BLAW EXAM 4 REVIEW

Know the law that allows a private person to sue a false advertiser.

Lanham Act

Know what the Supreme Court said about non-corporate insiders who luck into inside information on securities

The Supreme Court held, that if a defendant is not a corporate insider who owed a fiduciary duty to the shareholders, but was lucky enough to learn inside information, they could be responsible only if their position had a requirement that they could not use such information. They may have an unfair advantage over other stock traders, but it is not securities fraud.

Know what the Fair Debt Collection Practices Act prohibits

The act makes abusive debt collection practices illegal and contains a list of required actions. Harassing, deceptive, and unfair debt collection practices—including threats of violence or arrest, obscene language, the publication of a list of delinquent consumers, and harassing phone calls—are prohibited. Debt collectors may not discuss the debts with other people, including the debtor's employer. The act prohibits the use of false or misleading representations in collecting a debt.

Know what must be proven by the plaintiff to win a pollution negligence case

Tort liability may be based on negligence, failure to use reasonable care to prevent pollution from causing a foreseeable injury. duty, breach, actual cause, foreseeability of proximate cause, and damages.

To get a permit to dredge wetlands, what requirement must you meet?

You must offer other land to become a wetland. It is common for trading to be done—a builder "buys" other wetlands, or restores wetlands, in exchange for the right to fill some wetlands.

Know the definition of the per se rule

in antitrust, a violation held to be so pernicious as to have no defense if a violation is shown to have occurred. means that certain business agreements or activities automatically are illegal if found to exist. The classic example of a per se violation of antitrust law is a group of competitors agreeing on the prices to charge for their goods so they can eliminate price competition.

Antitrust laws do not hinder or ?

stop a company by getting bigger by bringing in house things they use to outsource

Know the four elements of a security under the Howey test.

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

Know the factors that reduce punishment for corporate polluters.

- Cooperate with the government in investigations - Voluntarily report illegal actions - Educate their workforce about environmental standards - Assist those who suffer from environmental wrongdoing - Have a strong internal environmental compliance program

Know the five requirements put on creditors by the Consumer Credit Protection Act (CCPA)

- Creditors must disclose all relevant terms in credit transactions (truth in lending). - Procedures for correcting inaccurate and disputed bills and charges must be provided (fair credit billing). - Credit-reporting agencies must provide accurate information in consumer reports (fair credit reporting). - Creditors may not use certain personal characteristics, such as sex or race, in determining a person's creditworthiness (equal credit opportunity). - Abusive debt collection techniques are prohibited (fair debt collection practices).

Know the four things that must be a state implementation plan under the Clean Air Act

- Enforceable emission limits - Schedules and timetables for compliance - Measures for monitoring air quality and emissions from pollution sources - Adequate funding, personnel, and authority for implementing and enforcing the SIP

Know the three statutes from the textbook that are indirect control on agencies.

- Freedom of Information Act, (makes most documents held by federal agencies available to the public. Unless the document falls within certain exempted categories, it must be released upon request from a citizen, although the process is often very slow and can be expensive. Exempted are trade secrets, documents related to national security, and documents that would, if disclosed, invade personal privacy.) - The Privacy Act ( informs citizens about what information is collected about them and how that information is used.) - The Government in the Sunshine Act (limits secret meetings by agencies. The public is entitled to at least one week's notice of the time, place, and subject matter of agency meetings.)

Know the remedies available for antitrust lawsuits

- Restrain a company or individuals from certain conduct - Force a company to sell part of its assets (break up the company) - Force a company to let others use its patents or facilities (licensing) - Cancel or modify existing business contracts Monetary damages Only plaintiffs suffering injuries caused by the anticompetitive behaviors of defendants can recover damages under antitrust law.

Know the FTC three-prong test for deception Be able to look at examples and find the one that meets the three prongs. HINT: look for deception (lies)

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.

Know the three things prohibited by Rule 10b-5

1.) To employ any device, scheme, or artifice to defraud; 2.) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or 3.) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

Know the standards for courts reviewing informal agency procedures.

A business unhappy with an agency sanction resulting from informal procedures may seek review. The agency head (or heads, if there is a commission) first reviews the decision. If dissatisfied with the agency's final decision, parties may seek review by the federal appeals court. In reviewing agency procedures, the courts are generally most concerned with whether the agency procedure was fair and whether the decision was consistent with the legislative intent of Congress. make sure agency follows rules and is fair courts interpret the law themselves

Know the definition of private company

A company that has fewer than 500 shareholders and does not allow its securities to be openly traded is called a private company. Also called close corporation; a firm owned by a relatively small number of shareholders that does not offer or trade its company stock on the stock exchanges; the company's stock is offered and traded privately, subject to restrictions imposed when the stock was issued.

