Principles of Securities Regulation, Revised
Author:
Hazen, Thomas Lee
Edition:
4th
Copyright Date:
2017
29 chapters
have results for Principles of Securities Regulation
Preface 11 results (showing 5 best matches)
- Principles of Securities Regulation provides an overview of securities regulation without the detail and source materials provided in the Treatise and Hornbook. This Concise Hornbook is specifically designed for the law student seeking a book to help tie together the many complex principles covered in a course in securities regulation.
- Principles of Securities Regulation is a distillation of my seven volume Treatise on the Law of Securities Regulation (Thomson Reuters 7th ed. 2016) and the one volume student edition—Hornbook on the Law of Securities Regulation (West Academic Press 7th ed. 2016).
- Principles of Securities Regulation is meant to supplement a student’s casebook and notes. I have kept citations to a minimum. Students desiring more detailed explanation of sources for further research should consult the Treatise or Hornbook.
- Securities Act of 1933 (1993 Act)
- Securities Exchange Act of 1934 (1934 Act)
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Chapter 1. The Basic Coverage of the Securities Laws 197 results (showing 5 best matches)
- The regulation of securities transactions began with the regulation of the dealers in securities. Over time the regulation expanded to cover the companies issuing the securities as well as the market place itself. Today there is widespread regulation of all aspects of securities transactions and the market place.
- In addition to regulation of the securities markets, the federal securities laws regulate the companies issuing securities (“issuers”), as well as purchasers and sellers of securities. Securities trading activities can be divided into two basic subgroups: market regulation and initial public offerings.
- The scope of state blue sky laws was significantly curtailed in 1996 with the enactment of the National Securities Markets Improvement Act of 1996. These 1996 amendments to existing federal securities laws reversed the pattern established under the first sixty-three years of federal securities regulation by ending concurrent state and federal regulation. Because the 1966 amendments explicitly preempted stat law in many areas of securities regulation, the former regime of concurrent state and federal regulation was significantly narrowed. Particularly affected were the registration and reporting requirements applicable to securities transactions. State regulation of broker-dealers and investment advisers was also curtailed. Notably, although the National Securities Markets Improvement Act preempts states from imposing specified regulatory provisions, it does not preclude state law fraud actions. In contrast, the Securities Litigation Uniform Standards Act of 1998 preempts most
- In 1996, Congress significantly limited the role of state law in securities regulation. The National Securities Markets Improvement Act of 1996 (NSMIA) explicitly preempts state law in many areas. The Act amended the 1933 Act § 18 to provide that a number of securities offerings would be exempted from state law regulation. Moreover, the 1996 amendments specifically preempt state regulation that would require registration or qualification of several categories of covered securities. Those covered securities include most publicly traded securities: securities listed on the New York Stock Exchange, the American Stock Exchange, or the NASD’s National Stock Market. Although the federal act precludes the states from imposing registration or reporting requirements on issuers of covered securities, it does expressly preserve the states’ right to require filing of documents solely for notice purposes. In addition to the preemption of state laws with regard to publicly traded securities, a...
- The statutory definitions in both the 1933 and 1934 Acts make it clear that securities include not only stocks and bonds but also “any put, call, straddle, option, or privilege on any security.” Thus, an investment that is derivative of a security is itself a security. Derivative investments—both those based on securities and those based on commodities or other underlying values—have become a significant segment of the investment markets. Regulation of derivative investments is more fragmented than securities regulation generally. The discussion that follows addresses the applicability of the securities laws to derivative investments.
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Chapter 8. State Blue Sky Laws 13 results (showing 5 best matches)
- Most law school courses in securities regulation focus primarily, if not exclusively, on federal law. The emphasis on federal law should not be taken to indicate, however, that the states do not play a significant role in regulating securities transactions. In fact, state law represents the genesis of U.S. securities regulation. Securities regulation in this country began as a matter of state law, and it was not until twenty-two years after the first state securities law that Congress enacted federal securities regulation in 1933.
- In 1996, Congress significantly limited the role of state law in securities regulation. By enacting the National Securities Markets Improvement Act of 1996 (NSMIA), Congress reversed the pattern established under the first sixty-three years of federal securities regulation. Pub. L. No. 104–290, 110 Stat. 3416 (104th Cong., 2d Sess. 1996). The earlier model had contemplated concurrent state and federal regulation, but NSMIA explicitly preempted state law in many areas of securities regulation. Particularly affected were the registration and reporting requirements applicable to securities transactions.
- Unlike federal securities regulation, the state securities acts generally permit a merit analysis of the investment before certain securities can be offered for sale within that state’s borders. The states thus have what is known as a “merit approach” (at least with regard to some offerings of securities), in which state law merit regulation imposes a substantive scrutiny that goes further than the full disclosure approach of the federal laws. Under the registration by qualification, state securities administrators are empowered to look into the merits of the investment being offered. The state acts also generally provide for a short form registration for securities of more established issuers. The “merit approach” thus contrasts with federal securities law’s exclusive focus on full disclosure. As is the case with the federal registration provisions, the state securities acts provide numerous exemptions. Additionally, under merit regulation, the states may impose standards that are...
- The preemption of state registration requirements is not limited to the above-mentioned publicly traded securities. Under NSMIA, a large number of federally exempt securities and transactions are now also exempted from state regulation. Additionally, even for those securities and transactions not otherwise exempted from state regulation, sales to “qualified purchasers,” as defined by the SEC, are exempted from state imposed registration and reporting requirements that go beyond the federal filings.
- 1933 Act § 18(b), as enacted by NSMIA, provided that a number of securities offerings would be exempted from state law regulation in terms of registration and reporting requirements. Notwithstanding the curtailing of state law regulatory jurisdiction, state antifraud provisions were preserved. 1933 Act § 18(b) precluded state regulation requiring registration or qualification of several categories of certain covered securities: those included securities listed on the New York Stock Exchange. Parallel preemption existed with respect to securities traded on the American Stock Exchange or through the NASDAQ National Stock Market. Although precluding substantive registration and reporting requirements by the states, the Act expressly preserved the states’ right to require filing of documents solely for notice purposes. This preservation of the states’ authority to require notice filings has the effect of preserving state registration by coordination of the federal registration.
