency International

- A non-governmental organization that monitors and publicizes corporate and political corruption in international development - operate the CPI

Fair Credit Reporting Act

- Act that protects privacy of background information and ensures that credit information supplied is accurate. - gives you right to fix mistakes in your credit history

CPI: Denmark and Singapore vs Russia and Afghanistan

- Denmark has score of 87 and Singapore has score of 85 - Russia has score of 28 and Afghanistan has score of 16 - Denmark and Singapore are much corrupt-free than Russia and Afghanistan

Business Structures in International Markets

- Direct Sales-to-End Users - Offshoring/Contract Manufacturing - Outsourcing of Service - Franchise Agreement - Foreign Sales Agent - Foreign Manufacturing- Joint Venture Agreement - Wholly Owned Subsidiary -nationalization - worst case scenario

Outsourcing/Licensing Agreement

- One business (the licensor) grants another business (the licensee) access to its patents and other technologies - licensor may require royalty fees

Otter example

- Otter makes cellphone covers - there's category called "Containers" in tariff schedules, which are tariffed 20% - Otter's covers are marked as Containers, but Otter says there's other category called "Other Plastics" which only tariffs 5% - Courts rule in favor of Otter because cellphone covers protect the phones, they do not help in transportation like other containers

International Court of Justice

- Principal court of the United Nations, located in the Netherlands - only countries—not private parties—have standing to bring cases - 15 judges

World Bank

- Promotes private foreign investment through loans and guarantees - provides technical and managerial assistance on large capital projects

FTC v QT case

- QT claims a bracelet was a miraculous cure for chronic pain, had been test-proven, emit Q-rays, is ionized, is sold in gold and silver variants, and has a memory cycle specific to the original owner only - all of these were false, and the FTC sued for misleading advertisement - QT must pay $16M plus the full purchase price of some bracelets sold online

Rubies Costume Co. v. United States

- Rubies asks for pre-importation ruling from US Customs and Border Patrol on a Santa suit, adding rates do different parts - Rubies appealed, saying the whole suit should be duty free under "festive articles" classification, but Customs still treated it as regular suit - Rubies appeals to Court of International Trade, but they agree with Customs, so they appeal again - Appeals court still stand against Rubies, stating the Santa suit classified as "fancy dress", which ca be a costume of textile material, and it has been made to last years

finance charges and how to compute

- The dollar amount the credit will cost the borrower. - take the monthly payment and multiply it by however many months are paid. Compare result to the initial amount you owe. The difference is the finance charge. - ex: owe $4000, $100 monthly payment, 4 years (48 months); 100 x 48 = $4800. $4800 - $4000 = $800 finance charge

Wholly Owned Subsidiary

- a fully operational, independent entity that a firm sets up in a foreign country to conduct business in that market - can be built or bought

Harmonized Tariff Schedule

- a set of definitions to classify goods - adopted by many countries so that they share common terminology when setting tariffs

Types of Red Flags

- alerts, notifications, or warnings - suspicious documents - dubious identifying information - unusual use of particular account - notices from customers or victims of theft

Unfairness

- causes substantial harm to consumers - injury is harmful in its net effects - consumers cannot reasonably avoid injury

Credit CARD Act (CCA)

- low promotional rates must have at least 6 months- 45-day notice when raising rates - statements must be sent at least 21 days before payment is due - gift cards may not expire for at least 5 years

Corruption Perception Index (CPI)

- measurement of the level of corruption in a country according to numerous surveys - lists from least to most corrupt, in which score of 100 represents corruption-free

Oil and gas well investments

- oil and gas well lease scams - people invested $5000 to $10,000 each in application fees to participate in a lottery for oil and gas rights on federal lands -promoters were sued and companies that worked with them in scheme

Consumer Leasing Act (CLA)

- provides standard terms for leases of personal property, such as cars - must be for at least 4 months and obligation of no more than $50,000

USMCA (United States-Mexico-Canada Agreement)