Know what kind of standards and restrictions nonattainment areas have under the Clean Air Act

A new plant's pollution must be controlled to the maximum degree possible. The plant must use the lowest achievable emissions rate (LAER) technology. LAER can be a cleaner technology than the BACT. Generally, the EPA designates the LAER as the cleanest emission technology in use by any similar plant. New plant owners must certify that any other plants they have in the area meet SIP requirements. A new plant can be built in a nonattainment area only if any increase in air pollution from the new plant is offset by reductions in the same pollutants from other emission sources in the area. That is, when the new plant is operating, the area must enjoy an overall air quality improvement.

Most violations discovered by agency inspections are cleared up informally.

Agencies rely heavily on informal procedures that allow leeway in forcing compliance. Because informal procedures generally require less time and money than formal procedures, agencies prefer to use them when possible.

Know how states deal with deceptive business practices

All states give their attorneys general and private citizens powers similar to the FTC to bring suit against those involved in scams or dubious business practices. Most states have a business code or consumer protection act that restricts deceptive trade practices. These statutes can be applied to a wide range of activities.

Know the definition of publicly held company

Any company that issued traded securities is a publicly held company subject to reporting requirements. A company that has permission to offer its registered securities (stock, bonds) for sale to the public, usually through a stock exchange or traded over-the-counter via market makers who use non-exchange quotation services.

Know who Truth in Lending applies to

Anybody who provides credit as a normal part of their business. TILA covers only consumer credit transactions because the debtor must be a "natural person," not a business organization.

If you want to change wetlands in anyway, what permit must you obtain?

Army corps of engineers permit to Often, a permit to dredge wetlands includes a requirement that other land be restored to wetland status in exchange.

Know what the FTC must do to finalize a new regulation

As with most regulations, a proposed rule must be published in the Federal Register so interested parties may comment on it before it is finalized. After finalized it becomes part of the code of federal regulations

Know what is considered illegal practices for security professionals

Churning which 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 commissions earned on transactions. and scalping which is 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.

Know where regulatory agencies get their rulemaking powers from

Congress has authority under the commerce clause and the necessary and proper clause in the Constitution to create agencies and give them powers to enact rules.

Know the two ways agencies enforce regulations

Direct observation determines if a business is following the law. Examples include worksite safety inspections by OSHA inspectors and testing by the EPA for excessive air pollution emissions. Agencies may require businesses to monitor their own behavior. Those subject to a regulation can be required to report certain information to an agency at set times, such as monthly, or when certain events—often a violation—occur. Regulated businesses are required to self-report. Direct observation determines if a business is following the law.

Know how much the average development cost of a new drug is

Drug companies bear the cost of developing new drugs. It costs as much as $1 billion

Know the name of the statute that prohibits discrimination in credit

Equal Credit Opportunity Act (ECOA)

Know the textbook's example of Agency Direct Observation enforcement.

Examples include worksite safety inspections by OSHA inspectors and testing by the EPA for excessive air pollution emissions

Know the example of securities law misleading information from the text

For example, overly optimistic statements by executives can cause expectations of higher profits, leading investors to bid up the price of the stock. When the statements are found not to be related to actual performance, the stock price falls, thereby imposing losses on those who bought the stock on the basis of the positive statements.

Know what a business does if it does not agree with the outcome of an agency's adjudicatory hearing.

If the business is dissatisfied with the ALJ's decision and seeks review, the agency head (commissioner or administrator) reviews the decision. If the business is dissatisfied after this final agency review, it may then proceed to the federal appeals courts for further review, as in the Black Beauty case. appeal to the director of the agency (head of the agency).

Know how an agency's statutory interpretation is reviewed by courts.

It is given a greater scope of review. In contrast to the technical judgments required of the agency in implementing a statute, the courts have responsibility for the interpretation of the meaning of statutes enacted by Congress.

Know what CEO's and CFO's of publicly traded companies are required to do under Sarbanes-Oxley

It requires that the chief executive officer (CEO) and chief financial officer (CFO) of large companies that have publicly traded stock personally certify that financial reports made to the SEC comply with SEC rules and that the information in the reports is accurate.

Know the requirements for an agency to obtain evidence from public access areas against potential violators.

No warrant is required if evidence is obtained from an "open-field" observation, that is, if the evidence is gathered by an inspector through observations from areas where the public has access.

Price fixing for music licenses is legal by the rule of ?

Reason because otherwise the rule of market couldn't function well.

Know what enabling legislation created the Public Company Accounting Oversight Board

Sarbanes-Oxley (SOX) established the Public Company Accounting Oversight Board, which has authority to set accounting standards and discipline CPAs for misconduct.

Know what the Sherman Act prohibits

Sec. 1: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Sec. 2: Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.