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Chapter 14. Market Regulation; Broker-Dealers 226 results (showing 5 best matches)
- In making his or her recommendation to the customer, the broker-dealer is under an obligation not only to know and consider the customer’s investment objectives, but also to have some familiarity with the security being recommended. High pressure sales tactics can take various forms and are carried our using a variety of tactics. The movie “Boiler Room” accurately depicted many of the tactics used in the perpetration of securities brokers’ high pressure sale frauds. The extreme measures portrayed in that movie were not exaggeration. These tactics are not new. In fact, similar overreaching brokerage sales programs were behind the regulation that Congress imposed in 1934. For example, many of these operations “lent a carnival tone to securities marketing.” Joel Seligman, The Transformation of Wall Street 24 (1982). In particular, Congress was concerned with sales contests for brokers, awarding liberal prizes to the brokers and/or offices with the most securities sales. These types of...
- SEC regulation of the industry is supplemented by a system of “self-regulation”. 1934 Act §§ 6 and 15A delegate to “national securities exchanges” and “national securities associations,” respectively, substantial authority over their members, including the power to expel, suspend, or discipline them for certain specified kinds of activities or for “conduct . . . inconsistent with just and equitable principles of trade.” In order to exercise such powers, an exchange or association must register with the SEC, which, under 1934 Act § 19, is given certain oversight powers with respect to its disciplinary proceedings and adoption and amendment of its rules.
- When Congress created the SEC in 1934, stock exchanges, as private associations, had been regulating their members for up to one hundred and forty years. Rather than displace this system of “self-regulation,” Congress superimposed the SEC on it as an additional level of regulation. The effect of 1934 Act § 5 is to require every “national securities exchange” to register with the SEC. Under 1934 Act § 6(b) an exchange cannot be registered unless the SEC determines that its rules are designed, among other things, to “prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,” and to provide for appropriate discipline of its members for any violations of its own rules or the securities laws.
- Regulation of securities brokers is not new. Securities broker regulation can be traced back to the thirteenth century. This early regulation took the form of licensing securities brokers in London. Notwithstanding this regulatory structure, stock exchange dealings, with speculation subject to alternate booms and panics, became a part of the English markets in the latter part of the seventeenth century. There were periods of speculation and wild fluctuations in the market. This was followed by English legislation by the end of the seventeenth century that was enacted to protect investors against unscrupulous manipulation by stock jobbers and stock brokers. Many of the U.S. states adopted similar stock jobber and stock broker regulation. For example, in 1829, in reaction to speculative fever, New York enacted a Stock Jobbing Act that was designed to control “the more shadowy forms of financial speculation.” This and similar legislation proved to be ineffective, and there was no...
- There was no comparable regulation for government securities dealers until 1986. Following the insolvency of a number of government securities dealers, Congress enacted legislation to require the regulation of government securities dealers. The government securities dealer registration requirements more closely parallel that of broker-dealers generally than of municipal securities dealers. Government securities are those securities that are issued or guaranteed by the federal government or a federal agency. Treasury securities, such as savings bonds, “T-Bills,” and “Treasury Notes” are familiar government securities. Lesser-known government-guaranteed securities are those issued by federally-owned agencies, for example Government National Mortgage Obligations or “Ginnie Maes.” Finally, there are money market instruments such as “federal funds,” and “repurchase agreements.” Federal funds are cash reserves that the Federal Reserve Board requires banks to maintain for liquidity...
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Chapter 9. Securities Exchange Act of 1934— Registration and Reporting Requirements for Publicly Traded Companies 114 results (showing 5 best matches)
- However, the scope of the 1934 Act is not limited to regulation of issuers and their securities; the Act also focuses on the structure and operation of the securities markets. This market regulation encompasses regulation of the markets themselves and regulation of the broker-dealers who participate in those markets. With regard to the market system and the broker-dealer industry, the 1934 Act requires registration of all national exchanges, as well as all professional traders, dealers and brokerage firms that are members of these exchanges.
- The 1934 Act’s registration and periodic reporting provisions for securities of publicly held companies trigger other reporting and remedial provisions of the Act. For example, the 1934 Act regulates the proxy machinery of reporting companies, tender offers for securities of publicly traded companies, insider short-swing profits, manipulative practices regarding publicly traded securities, and prohibitions against fraud in connection with the purchase or sale of a security. In addition, securities that are required to be registered are also subject to annual and periodic reporting requirements under the 1934 Act. In addition to the foregoing regulation of publicly traded securities, the 1934 Act also prohibits fraud in connection with all securities transactions, regardless of whether they are publicly traded. This prohibition stems from 1934 Act Rule 10b–5.
- 1934 Act § 12(a) makes it unlawful for any broker or dealer to effect any transaction in a security on a national exchange unless a 1934 Act registration has been effected for the security. Accordingly, all securities traded on a national exchange must be registered with the SEC. Registration under the 1934 Act in turn triggers the Act’s periodic reporting requirements, proxy regulation, insider trading and anti-manipulation prohibitions, as well as the regulation of tender offers.
- Regulation S–K is divided into ten subparts (Subpart 1—Subpart 1000). Subpart 1 sets out the Commission’s procedures on two volitional disclosure issues—projections or forward looking statements and security ratings. Subpart 100 itemizes disclosures regarding the business of the registrant, while Subpart 200 sets forth disclosure requirements for the registrant’s securities. Subpart 300 provides guidance for disclosing information regarding the registrant’s financial information, and Subpart 400 deals with management and certain security holders. Subpart 500 requires disclosure concerning the issuer’s registration statement and prospectus, while Subpart 600 lists required exhibits to various filings. Subpart 700 provides for “miscellaneous” disclosures regarding unregistered securities and indemnification of directors and officers. Subpart 800 speaks to the industries guide for the 1933 Act and 1934 Act Filings, and Subpart 900 articulates disclosure responsibilities concerning roll...
- In contrast, a company’s disclosure and reporting obligations do not end with the filing of the Exchange Act registration statements. Exchange-listed securities, as well as those over-the-counter equity securities subject to 1934 Act § 12(g)(1)’s registration requirements, incur periodic reporting obligations under 1934 Act § 13(a). These periodic reports include the 10–K annual report and the 10–Q quarterly report. Also required, on Form 8–K, are filings of certain specified material changes in the issuer’s condition or operations. Supplementing the interim disclosures required by Form 8–K are the enhanced requirements of the Sarbanes-Oxley Act that there be disclosure on “a rapid and current basis” of information regarding material changes in financial condition or operations, which may include trend and qualitative information and graphic presentations, as the SEC determines is necessary or useful to investors and in the public interest. ...Regulation FD, which was adopted by the...
