Law 204 - Week 9 - Raising Capital Part I: Securities Law
Who is an accredited investor?
A person who has sizeable net income and financial assets who can purchase securities without the need for a prospectus.
Which of the following is NOT a corporate law step a private corporation must take before "going public"?
Appointing a Chief Executive Officer.
What must be included in a prospectus?
Audited financial statements and statements of material investment risk.
Why are public companies subject to significant disclosure requirements?
Given the secondary market for shares, it is important to give would-be purchasers of shares information about corporate well-being.
What is something a public corporation would be required to do in Canada that a private corporation would not be required to do?
Inform regulators and the public of all material changes to the corporation, whether good or bad.
In securities parlance, what is mean by the "exempt market"?
It is a section of Canada's capital markets where securities can be bought without the protections of a prospectus.
Which of the following is NOT required to be disclosed by a reporting issuer?
Its shareholder list.
What is a primary reason why equity investment in corporations is attractive?
The Corporate Veil limits the investment risk to the money invested.
What is the benefit of buying shares pursuant to a prospectus over buying shares pursuant to a private placement?
The prospectus shares will be freely tradable while the private placement shares must be held onto for a period of time
What is the benefit of buying shares pursuant to a prospectus over buying shares pursuant to a private placement?
The prospectus shares will be freely tradable while the private placement shares must be held onto for a period of time.
How do securities laws protect corporations that wish to raise money through Canada's capital markets?
They protect the integrity of the capital markets, which in turn encourages investors to use the capital markets and invest in companies.
An overarching aim of securities laws and regulation is...
To protect the integrity of the investment markets.
Which of the following trades would be exempt from the prospectus requirements of the Securities Act?
When a private corporation issues shares to a computer programmer for services rendered to the company.
When must a corporation write and file a prospectus?
When it wishes to make a distribution.
For an investor, what makes buying "exempt securities" risky?
a) Greater potential to lose your investment. b) The investor receives less information about the investment than if it was a non-exempt purchase. c) Liquidity risk - the exempt security may be difficult to sell. d) All of the above. ***Answer***
Which of the following is NOT considered a "security"?
a) a non-voting preference share b) corporate bonds (or "debt certificates") c) options to buy common shares d) none - they are all securities **Answer**
