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Regulations
| Question | Answer |
|---|---|
| Security act of 1933 started in which market? | 1st/Primary |
| the Securities Exchange Act of 1934 was passed to | To eradicate manipulative activities in the secondary market |
| The Trust Indenture Act of 1939 was passed to | to safeguard investors in corporate bonds by requiring the appointment of a trustee to oversee corporate compliance with requirements of the "Trust Indenture." |
| The Investment Company Act of 1940 was passed to | to regulate the activities of investment companies and to safeguard the purchasers of investment company securities. |
| The Securities Investor Protection Act of 1970 was passed to | to protect customer funds and securities when a brokerage firm fails. |
| Sarbanes-Oxley Act of 2002 was passed in response to.. | "wave" of corporate scandals that became evident after the great stock market meltdown of 2000. |
| The Act of 1933 required that new issue purchasers be provided with a | a detailed prospectus before a purchase was completed. |
| The Securities Act of 1933 applies to exempt or non-exempt issues? | Non-exempt |
| The Act of 1933 requires that a registration statement be filed with the | the SEC before any sales related activities can take place. It is the issuer's responsibility to file the registration statement |
| Included in the registration statement is the.. | the general character of the business: the uses of the proceeds of the offering: historical audited financial statements; biographical data on officers and directors as well as their percentage holdings: legal issues; |
| Once the registration statement is filed, the issue enters into a? | the "20-day cooling off" period |
| During the "20-day cooling off" period: | The issue cannot be sold. The issue cannot be advertised. The issue cannot be recommended. Orders to buy the issue cannot be solicited |
| problem. If the SEC feels that there is not sufficient disclosure, the issuer gets a | "deficiency letter" from the SEC asking for more disclosure. Until disclosure is adequate, registration is not "effective |
| During the "20-day cooling off" period, the following are permitted | underwriters are allowed to distribute a "preliminary prospectus, During this period, lists of interested customers may be drawn up(taking Indications of Interest) |
| The prospectus must be delivered when? | At or prior to confirmation |
| The final prospectus must be given to purchasers during the.. | the 90-day period following the effective date, only applies to first registered offerings. |
| If an issuer already has registered stock outstanding, and the issuer wishes to perform another offering of securities, a prospectus only has to be delivered for | 40 days |
| Prospectus Delivery For Exchange Or NASDAQ is how long | 25 days |
| Rule 415 | Allows issuer to place a blanket registration statement on the sec shelf. Good for 3 years. No cooling off purchase, purchase anytime with 2 days notice. Not applicable to IPOS |
| Section 4(2) | "general" provision of the Act that allows private placements to be made to institutions and other wealthy investors deemed to be able to "fend for themselves" without a registration filing with the SEC |
| Section 4(6) states that: | offers of no more than $5,000,000 made only to accredited investors (covered later in this section), where no advertising is used, are exempt. |
| The issues which are exempt from registration under the Act of 1933 can be broadly categorized into four areas - | - government obligations, issuers already regulated under other laws, non-profit issues; and other exemptions. |
| Non-exempt issues of 1933 are.. | Corporate stocks, bonds, rights, warrants Options Investment companies and variable annuities Limited partnerships |
| Unless these securities are offered in exempt transactions, they must be registered and offered through a prospectus under the 1933 Act. The exempt transactions are: | Intrastate offerings (Rule 147) Private placements (Regulation D) Small dollar amounts (Regulation A) Rule 144 transactions (transactions that would otherwise require the use of a prospectus) Rule 144A (Tradable Private Placements) |
| Rule 147 | Federal laws only apply to interstate activities - the federal government has no authority if the activity is confined within a state. |
| Regulation D | issue is offered "privately," it is not considered to be a "public" offering and the transaction is exempt from registration |
| Reg D. The max ammount of non-accredited investors are? | 35 |
| Reg D. The max ammount of accredited investors are? | Unlimited |
| What is an accredited investor? | Individual with a net worth of $1,000,000, exclusive of residence; 200,000 income per year for the past 2 years. 300,000 joint income, officer or director of issue. |
| Financial Institutions such as banks, insurance companies, mutual funds, with assets in excess of $5,000,000 are considered? | accredited investors |
| Non-profit institutional investors such as pension plans and college endowment funds with assets in excess of $5,000,000 are considered? | accredited investor |
| Rule 504 | for offerings not to exceed $1,000,000 - there is no specific information requirement on the disclosures that must be made to investors. |
| Rule 505 | for offerings not to exceed $5,000,000 - there is a specific information requirement on the disclosures that must be made to investors, including the presentation of certified financial statements of the issuer |
| Rule 506 | for offerings of unlimited dollar amounts |
| All non-accredited purchasers must be? | Sophisticated buyers |
| Sophisticated investors are? | investors. This means that the investor is able to evaluate the merits of the issue. This does not mean that the purchaser cannot bear the investment's economic risk |
| It is the issuer's responsibility to insure that all non-accredited investors are? | Sophisticated |
| Regulation A | an issuer can sell up to $5,000,000 of securities each year and be exempt from registration. |
| Regulation A is not permitted to be used to make offers of interests in? | Oil and Gas programs |
| Rule 144 allows the holder of "restricted" (never registered) shares to sell them publicly if: | The issuer has registered shares outstanding and is current with its SEC filings. Files form 144, Fully paid securities for 6 months |
| The maximum sale under each Form 144 filing is the.. | GREATER of 1% of the outstanding shares of the company; or weekly average of the 4-weeks' trading volume preceding the filing of the Form 144 |
| Rule 144 is extended to include "control" stock, defined as stock held by an.. | an officer, director, 10% shareholder or "affiliated person" (such as an officer's wife). |