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Chapter 4. Exemptions from 1933 Act Registration 187 results (showing 5 best matches)
- There are a number of advantages to relying upon a Regulation A offering rather than one of the other exemptions or, alternatively going through a full-fledged 1933 Act registration. Even with the expansion of Regulation A, Regulation A offerings are simpler than registration even with the scaled disclosure requirements for qualifying small businesses. For example: (1) Unlike a registered public offering, most securities issued in a Regulation A offering are not automatically subject to the periodic reporting requirements of the Securities Exchange Act of 1934. However, for Tier Two offerings (those in excess of $20 million), the issuer would still be subject to the 1934 Act’s continuous reporting requirements. (2) General solicitations of purchasers are permitted in Regulation A offerings. (3) There are no required restrictions on resales of securities offered under Regulation A. (4) Unlike a 1933 Act registration, offerings under Tier One of Regulation A do not require that the...
- Regulation S’s safe harbor for issuers has three categories of securities offerings, which are based on various factors including the nationality and reporting status of the issuer and the degree of United States market interest in the issuer’s securities. The first category consists of securities of foreign issuers with no substantial United States market interest, provided that the securities are offered and sold in offerings that are directed overseas, as well as securities backed by the full faith and credit of a foreign government, and securities issued pursuant to certain employee benefit plans. The second category includes securities of 1934 Act reporting issuers, non-reporting foreign issuers’ debt securities, non-reporting foreign issuers’ non-participating preferred stock, and asset-backed securities. The third category consists of securities of non-reporting United States issuers and equity offerings by non-reporting foreign issuers with a substantial United States market...
- The exemption provided in Regulation A is dependent upon the securities being offered through the use of an “offering circular,” in a manner similar to the use of a prospectus in a registered offering. In order to use the Regulation A exemption, an issuer may not offer securities that exceed an aggregate amount of $50 million in any one year. As has been the case with § 3(b), the dollar ceiling for a Regulation A offering has increased over time. Because of the disclosure burdens imposed and the former $5 million ceiling on offerings, Regulation A had been used relatively infrequently when compared to the exemptions from registration available under Regulation D. However, Regulation A is likely to get renewed vitality since, as noted above, the JOBS Act raised the ceiling to $50 million. As noted above, in March 2015, the SEC amended its Regulation A rules to replace the previous $5 million ceiling for Regulation A offerings with two tiers—Tier One provides an exemption for...
- Until 1996, an exemption from 1933 Act registration did not affect the need for an exemption or registration under any applicable state securities laws. However, in 1996, Congress changed this overlapping coverage when it enacted the National Securities Markets Improvement Act of 1996 (NSMIA). 1933 Act § 18(b), which was added by NSMIA, provides a preemption of, and thus an exemption from, state securities registration requirements. The preemption extends to most publicly offered securities which are registered with the SEC and to many transactions that are exempt from SEC registration by virtue of 1933 Act § 3 or § 4. Most of the federal exemptions set forth in section 3 trigger the preemptive provisions; if a person issues a security under one of those exemptions, they likely will not have to register those securities in accordance with state requirements. For example, many transactions that are exempt under 1933 Act § 4 qualify for the federally mandated exemption from state law...
- “Restricted securities” are defined in Rule 144 as those acquired directly or indirectly from an issuer in a nonpublic offering, as well as securities subject to the resale restrictions imposed by the exemptions provided by Regulation D. Rule 144’s resale restrictions include a one year holding period for restricted securities, which is reduced to six months for securities of companies subject to the 1934 Act’s periodic reporting requirements. Rule 144 also is available with regard to securities issued under § 3(a)(9)’s exemption for securities issued exclusively in exchanges with existing securities holders. In 1998, securities issued in off-shore offerings under Regulation S were added to the list of restricted securities. The SEC has emphasized, however, that persons who offer or sell restricted securities without relying on Rule 144 will have a “substantial burden of proof in establishing that an exemption * * * is available,” and that “brokers * * * who participate in the...
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Chapter 20. Related Laws 21 results (showing 5 best matches)
- The preceding chapters are devoted primarily to the federal securities laws. In addition to the seven federal securities acts that are discussed in the preceding chapters, there are a number of other laws—both federal and state laws—that in some major respects overlap with the federal securities laws. Many of those laws are referred to in the earlier chapters. This chapter provides a summary of the most significant of these related laws. After providing an overview of the relationship of the federal securities law to state law and to other federal laws, this chapter discusses some of the more prominent federal laws that have a significant relationship to securities regulation.
- There are a number of related federal laws that affect securities law practitioners and their clients. There may be SEC involvement in some of these related areas. For certain regulated industries, the securities of regulated issuers are subject to other federal administrative agencies. For example, the Comptroller of the Currency has jurisdiction over the distribution of securities issued by national banks, although securities issued by bank holding companies are subject to SEC jurisdiction. A similar arrangement exists with regard to securities of savings and loan associations, that are subject to regulation by the Office of Thrift Supervision (formerly the Federal Home Loan Bank Board).
- With respect to companies and their securities that are subject to SEC regulation, there are a number of other related federal statutes that may come into play in addition to the federal securities laws. The more important of these laws are taken up in the sections that follow. First, the Foreign Corrupt Practices Act of 1977 (FCPA) was enacted in response to widespread concern over the activities of domestic companies in their dealings abroad. This act has implications that go beyond foreign activities and corrupt practices.
- Perhaps the hottest topic in securities regulation at the end of the twentieth century was the increasing competition between banking and more traditional securities industries. Although the Glass-Steagall Act of 1933 prohibited commercial and savings banks from engaging directly in various aspects of investment banking, the line between investment banking and commercial banking became increasingly blurred over time. The developing competition between commercial and investment banking was highlighted not only by each offering competing services, but also by bank acquisition of stock brokerage operations and vice versa. In addition to the increased competition between the two industries, the SEC and various bank regulatory agencies, including the Comptroller of the Currency, were constantly engaged in jurisdictional disputes. In 1999, Congress eliminated the separation of commercial and investment activities that had been imposed by the Glass-Steagall Act.
- As a general proposition, federal securities law is premised on a system of full disclosure rather than scrutinizing the merits of securities that are offered and sold. The SEC does not review the substance of the investment. Instead, the SEC is charged with ensuring that investors have sufficient information upon which to make an investment decision. As discussed in chapter 8 above, this is in contrast to the state securities laws that focus not only on disclosure, but may also regulate the merits or fairness of securities offered within the state. State securities laws are supplemented in many respects by state corporate laws. State corporate laws focus on corporate formation, operation, and corporate governance. Corporate governance includes defining the respective roles of shareholders, officers, and directors. Among other things, state corporate law provides the rules governing shareholder voting rights, although there are the federal disclosure requirements that are discussed...