- reduced or eliminated tariffs and trade barriers on most North American trade. - replaced NAFTA (North American Free Trade Agreement)

Direct Sales to End Users

- sell product to buyer by making them pay first (PayPal, etc.) and then ship the product -safest business structure

Countervailing Measures: Brazilian Case with Cotton

- the US paid its cotton farmers $3B in crop subsidies, which helped the farmers as it would be unlikely that the US grows much cotton without the subsidies - Brazil files complaint with WTO stating the subsidies to US farmers made it difficult for them to compete - WTO finds that the US did provide improper subsidies, but the US kept appealing - WTO told Brazil to impose tariffs on imports from US that would usually not be subject to tariffs, so they're known as countervailing measures

Dumping

- the practice of charging a lower price in the export market than in the home market - causes domestic industries to lose sales

Elizabeth Holmes and Theranos

- was said that with just a drop of blood, Theranos' Edison test could detect diseases and other conditions - didn't have proof of it working but she had the backing of many big names, lending her credibility - many articles came out exposing the Edison, and things began to unravel - Theranos dissolves in 2018 - she was sentenced to 11 years in prison

DTPA Claims

1) False geographic of products 2) Unnecessary repairs needed 3)Substituting old for new parts and charging for new 4) Failure to honor warranty 5) False "going out of business" sales) 6) "Bait and switch" marketing by falsely advertising availability of special items egg, women shoes limited amount 7) Passing of another goods as your own e.g. making shoes and putting a Nike "swoosh" on it

Exemptions from Registration:

1)Private placement (no more than 35 unaccredited investors, any number of accredited investors) 2) Regulation D has a $ 5,000,000 limit as too little in amount for SEC to bother with 3) WKSIs ($700,000,000 market capitalization or $1.0B in prior issued securities 4) Crowdfunding- $1,000,000 is maximum amount

An investment is classified as a security for purpose of federal regulation if it contains four basic elements:

1. An investment of money 2.In a common enterprise 3.With an expectation of profits 4.Generated by the efforts of persons other than the investors

3 Things that need to be true for Deception to exist

1.There is a misrepresentation or omission of information in a communication to consumers. 2.The deception is likely to mislead a reasonable consumer. 3.The deception is material; that is, it is likely to be misleading to the detriment of consumers

Under Fair Debt Collection Practices Act, what times can you be called by creditors?

12 hour period, 8 am - 8 pm

Liens

A charge or claim which one person has upon the property of another as security for a debt or obligation

quitclaim deed

A conveyance that transfers whatever interest the grantor (current owner) has in the specified real estate, without warranties or obligations.

Texas Gulf Sulfur Case

A corporation in the mining field who thought there was gold in the hills in the remote part of Canada. They buy thousands of acres of land. They tell the SEC in a disclosure law that they have news that will impact their stock and set a date. Some executives of the company decided to purchase shares of their stock before the announcement. After it was announced, the shares went up 8 points which made them a profit. The court found them guilty of insider trading and they had to disgorge their earnings.

Special Warranty Deed

A deed in which the grantor warrants, or guarantees, the title only against defects arising during the period of his or her tenure and ownership of the property and not against defects existing before that time, generally using the language, "by, through, or under the grantor but not otherwise."

Specific Tariff

A fixed tax or duty on each unit of a product

Joint Tenancy

A form of co-ownership that have the same interest in the undivided possession of property but includes the right of survivorship meaning if one owner dies the deceased owners interest ends

Quota

A limit placed on the quantities of a product that can be imported

Consumer Credit Protection

Act that limits the amount of wages that can be garnished or withheld in any one week by an employer to satisfy creditors.

Are both liable or just tipper?

Both are liable

Howey Test

Created by the U.S. Supreme Court; A test which states that an arrangement is an investment contract if there is an investment of money by an investor in a common enterprise and the investor expects to make profits based on the sole or substantial efforts of the promoter or others

DTPA procedures

Demand letter treble damages 60-day period to settle or lawsuit for treble damages and attorney fees

Prescription drugs

Drugs legally available only with a physician's order.