Know what law the government used to break-up the Standard Oil Trust

Section 1 of the Sherman Act

Know SEC Rule 10b-5

Section 10(b) of the 1934 act makes it illegal for any person "to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe...." It provides the broadest base for bringing a securities fraud action, and it is used in litigation more than any other part of the act. Trying to prevent security fraud.

Know which statute gives you the right to see your credit report for free once a year

The Fair and Accurate Credit Transaction Act (FACT Act)

Know what SEC can and cannot do when reviewing a registration statement

The SEC does not rule on the merits of an offering; that is, it does not give an opinion about the likelihood of success of a proposed business. But it can require issuers to make high-risk factors clear in the prospectus so as to put buyers on notice. The registration becomes effective 20 days after it is filed. However, if the SEC issues a deficiency letter, the issuer needs extra time to amend the filing to provide more detail in the registration materials. The SEC can also issue a stop order to prohibit the sale of securities until the registration statement is amended to satisfy the examiners, but this is not common.

Know what types of boycotts are prohibited under the Sherman Act (This will be a question with four hypothetical answers and you will have to pick the most legal boycott. This question will require you to apply the principles we talk about in class and taught in the book.)

The boycott is used to force compliance with a price-fixing scheme or some other restraint of trade. Boycott cases usually fall under the per se rule against price fixing. boycotts may involve manufacturers getting together to tell dealers what they must do, or dealers getting together to tell manufacturers what they must do. The Supreme Court has made it clear that when horizontal competitors use a boycott to force a change in the nature of a vertical relationship, there is a per se violation of the law. Such cases are not common.

Know what CERCLA (the Superfund statute) says about the liability for potentially responsible parties

The parties may be held for joint and several liability they can get anybody they can reach to pay the whole thing.

Know the purpose of the disclosure provisions in federal securities law.

The purpose is to want potential investors to have good transparent clear information. Disclose to prospective investors all material information about the security, its issuers, and the intended use of the funds raised.

Know what must be included in the second part of an SEC registration statement

The second part is detailed information required by the SEC. SEC spells out detailed requirements in Regulation S-K. More history on the financial background and past experience of the issuers is required. There is also more information about the proposed business and the issuers. Investment analysts who want to see more detail may use this information because the disclosure document is available for public inspection.

Know the objective of the Clean Water Act

To restore and maintain the integrity of the navigable waters of the US.

Know the term for the entity that is hired to market new securities

Underwriter an investment banker, such as Morgan Stanley—to market the securities.

Vertical restrained trait

When companies in the same supply chain collude together

Know the example of what is not deceptive advertising

Years ago, the FTC commissioners said: "Perhaps a few misguided souls believe ... that all 'Danish pastry' is made in Denmark. Is it therefore an actionable deception to advertise 'Danish pastry' when it is made in this country? Of course not." The point is that some people may misunderstand certain advertisements, but that does not mean that the FTC is always concerned. For example, hair dye is often advertised as "permanent." A few people may think it means their hair will be the color of the dye forever, but no deception is involved. Most consumers know what is meant, and those who do not understand do not incur significant injury. The focus is on likely injury to the target of advertisements.

Can Congress prohibit judicial review of a particular administrative decision?

Yes, it can prohibit certain judicial review. It can decide when you can go to court. congress has the authority to do this

Be able to define the term Security (under the 1933 Act).

a negotiable financial instrument that represents some type of financial value; freely exchangeable for or replaceable in the satisfaction of an obligation. is one of two things: First, it may be debt in certain forms, primarily money borrowed by a corporation, usually a note or bond that can be traded. Second, it may be equity the most well-known being common stocks traded on stock exchanges.

Know what an administrative law judge is.

a person appointed to conduct an administrative hearing about a regulatory matter. Usually attorneys who work for the administrative agency, such as the Federal Trade Commission, serve in this capacity. They run a trial-like proceeding and issue a decision in the matter based on the facts determined at the hearing. a civil service employee of the agency, usually a staff attorney. Counsel for the agency presents the agency's evidence in support of the complaint; the business presents its evidence. An administrative law judge is an agency employee employee of the agency

Know what waters are considered to be under federal jurisdiction from the Clean Water Act. (You will get a fact pattern about run off that goes into a gully. You have to decide if the EPA has jurisdiction under the Clean Water Act).

all navigable water (large amount of water) and any water that connects with it.

Know what a horizontal restraint of trade is

anticompetitive action by businesses at the same level of operation. Rival firms that come together by agreement in an attempt to restrain trade by restricting output and raising prices is called a cartel. occurs when the businesses involved operate at the same level of the market and generally in the same market.

Know what kind of damages a company can get when its competitor makes false statements about the company in advertising

collect double the value of the profits that the defendant earned from false advertising by luring business away. double damages

Antitrust law does not stop a company from getting larger or?

doing more of its processes in-house The focus of the law is on business practices that can lead to a monopoly. The law does not restrict the size of firms. as long as you're growing internally and ringing in house things to outsource antitrust laws will not stop you.