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Chapter 6. IPO Practices: Manipulation, Stabilization and Hot Issues 37 results (showing 5 best matches)
- Securities that are offered to the public are sometimes subject to manipulation. The Securities Act of 1933 contains registration, disclosure, and antifraud provisions, but the Act does not directly address aftermarket activities of securities offered under a 1933 Act registration statement. Market regulation generally is the province of the 1934 Act.
- In general, Rule 101 of Regulation M prohibits distribution participants and their affiliated purchasers from bidding for or purchasing—or attempting to induce any person to bid for or purchase—a covered security during a specified period (the “restricted period”). Rule 101 applies only to distribution participants and their affiliated purchasers in connection with a distribution of securities.
- Rule 105 of Regulation M is designed to prevent manipulative short selling prior to a public offering by sellers who cover their short positions by purchasing securities in the offering, thus largely avoiding exposure to market risk. Under the rule, certain short sales are prohibited from being covered with securities offered by an underwriter, broker, or dealer participating in the offering.
- A distribution of securities subject to Regulation M is distinguished from ordinary trading transactions by the “magnitude of the offering” and the presence of “special selling efforts and selling methods.” The rule thus is not limited to the types of distributions generally covered by the 1933 Act registration requirements. In exploring the magnitude of the purported distribution, the SEC looks at a number of factors, including the number of shares for sale, the trading volume that those shares represent, the percentage of outstanding shares, and the public float. The amount of the shares being sold is not as significant as the percentage of the public float that the sales represent. The concept of distribution is interpreted flexibly in order to permit the anti-manipulation rules “to evolve with changes in the practices and methods of offering securities.” Review of Antimanipulation Regulation of Securities Offerings, Sec. Act Rel. No. 33–7057, 56 S.E.C. Docket 1302, Release No....
- In adopting the anti-manipulation rules, the Commission was aware of the additional risks of price manipulation that can be associated with “at market” offerings. Most securities offerings are marketed through a price that is fixed before the offering commences. In contrast, in an “at market” offering, rather than the issuer setting a predetermined offering price prior to the commencement of the offering, the securities are offered with a fluctuating price to be determined by the market price for securities of the same class that are already traded. Thus, each sale in an “at market” offering will be the then-prevailing market price, rather than a price fixed before the offering commenced. As was the case with the former 1934 Act Rule 10b–7, Regulation M’s Rule 104 expressly prohibits all stabilizing activity with regard to any offering of securities at the market, as opposed to a fixed price offering.
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Chapter 12. Manipulation and Fraud 244 results (showing 5 best matches)
- In a related development, the SEC adopted Regulation FD to prohibit selective disclosure. Companies who make disclosures to analysts must now make prompt public announcements so that all investors can have access to the same information. Regulation FD applies only to “communications by the company’s senior management, its investor relations professionals, and others who regularly communicate with market professionals and security holders.” Regulation FD further applies only to a company’s “communications with market professionals, and holders of the issuer’s securities under circumstances in which it is reasonably foreseeable that the security holders will trade on the basis of the information.” Accordingly, Regulation FD does not apply when the
- Former Rule 10b–6, which is now part of Regulation M, prohibited purchases during a distribution of securities by persons interested in the distribution, except for stabilizing bids in compliance with former Rule 10b–7 (which is now Rule 104 of Regulation M).
- Manipulation can arise in many respects in connection with a public offering of securities. For example, SEC Regulation M severely regulates purchases of publicly offered securities by participants in a public offering.
- 1934 Act Rule 15c1–2 prohibits fraud and misrepresentation by securities brokers and dealers and also prohibits conduct that operates as a fraud and material misstatements and omissions within § 15(c)’s purview. 1934 Act Rule 15c1–3 prohibits brokers and dealers from implying that the SEC has reviewed their financial standing and/or business practices. Under 1934 Act Rule 15c1–5, broker-dealers (including municipal securities dealers who control or are controlled by the issuer of a security), cannot enter a customer’s transaction without disclosing the control relationship. 1934 Act Rule 15c1–6 requires brokers and dealers participating or interested in a distribution to fully disclose such participation or interest. Rule 15c1–7 prohibits churning or the charging of excessive fees in connection with discretionary accounts, and requires prompt disclosure of all transactions made on behalf of discretionary accounts. Rule 15c1–8 prohibits sales “at the market” unless the broker or...
- Former Rule 10b–8, also now part of Regulation M, prohibited manipulative and deceptive devices in connection with a securities distribution through rights held by security holders.
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Chapter 11. Tender Offer and Takeover Regulation 123 results (showing 5 best matches)
- Exemptions from Regulation 14D
- 1934 Act Rule 13e–3, which applies primarily to issuers subject to 1934 Act § 12’s registration requirements, defines the types of transactions covered. A Rule 13e–3 transaction is one of a series of transactions that involves either (1) the purchase or tender offer by an issuer or its affiliates of any equity security subject to the Act’s reporting requirements, or (2) a proxy solicitation subject to Regulation 14A, or a distribution of information subject to Regulation 14C, to the holders of equity securities subject to the Act’s reporting requirements that is sent out by the issuer or affiliate in connection with a merger, consolidation, reclassification, recapitalization, reverse stock split, or similar transaction. Any of the foregoing Rule 13e–3 transactions are covered by the Schedule 13E–3 disclosure and filing requirements if the effect of the transaction or transactions is the cessation of the reporting obligations under the 1934 Act. A difficult problem is judging the...
- 1934 Act Rule 14e–1(c), which is not a part of Regulation 14D and therefore applies to all tender offers, requires that the bidder pay the consideration offered or return the tendered securities “promptly” after the termination or withdrawal of the tender offer. The rule does not define “promptly.”
- The Schedule TO begins with a summary term sheet, as required by Item 1001 of Regulation M–A. The summary term sheet is not required if the information is contained in a prospectus pursuant to a 1933 Act registration statement for the securities to be issued pursuant to the tender offer. Schedule TO requires disclosure of the name of the bidder, name of the target company, and the title of class of securities being sought. It also requires that all “persons” reporting under the Schedule provide their names and addresses, as well as disclosing whether or not they belong to a “group” within the meaning of 1934 Act § 14(d)(2). Further, it is necessary to disclose the source of funds that will be used in connection with the tender offer, and to disclose the identity and background of the person filing the document, including the disclosure of any criminal conviction within the past five years of the person presenting the tender offer. The Schedule TO must also describe the terms of the...