What is an advertising substantiation program?

FTC program that ensures advertisers make available to consumers supporting evidence for advertising claims

How can you protect yourself as an alien from nationalization?

Insurance

Risk of Wholly Owned Subsidiary

Nationalization (government takeover of the entire subsidiary)

Can the states collect tariffs?

No, only the federal government can

With company stock options, how much money does the employee put in?

None

Fair Debt Collection Practices Act

Prohibits unfair, abusive, and deception methods of collecting debt

World Trade Organization (WTO)

Promotes international trade by working to reduce trade barriers and to establish uniform tariff schedules and trade rules

Equity financing

Raising funds through the sale of company stock. A purchaser of shares of stock gains an ownership interest or equitable interest in the corporation

How are securities offered to public?

Require Registration statement filed with SEC, must be approved before cash can be accepted by offeror.

Types of Securities

Stocks Treasury stock Collateral Trust Agreement Preorganization Certificate Voting-Trust Certificates

Howey Case vs SEC

Supreme Court case established a test to determine when an investment is a security for the purposes of federal regulation in 1946

Texas Deceptive Trade Practices Act (DTPA)

Texas law that allows people to sue companies for deceptive practices

Nutrition Labeling act—what does it do?

The federal and drug administration regulates it. The intent is to prevent misleading product claims and to help consumers make informed purchases. hose with added nutrients and those for which a nutrition claim was made on the label, or in labeling or advertising

What is the $$ loss if share options not exercised?

Typically have 1-year exercise period before expiring.

Countervailing Measures

WTO Agreement that restricts the use of subsidies and regulates the actions countries can take to counter the effects of subsidies

tender offers

When one company attempts to take over another; offer may be contingent upon receiving a certain amount of stock before any purchase is completed or may be an open offer;

Offshoring (contract manufacturing)

a company contracts with manufacturers in a foreign market to produce its product or provide its service

What does Federal and drug administration do?

a federal agency charged with monitoring food and drug safety

Tenancy is common

a form of ownership in which each tenant (owner) has an undivided interest in the property

Franchise Agreement

a franchisor grants the franchisee the rights to operate under the company name and sell its products/services

garnishment and 25% restriction

a legal process that allows part of your paycheck to be withheld for payment of a debt

registration statement

a new security offering has two parts: The first part is the pro-spectus, a document providing the legal offering of the sale of the security. The second part is detailed information required by the SEC

What is a tipper?

a person who discloses material nonpublic information to another person.

Ad Valorem Tariff

a tax as a percentage of the product price

Tariff

a tax imposed by a government on imported goods

What is a Secuirty

a wide array of investments, such as stocks, bonds, notes, debentures, limited partnership interests, oil and gas interests, and investment contracts.

Anti-Dumping Duty

additional tariff placed on an imported product that a nation believes is being dumped on its market

Impact of the SEC v. TGS case

affirmed the principle that the test whether information is "material" is whether it would affect the judgment of reasonable investors

Lanham Act (trademark)

allows a party to sue for an injury caused by false advertisement

Letter of Credit

an assurance by the buyer's bank to pay a specified amount to the seller upon receipt of documents that prove the goods have been shipped and that contractual obligations of the seller have been fulfilled

Conflict of interest

an incompatibility between a person's private interests and their public duties

Foreign Corrupt Practices Act

antibribery law that prohibits U.S. companies and their agents from offering gift of a value to foreign officials to get or retain business.