Know what predatory pricing is

in antitrust law, pricing below an accepted measure of cost (such as average variable cost) to drive competitors from the market in the short run to reduce competition in the long run.

Know the definition of the rule of reason

in antitrust law, the court considers all facts and decides whether what was done was reasonable and did not harm competition in net; compare to the per se rule. court looks at the facts surrounding business practices before deciding whether it helps or hurts competition. The court considers such factors as the reasons for the restraint, the position of a firm in an industry, and the structure of the industry. If a court concludes that a business practice promotes competition, the court dismisses the case. But if the court finds that the practice on net reduces competition, then it violates the antitrust laws.

Know the definition of public nuisance in a pollution case

is an unreasonable interference with a right held in common by the public. In a pollution case, the right held in common is a community's right to a reasonably clean and safe environment

Can Corporations use the 5th Amendment protection against self-incrimination when being required to self-report to an administrative agency?

no, corporations cant it only applies to real people. the Supreme Court holds that the self-incrimination privilege does not provide much protection for corporations. Failing to report violations or reporting false information usually leads to heavier penalties than when a party volunteers violations.

Price fixing is?

per se illegal

Know what Truth in Lending requires

requires creditors in consumer transactions to disclose basic information about the cost and terms of credit to the consumer-borrower. By standardizing credit terms and methods of calculation, it helps people to shop for the most favorable credit terms. Transactions covered by TILA must disclose the credit costs in dollars (the finance charge) and the interest rate of that finance charge (the annual percentage rate, or APR). 1.) Service, activity, carrying, and transaction charges 2.) Loan fees and points (charges for making the loan) 3.) Charges for credit life and credit accident and health insurance 4.) In non-real-estate transactions, the fees for credit reports and appraisals

Know what the Securities Litigation Uniform Standards Act of 1998 requires

requires securities suits involving nationally traded securities to be brought exclusively in federal court under federal law

Know what right a consumer has under the Fair Credit Reporting Act

right to see information reported about them that plays a role in credit being denied. As consumer reporting agencies collect some inaccurate information, it is wise to check your reports and take steps to correct the information. Credit bureaus must: Respond to consumer complaints about inaccurate information within 30 days. Tell consumers, on request, who has asked for copies of their credit history in the past year. Provide a toll-free consumer service number. Get the consumer's permission before giving a report to an employer or before releasing a report containing medical information.

Know what the primary intention of the Clayton Act is

stop certain business practices that allowed a firm to develop into a monopoly by declaring practices that "substantially lessen competition or tend to create a monopoly" illegal. stops companies from joining together to get monopoly power

Know why the court in S. v. Baker Hughes let the merger go forward

the D.C. Circuit Court of Appeals denied the government's attempt to stop a merger of manufacturers of hard-rock hydraulic underground drilling rigs. Even though this industry had few sellers, the court found that the sophisticated and powerful buyers of such drilling rigs—oil companies—had sufficient bargaining power to ensure that the merged firm would be unable to charge monopoly prices for its rigs.

Know the scam where a postcard informing the recipient that they won valuable prizes results in the recipient having to pay money to get the prizes. Know what the FTC can do about it.

the FTC investigates practices claimed to be unfair and deceptive. The FTC staff proposes complaints to the five commissioners, who decide by majority vote whether to issue a complaint. The complaint begins legal proceedings against a business engaged in practices the commission wants ended or modified. They are settled by consent decree

A court is more likely to approve a data exchange when?

the information is made public

Know what a credit reporting company must do when a consumer notifies it of an error on their credit report

the information must be deleted or changed or a statement from the consumer about the problem must be put in the file.

Know what must be proven by the plaintiff to win a pollution trespass case

there was physical invasion of plaintiffs property.

Know what happens when the EPA determines that a pollutant is a threat to public health or the environment

tighter control standards are to be imposed without regard to such economic factors as cost or technological feasibility.

Know the definition of agency procedural rules

under the Administrative Procedure Act or other legislation, the process that an administrative agency must follow for its actions to be valid. The details of an agency's structure and an explanation of its method of operation and its internal practices are covered in procedural rules. The power to enact such rules is authorized by the agency's enabling statute.

Know the FTC test for unfairness (it also has three elements)

unfairness is a consumer protection law, a charge under Section 5 of the Federal Trade Commission Act that a business practice causes harm that consumers cannot reasonably avoid. It is usually added to a charge of deception. 1.) It causes substantial harm to consumers. 2.) The injury is harmful in its net effects. 3.) Consumers cannot reasonably avoid injury.

Horizontal restrained trait

when two companies that do the same thing collude together