- Edgar v. MITE Corp., 457 U.S. 624 (1982) a number of states enacted “second generation” takeover statutes that were designed to overcome the constitutional infirmities of the Illinois statute that was struck down in . The basic thrust of these statutes is to regulate tender offers through state law rules relating to corporate governance, rather than through state securities laws and administrative regulations. The basic approach of such statutes is substantive regulation of tender offers.
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Chapter 7. Liability Under the Securities Act of 1933 91 results (showing 5 best matches)
- Common law agency principles apply in determining who is a purchaser for purposes of 1933 Act § 12. Thus, when an agent purchases securities for the account of the principal, the principal as the true party in interest should be able to bring suit under § 12. In contrast, when someone who purchases securities on behalf of another has sufficient indicia of ownership, that person qualifies as a purchaser under § 12, and thus can bring suit thereunder. By virtue of § 12(a)(1), a violation of § 5 gives the purchaser a right of rescission (or rescissory damages).
- In the 1990s, Congress enacted legislation to curtail suspected abuses in connection with securities class actions. In particular, the Private Securities Litigation Reform Act of 1995 (PSLRA) imposed procedural requirements and additional protection for projections and other forward-looking statements. The Securities Litigation Uniform Standards Act of 1998 (SLUSA) significantly preempted the role of the states in securities litigation by precluding most securities fraud class actions from being brought in state court or under state law.
- Damages under § 12(a)(1) are limited to the return of purchase price of the security with interest, upon tender of the security. If the purchaser no longer owns the securities, the defendant is liable for damages based on the loss comprising the difference between the plaintiff’s purchase price and sale price. By virtue of § 13, the § 12(a)(1) action must be brought within one year of the section 5 violation upon which it is based, but in no event may suit be commenced more than three years after the security was bona fide offered to the public. For statute of limitations purposes, the sale occurs, and the statute generally begins to run, on the date the parties entered into a binding contract of sale.
- Virtually all state corporation statutes have provisions that authorize corporations to indemnify officers and directors against liabilities incurred by them in the scope of carrying out the business of their office. Under these statutes, officers or directors who have been successful in any action against them in their corporate capacity have an absolute right to indemnification for all expenses in defending the suit, including their legal fees. In 1944, the Securities and Exchange Commission molded its initial policy on indemnification agreements, in connection with a registered offering by Johnson & Johnson Company. This policy since became known as the “ formula,” and has been followed consistently by the Commission ever since. Under the formula, in order to qualify for acceleration of the effective date, a company that desires to indemnify any officers’, directors’, or controlling persons’ rights of indemnification must state in the registration statement that the Commission...
- In short, SLUSA mandates that most class actions involving publicly traded securities be brought in federal court. SLUSA applies not only to actions under the federal securities laws, but also to most fraud-based class action suits brought under state securities law as well. In addition, common law class actions based on fraud with regard to covered securities are preempted. SLUSA is not complete in its elimination of state court class actions, however. Class actions involving securities that are not publicly traded may still remain in state court. Also, SLUSA applies only to class actions and thus not to individual or derivative suits, and there is an exception for certain claims involving corporate transactions that are brought in the state of incorporation. Furthermore, suits that are based on state law other than fraud, such as breach of contract or conversion, are not preempted. In contrast, where a complaint is merely an attempt to disguise a securities fraud claim as...
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Chapter 17. Investment Advisers Act of 1940 53 results (showing 5 best matches)
- Bona fide news media including financial publications of general circulation and persons limiting such advice to securities issued or guaranteed by the federal government are not subject to the Investment Advisers Act registration requirements, as are other persons excluded by SEC rule. IAA § 202(a)(11)(D)–(F). However, the SEC has indicated that registration may be required for a computer-generated financial planning service, although not recommending specific securities, that would nevertheless offer a service developed by an unaffiliated organization where the service identifies investments that would affect the generalized investment recommendations. ...U.S. 181 (1985), the Supreme Court interpreted the exclusion for publications and investment newsletters. The Court explained that the exclusion is limited to publications that render impersonal investment advice, and then held that the publication in question did not fall within the Act’s definition of investment adviser....
- The definition of investment adviser depends upon the advice being rendered with regard to securities as opposed to some other type of investment. However, it is to be recalled that the definition of security is expansive and is not limited to traditional securities such as stocks and bonds. Thus, for example, someone who offers clients advice with regard to investment vehicles, such as tax-exempt repurchase agreements, stock income agreements, or collateral loan agreements can fall within the Act’s definition of investment adviser.
- IAA § 203(a) requires registration of all investment advisers doing business through an instrumentality of interstate commerce unless exempted under § 203(b). The Investment Advisers Act defines “investment adviser” to include “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings as to the value of securities or as to the advisability of investing in, purchasing, or selling securities * * * .” IAA § 202(a)(11). As discussed below, there are significant exclusions from the definition of investment adviser. Some of the more important exclusions are banks, lawyers, accountants, engineers, or teachers rendering such advice incidental to their professions. Broker-dealers who render advice incidental to their broker-dealer operations are excluded from the definition of investment adviser There is another exclusion for publications that ...activities but do not render advice on individual securities or mutual...
- An exclusion from the definition of Investment Adviser means that there is no regulation under any of the provisions of the Investment Advisers Act. In contrast, an exemption provides only an exemption from the Act’s registration provisions.
- The definition of investment adviser excludes banks, lawyers, accountants, engineers, or teachers rendering such advice incidental to their professions. IAA § 202(a)(11)(B). Also excluded are advises who render advice solely with respect to government securities of the Untied States government. IAA § 202(a)(11)(E).
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Chapter 10. Shareholder Suffrage—Proxy Regulation 71 results (showing 5 best matches)
- If an issuer subject to the registration requirements of 1934 Act § 12 does not solicit proxies, its security holders are still guaranteed information by virtue of 1934 Act § 14(c). The issuer must file with the SEC and send its security holders information similar to that which is required for a proxy solicitation. These informational requirements are set out in Regulation 14C and Schedule 14C.