Foreign Trade Zone

areas where businesses can import goods without paying tariffs

Grantee

buyer (new owner)

Investment Company

company that invests and trades in securities

consent decree

defendant agrees to stop alleged illegal activities without admitting guilt or wrongdoing

Origins of Security Regulations

due to concerns of fraud, where promoters used to go door-to-door offering worthless securities with nothing backing them other than the "blue sky"

What is the role of the federal and drug administration and United States department of agriculture?

ensure regulatory compliance and food safety by sharing information and coordinating inspections. have the power to bring criminal charges against those who do not comply with their safety standards, but fines and orders to come into compliance are more common.

mutual funds

fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets (most common)

Investment Company Act

gives the SEC control over the structure of investment companies

Arms Export Control Act

imposes many restrictions on the export of weapons and technology that can be used to make weapons

Fair Credit Billing Act (FCBA)

in case of billing error, consumer must notify creditor in writing within 60 days and creditor must answer within 30 days and solve problem within 90 days

What is securities fraud?

in securities law, the statutory basis for charging anyone involved in the issuance or trading of securities with fraud, which is usually due to misleading issuance of information or failure to disclose material information that causes investors to suffer losses.

International Business

includes all business transactions that involve entities from two or more countries.

proxy

is permission given by a shareholder to another party to vote one's shares in the manner instructed.

Securities Exchange Commission

is the agency charged with enforcing and administering federal securities laws. an independent agency that has five members appointed by the president for five-year terms

misstatements

liability may be imposed on those responsible for issuing information about securities that misleads a reasonable investor in investment decisions to her detriment; may be part of fraud.

Blue sky laws

name given to state laws that regulate the offer and sale of securities.

Sovereign Immunity Doctrine

non-sovereign party is prevented from engaging in legal action against a sovereign party

Subsurface (mineral) rights

often legally separated from ownership of the surface land (in US all mineral rights belong to the government)

debt security

often traded on the securities market. also be obtained by borrowing money from large lenders and pay the bond back in 10 years

Restrictions on Garnishment

only allowed to withhold up to 25% of the paycheck

Investment Advisers

person who, for compensation, engages in the business of advising others as to the advisability of investing in, purchasing, or selling securities

Dealers

persons who buy and sell securities for their own account

Brokers

persons who make transactions in securities for the account of others

Real Property

physical property such as land, things under the land, oil and materials, and buildings and trees

tenancy

possession or use of lands by any kind of right or title, whether in fee simple or for a limited purpose or time periods

Federal Trade Commission (FTC) started in 1914

prevents the unfair, false, or deceptive advertising of consumer products and services

Equal Credit Opportunity Act (ECOA)

prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act.

Warranty deed (general warranty deed)

promises that the seller is conveying a good, clear title to the property

Truth in Lending Act (TILA)

requires creditors in consumer transactions to disclose basic information about the costs and terms of credit to the borrower

What are stock options?

right to sell or buy a specified number of shares of a stock at a specific price and time

Grantor

seller (current owner)

Choice-of-Language Clause

sets out the official language by which the contract is to be interpreted

Arbitration

settling a dispute by agreeing to accept the decision of an impartial outsider

Joint Venture

sharing ownership of a company with foreign partners

Red Flag Rule

specific to the kind of business, there must be procedures to catch "red flags" that tip one off about possible information thefts.

Choice of Law Clause

specifies what law must be used to resolve a dispute that arises between the parties to a contract

Payment Clause

states the manner in which payment is to be received and the currency in which it is made.

Who's in charge of regulating medical devices?

the Food and drug administration

What is insider trading?

the illegal practice of trading in " material, non-public information."

A deed

the official document transferring ownership interests (title) from seller to buyer

title

the owner of property has legal possession of the property

Forum Selection Clause

the parties establish the place such as the country, state, or type of court for specified litigation or arbitration in the event of a dispute

what is a tippee?

the person who receives material nonpublic information from a tipper

Exchange rate risk

the potential loss or profit that occurs between the time currency is acquired and the time it is exchanged for another currency

Fee Simple or Fee Simple Absolute

the right to dispose of the property as the owner pleases (strongest form of real property control)

PONZI SCHEMES (MADOFF)

using cash from newer investors to pay off older ones

Transfer pricing

when division in multinational firms sells goods or services to another division within the company, but since there's no market price, so they create an artificial price

Mediation

where a third party helps the opposing parties come to a decision, but does not actually make the decision