| Cannot solicit orders to buy / Can recontact customers regarding 144 securities within.. | 10 business days |
| If the holder of "144" shares dies, his or her estate can sell the position.. | without being subject to the 144 volume limitations |
| If the holder of restricted "144" shares is no longer affiliated with the company for at least 3 months, and has held the shares for at least 6 months, then | then the shares can be sold without meeting the volume restrictions |
| When effecting a "144" transaction for a customer, the following documentation must be kept on file by the member firm | Copy of Form 144, Issuer's Representation Letter, Broker's Representation Letter |
| Rule 144a | enacted in 1992 to allow large institutional purchasers to trade private placement securities in the United States |
| Rule 145 reorganizations | certain corporate reorganizations will require the filing of a registration statement, while some other corporate reorganizations are exempt from registration. |
| Rule 153A prospectus delivery | Majority vote of the shareholders is required to approve these reorganizations. Under Rule 153 A, the shareholders must get a copy of the prospectus detailing the terms of the reorganization prior to the voting date. |
| Under Rule 145, the following corporate reorganizations do not require the filing of a registration statement: | a stock split or reverse split a change in par value a stock dividend |
| Manipulation (Miss Perms) | Becomes fraud under the Act. |
| Insiders (Miss Perms) | Are defined under the Act and prohibited from profiting from inside information. |
| SEC created (Miss Perms) | The Securities and Exchange Commission was created to regulate the markets. |
| Short Sale Rules (Miss Perms) | The SEC wrote Regulation SHO to set rules for selling securities short (selling borrowed shares) |
| Proxy Rules (Miss Perms) | Outside proxies of shareholders became regulated to make takeover attempts fair to shareholders |
| Exchanges(Miss Perms) | Exchanges - Must now register with the SEC and regulate themselves under SEC guidance, as must their members. |
| Reports (miss Perms) | Corporate issuers must file annual and quarterly financial reports which are public information. |
| Margin (miss Perms) | Control over credit on securities was given to the Federal Reserve |
| Stabilization (miss Perms) | Though manipulation is fraud, stabilization of a new issue in the trading market is permitted under SEC rules. |
| Act of 1934 does not apply to? | Exempt securities except for "manipulations" that apply to both |
| Wash Trades are.. | Buying and selling the same security to create the "appearance" of trading activity. |
| Trading Pools are.. | Investors grouping together trading the same security among themselves at successively higher prices without true change of ownership, cuases a fake market |
| Rule 10b-5 | Catch all rule. states that if you do something the Act didn't specify, and it is wrong, it can be considered as "fraud" under the Act. |
| I = Insider | as an officer, director or 10% shareholder of a company |
| Insiders are required to report their trades within.. | Two business days of the event to the SEC |
| Insiders are prohibited from trading based.. | material non-public information". |
| Any short swing profits under 6 months from an insider must be.. | paid back to the corporation |
| Insiders are prohibited from selling their.. | eir own company's stock short except that they can "short against the box" at year-end to lock in a gain and defer tax to the next year |
| Under the new definition of an "insider," both the "tipper" and the "tippee" are | Liable for the act |
| The SEC regulates? | Securites only, does not regulate insurance products, commodities, or futures contracts |
| Regulation SHO | requires that every order ticket to sell be marked long or short |
| Reg. T | Reg. T controlling credit on securities extended from broker to customer; non-exempt only |
| Reg. U | Reg. U controlling credit on securities extended from bank to broker. non-exempt only |
| Regulation M: | 1934 designed to deal with potential market manipulations that occurred during the "20-day cooling" off period for "add-on" securities offerings |
| Rule 101 | sets limits on syndicate members that are not market makers during the "20-day cooling off" period for an add-on offering |
| Rule 101 Tier 1: | Actively Traded: There is no trading restriction. This applies to a stock that has an average daily trading volume of at least $1,000,000 and a minimum market capitalization of at least $150,000,000 |
| Rule 101 Tier 2 | Subject to Limited Trading: Trading by syndicate members who are not market makers is restricted only for the 1-day period prior to the effective date. 100,000 and cap at 25 million |
| Rule 101 tier 3 | Inactively trading, 25,000 with cap at 25 million |
| Rule 105 | Impedes Short Sellers From Pushing Down A Security's Price Prior To The Effective Date |
| Rule 104 | details the requirements for stabilization of a new issue in the aftermarket. |
| A "Notice of Stabilization" must appear on | the inside front cover of the prospectus |
| stabilizing bid can only be placed.. | At or below the Public Offering Place, never above |
| Under the Securities Act of 1934, an "insider" is defined as an | Officer Director 10% shareholder of the issuer's equity securities |
| The Trust Indenture Act of 1939 was passed because | it was found that the Act of 1933 did not adequately protect bondholders after the offering was completed |
| Trust Indenture Act of 1939 requires that all.. | interstate offerings of "non-exempt" bonds of $5,000,000 or more must be made with a Trust Indenture |
| The Investment Company Act of 1940 | This act requires that investment companies register with the SEC and that initial offerings of investment company securities be registered with the SEC. |
| An investment adviser is | is someone who gives advice to a client about investments for a fee. these persons must register with the SEC if they give advice interstate to 15 or more persons. |
| securities investor protection act of 1970 | Protects customers, In the 1960s, many brokerage firms failed and took customer assets with them |
| What is SIPC? | insurance fund derived from annual assessments made by broker-dealers. The fund protects each customer of the firm for up to $500,000 of equity in an account, inclusive of coverage for cash balances not exceeding $250,000 |
| 3 exceptions for the do not call not.. | Established Business Relationship (EBR), Express Written Consent, Personal Relationship with The Representative Making The Solicitation |
Created by:
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