- Securities Held in Street Name; Broker-Dealers and Federal Proxy Regulation—1934 Act § 14(b)
- Securities Held in Street Name
- An issuer subject to the Securities Exchange Act’s registration and reporting requirements (and thus to the SEC proxy rules) must comply with written shareholder requests for information with regard to matters to be voted on at a shareholder meeting. Specifically, 1934 Act Rule 14a–7(a) requires the issuer to provide the following information upon request by a shareholder: (1) a statement of the approximate number of security holders who have been or will be solicited on behalf of the issuer; and (2) an estimate of the cost of mailing a specified proxy statement, including the cost of bankers, brokers or other persons acting on the issuer’s, behalf. Also, if a security holder so requests, the issuer must mail, at the security holder’s expense, any material relating to matters to be voted upon at the meeting to all holders that were solicited by the issuer or someone acting on the issuer’s behalf. If the issuer so desires, in lieu of complying with the securities holder’s request,...
- plans to be acted upon. The disclosures relating to compensation and pension plans must include detailed descriptions of any options, warrants, or rights to be voted upon. The proxy statement must describe in detail any securities to be authorized for issuance. In the case of any modification or exchange of securities, the proxy statement must contain detailed disclosures. If the proxy statement is seeking authorization for the issuance of securities or for the modification or exchange of securities, the proxy statement must provide financial statements relating to any such transactions.
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Table of Contents 86 results (showing 5 best matches)
- § 42Exemption for Certain Offshore Transactions in Securities of United States Issuers
- § 61Registration of Securities Under the Securities Exchange Act of 1934
- § 67The Regulation of Shareholder Suffrage Under the Exchange Act—1934 Act § 14 and the Proxy Rules: Introduction; Regulation of Voting Rights
- § 75Filing Requirements for Acquisition of More than Five Percent of Equity Securities
- § 102Waiver of Claims; Voiding of Contracts in Violation of the Securities Laws
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Chapter 16. Federal Regulation of Investment Companies— The Investment Company Act of 1940 97 results (showing 5 best matches)
- Unlike the 1933 and 1934 Acts, the ICA imposes substantive rules upon an issuer’s internal governance structure. This represents a significant departure from the general thrust of most federal securities laws and regulations, which is to eschew direct involvement in the corporate chartering process.
- The totality of investment company directors’ duties is imposed by state corporate law, state securities laws (blue sky laws), common law, and the Investment Company Act. The Investment Company Act thus supplements federal and state regulation applicable to management generally.
- ICA § 17(f) requires that securities owned by investment companies be placed in a bank, with a member of a national securities exchange, or with the investment company. Securities may also be deposited in a central handling system established by any registered securities exchange. No investment company may act as custodian of its own securities except pursuant to ICA Rule 17f–2 that requires the securities to be physically separated at all times from those of any other person, unless the securities are serving as collateral for a loan.
- Open-end and closed-end investment companies are subject to different provisions and regulations of the Investment Company Act regarding both the types of capital structure they may have and the methods they may use for the distribution and pricing of their shares. Nevertheless, there are similarities between the two types of companies. Neither type of investment company may make a public offering of its securities until it has a net worth of at least one hundred thousand dollars. ICA § 18(i) requires, with some exceptions, that every share of stock issued by a registered management company must be voting stock with equal voting rights. Further similarities between open-end and closed-end management/investment companies lie in the Investment Company Act’s provisions prohibiting either type of company from issuing warrants or rights for its stock, and the provisions prohibiting the payment of dividends for either type of company from a source other than accumulated undistributed net...
- ICA § 17(a)(1) prohibits the sale of securities to an investment company by any affiliated person, promoter, or underwriter of the investment company, or by any affiliate thereof. Exceptions to ICA § 17(a)(1) include sales of investment company securities to the investment company that issued them (i.e. redemptions) and sales of securities issued by the affiliate, promoter, or underwriter (or affiliate thereof) that are part of a general securities offering to the public.
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Index 326 results (showing 5 best matches)
- See also Civil Liabilities; Filing Requirements; Prospectus; Proxy Regulation; Registration of Securities; Reporting Companies; Reporting Requirements; Tender Offers
- See also Exemptions from Registration of Securities; Regulation D
- See also Civil Liabilities; Disclosure; Insider Trading; Manipulation; Markets, Securities; Proxy Regulation
- See also Civil Liabilities; Insider Trading; Purchase of Securities; Resales of Securities; Restricted Securities; Securities Transfers
- See Broker-Dealers; Markets, Securities; National Association of Securities Dealers; National Securities Exchanges; Securities and Exchange Commission, Oversight of self regulatory organizations
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Chapter 5 The Theory of Sale: Corporate Recapitalizations, Reorganizations and Mergers Under the 1933 Act 34 results (showing 5 best matches)
- Even beyond exchanges of securities and the exercise of options or conversion rights, other definitional issues exist with regard to what constitutes a “sale.” Gifts of securities have on occasion been scrutinized in order to determine whether they are in fact sales so as to trigger the application of the securities laws. Ordinarily, however, a gift of securities will not constitute a sale under the securities laws.
- Exchanges of securities ordinarily fall within the definition of sale. This is because when an investor parts with one security in exchange for another, he or she is giving up value in exchange for the security to be acquired. Some exchanges of securities are exempt from the 1933 Act’s registration provisions, but these exemptions clearly demonstrate a Congressional intent to treat exchanges of securities as sales. However, when an exchange of securities is involuntary and does not significantly alter the rights of the securities holders, the exchange will not be treated as a sale.
- 1933 Act § 2(a)(1)’s definition of security expressly includes conversion rights which themselves constitute securities separate and distinct from the underlying common stock or other security and, thus, must be registered for sale (absent an applicable exemption). The question arises, however, whether an exercise of conversion rights is itself a sale of the convertible security and a purchase of the underlying security. Section 2(a)(3)’s definition of sale requires that there be a disposition “for value” in order for a sale to take place. When a conversion right is exercised, the holder of the security merely is receiving something he or she had a right to all along—the underlying security. Hence, it would seem to follow that a conversion ordinarily will not be a disposition “for value” since the owner already had those rights prior to exercising the right of conversion. The SEC’s safe harbor exemption from 1933 Act registration for resales of restricted securities takes the...
- 1933 Act § 2(a)(1)’s definition of security makes it clear that options, warrants, and conversion rights themselves constitute securities separate and distinct from the underlying common stock or other security. The question arises, however, whether an exercise of conversion rights is itself a sale of the convertible security and a purchase of the underlying security. Section 2(a)(3)’s definition of sale requires that there be a disposition “for value” in order for a sale to take place. As pointed out above, when the owner of a convertible security exercises a conversion right, the holder of the convertible security is receiving something he or she had a right to all along—the underlying security. Hence, it follows that the conversion was not “for value” since the owner already had those rights prior to conversion. This view is supported both by the case law and by SEC rulemaking.
- A bona fide gift will not be a sale even though some intangible or even indirect tangible benefit (such as a consequential tax deduction) inures to the donor’s benefit. For example, when a charitable donor receives a tax deduction for his or her gift of securities, has there been a disposition for value? Ordinarily there is no sale in the case of a charitable contribution, even if the donor receives a tax benefit as a result of the gift, because receipt of a tax benefit in exchange for the donation of a security is not considered sufficient to classify the gift as a disposition for value. There may nevertheless be securities law consequences that flow from a gift of securities. Thus, for example, after the gift has been made, if the donee sells the securities that he or she was given, that sale, as is the case with any sale of securities, will require either registration under the 1933 Act or an exemption from registration before the securities can fall into the hands of the...
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Chapter 13. Insider Reporting and Short-Swing Trading— 1934 Act § 16 74 results (showing 5 best matches)
- Other exemptions from § 16(b) include securities acquired through certain issuer redemptions. There is an exemption for redemption of other securities where the securities so acquired replace securities of an issuer whose assets consist of cash, government securities, and equity securities of the issuer whose securities were acquired. 1934 Act Rule 16b–5. Securities acquired in certain mergers are also exempt. 1934 Act Rule 16b–7. Rule 16b–8 exempts acquisitions and dispositions of securities resulting from the deposit to or withdrawal of securities from a voting trust. However, the exemption does not apply if there has been a non-exempt purchase or sale of an equity security of the class deposited within six months. 1934 Act Rule 16a–9 provides an exemption from § 16 for acquisitions of rights pursuant to a pro rata grant to all holders of a class of securities.
- Under 1934 Act Rule 16a–4(a), convertible securities are not considered a separate class of equity security, but rather part of the class of the underlying security which would be acquired upon the exercise of the conversion rights. This computation of ten percent beneficial ownership applies to convertible securities conversion rights, and derivative securities that are currently exercisable without contingencies. However, when the conversion rights have material contingencies and therefore are not presently exercisable, the shares underlying convertible securities will not be aggregated with other direct holdings in the underlying securities.
- Section 16(b) contains a two-year limitation period which begins to run from the date of the second transaction, that is, the transaction that creates the § 16(b) profits. However, the statute of limitations period may be extended until the time of reasonable discovery if there has been a failure to file timely § 16(a) reports. The courts formerly looked to § 16(a)’s reporting requirement rather than general equitable tolling principles to extend § 16’s statute of limitations. In 2012, the Supreme Court rejected a bright line rule based on the filing of § 16(a) reports in light of the absence of an express reference to § 16(a)’s reporting requirements.
- The former rules required inclusion in the ten percent ownership computation of all equity securities which the holder had the right to acquire by exercising presently exercisable rights, warrants, or conversion rights. Former Rule 16a–2(b). However, in light of the revised rules’ treatment of derivative instruments generally, the requirement that there be a present right was deleted. 1934 Act § 3(a)(11) and Rule 3a11–1 define equity security to include “any security convertible, with or without consideration” into an equity security; this definition also includes warrants and rights to subscribe to or purchase an equity security. The Second Circuit held that convertible debentures do not themselves constitute a separate class of equity security for purposes of § 16. ..., Inc. v. Xerox Corp., 377 F.2d 107 (2d Cir.1967). The court explained that the ten percent beneficial ownership threshold for § 16 reporting is computed with regard to the underlying security assuming “full... ...of...
- Standing to bring a suit under § 16(b) has three basic requirements. First, the plaintiff must be an owner of an equity security covered by § 16. Second, the security so owned must be the same class of security traded by the § 16(b) defendant. Third, the plaintiff must own the security at the time that the § 16(b) action is instituted.
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Chapter 15. Debt Securities and Protection of Bondholders—The Trust Indenture Act of 1939 24 results (showing 5 best matches)
- The role of the trustee under the Act’s provisions is perhaps its most controversial aspect. A qualified indenture must provide for one or more trustees, at least one of which is a corporation that is organized under the laws of the United States, or any single U.S. state, and further has a minimum combined capitalization and surplus of one hundred and fifty thousand dollars. The Act further specifies that trustees may not have conflicting interests with those of indenture securities holders. The statute enumerates a number of conflict of interest situations that preclude qualification of the trustee under the Trust Indenture Act. The conflicting interest situations that operate to disqualify a trustee are those where: (1) the trustees serve as trustee under other indentures of the obligor; (2) the trustees, or any of their officers or directors, are the obligors or an underwriter for the obligor; (3) the trustees control or are controlled by the obligor or its underwriter; (4) the...
- Unlike the 1933 and 1934 Acts that are generally limited to disclosure issues, the Trust Indenture Act goes beyond disclosure and imposes regulation over the substance of corporate and other private debt securities. The Act lists six separate instances wherein a public offering of private debt securities could prove harmful to investor interests: (1) when the obligor fails to provide a trustee; (2) when the trustee is without adequate rights, powers, or duties to protect and enforce the rights of investors; (3) when the trustee is without adequate resources to fulfill its duties; (4) when the flow of information from obligor to trustee is inadequate; (5) when the indenture contains misleading provisions; and (6) when the obligor prepares the indenture without investor participation or understanding.
- TIA § 304 exempts from its coverage a number of debt securities that would otherwise fall within the Act’s purview. TIA § 304(a)(9) exempts securities issued under an indenture where the aggregate amount of debt within a thirty-six-month period does not exceed ten million dollars unless the SEC prescribes a lower dollar ceiling. TIA Rule 4a–2 exempts securities issued pursuant to an indenture limiting the aggregate principal outstanding indebtedness to five million dollars and provided further that for thirty-six consecutive months the issuer has not had outstanding securities with more than five million dollars in aggregate principal indebtedness. Also exempted from the Trust Indenture Act are most securities exempted from 1933 Act registration. These are just some of the Trust Indenture Act exemptions.
- Once a trustee finds that it is in a conflict of interest situation, the trustee must eliminate the conflict within ninety days or resign. The trustee’s resignation under these circumstances is to be effective upon the appointment of a successor. If the trustee does not resign in the face of a statutorily defined conflict of interest, the trustee must notify indenture security holders within ten days of the expiration of the ninety-day period. Upon such notification, “any security holder who has been a bona fide holder of indenture securities for at least six months may, on behalf of himself and all others so situated, petition any court of competent jurisdiction for the removal of such trustee, and the appointment of a successor if such trustee fails, after a written request therefore by such holder, to [eliminate the conflict of interest or resign].”
- The contract, or “indenture,” identifies the rights of all parties concerned, as well as the duties of the trustee (a third-party administrator), the obligations of the borrower, and the remedies available to the investors (“indenture securities holders”).
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Chapter 19. Jurisdictional Aspects 17 results (showing 5 best matches)
- The 1934 Act’s registration and reporting requirements are triggered by offerings or issuers having sufficient interstate contact to support federal regulation. In contrast, the 1933 Act registration requirements are implicated by a nonexempt offer or sale of securities through an instrumentality of interstate commerce. Although not required as a matter of jurisdictional limitation, Congress elected to exempt from 1933 Act registration offerings that originate and take place within the confines of a single state. 1933 Act § 3(a)(11).
- The federal securities laws provide a mosaic approach to jurisdiction. The 1933 Acts and most of the other acts comprising the battery of securities laws provide for concurrent jurisdiction of federal and state courts in private civil actions, thus giving parties a choice of a federal or state forum in the context of private causes of action, subject to the preemption provisions of the Securities Litigation Uniform Standards Act of 1998 (SLUSA). In contrast, the 1934 Act provides that jurisdiction is exclusively federal, that means that all private suits must be brought in federal court. All criminal prosecutions under the securities laws and judicial enforcement actions by the Securities and Exchange Commission must be maintained only in federal court.
- The ability to take advantage of state court forums in private actions was severely limited by the preemptive effect of SLUSA. The federal preemption is not total but it does extend to most securities fraud class actions involving publicly traded securities, even if the complaint includes claims under state law. 1933 Act § 16(b), 1934 Act § 28(f).
- Geographic and geopolitical borders have had increasingly less significance in the operation of securities markets around the globe. This has led to increasingly complex questions about which countries should be regulating transactions in the increasingly multinational securities markets.
- As noted above, the courts found an alternative basis for jurisdiction in private and SEC actions if the conduct in question takes place in the United States, regardless of where the ultimate transaction occurs—this became known as the “conduct” test. However, in apply only if the transaction takes place in the United States or that the securities are listed on a U.S. securities exchange. Thus, as a result of the ruling in to give the SEC the authority to pursue fraud under either the conduct test or the effects test. As amended the jurisdictional provisions of the securities laws now provide that the SEC can pursue securities fraud for “conduct within the United States that constitute significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors” as well as “conduct occurring outside the United States that has a foreseeable substantial effect within the U.S.” ...of this legislative...
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Chapter 2. Registration Requirements of the Securities Act of 1933 99 results (showing 5 best matches)
- Rule 135 publicity may legitimately contain (1) the name of the issuer; (2) the title, amount, and basic terms of the offering; (3) in the case of a rights offering to existing security holders, the subscription ratio, record date and approximate date of the proposed rights offering, as well as the subscription price; (4) where securities are exchanged for securities of another issuer, the nature and “basis” of the exchange; (5) in the case of an offering to employees of the issuer or any affiliate, the class of employees and the amount proposed to be offered, including the offering price; and (6) any statement required by state law or administrative authority.
- Significantly, offers and sales in contravention of section 5 are violations even if the defendant did not know that he or she was marketing securities in violation of the Act. This is the case because section 5 is not based on common law fraud and thus does not require that the defendant have acted with scienter. All that is required is that a defendant willfully offer securities in contravention of section 5’s rules.
- The pressure for affirmative disclosure that may result from the 1934 Act reporting requirements, including the proxy rules and the tender offer provisions, or in the case of non-reporting companies from 1934 Act Rule 10b–5, may be at odds with 1933 Act § 5(c)’s limitations on publicity. In such a case “[t]he Commission * * * emphasizes that there is no basis in the securities acts or in any policy of the stify the practice of non-disclosure on the grounds that [the company] has [ ] securities ‘in registration’ under the Securities Act of 1933.” Guidelines for Release of Information by Issuers Whose Securities are in Registration, Sec. Act Rel. No. 33–5180, 1971 WL 11224, Fed. Sec. L. Rep. (CCH) ¶ 3056 (Aug. 16, 1971).
- Rule 174’s exemption for nonparticipating dealers from the post-effective prospectus delivery period is limited to securities of issuers which, immediately prior to the filing of the registration statement, were subject to the 1934 Act’s periodic reporting requirements. Thus, the exemption does not apply to first-time issuers or issuers whose securities were not widely held prior to the filing of the registration statement.
- The second type and most common arrangement in this country is firm-commitment underwriting. Under a typical firm commitment agreement the issuer sells the entire allotment outright to a group of securities firms represented by one or more managers, managing underwriters or principal underwriters. In a firm-commitment underwriting agreement, the underwriting group, headed by the managing or principal underwriters, agrees to purchase the securities from the issuer. The term “firm commitment” is somewhat misleading since it is common practice to have a “market out” clause which excuses the underwriters from the obligation to purchase in the event of a substantial change in the issuer’s financial condition. Typically, the principal underwriters will sign the firm-commitment underwriting agreement. These managers or principal underwriters in turn contact other broker-dealers to become members of the underwriting group; these broker-dealers will act as wholesalers of the securities to...
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Chapter 3. The 1933 Act Registration Process and Disclosure 114 results (showing 5 best matches)
- 1933 Act Rule 461 supplements the statutory criteria and also sets forth the procedures and requirements for requests for acceleration of the effective date. There are seven stated reasons for the denial of acceleration: (1) if there is a failure to make a genuine effort to keep the prospectus reasonably readable and concise, so as to make the information readily understandable by the investing public; (2) if the preliminary prospectus that has been distributed is found to have been inadequate or inaccurate in any material respect; (3) if the issuer, a person controlling the issuer, or an underwriter is under current SEC investigation; (4) if, in a firm commitment underwriting, the underwriter is not in compliance with the SEC’s financial responsibility and net capital requirements; (5) if there have been manipulative transactions by anyone proposed to be associated with the offering where those transactions have artificially affected the price of the securities to be offered; (6)...of
- 1933 Act § 8(a) sets forth general guidelines that the Commission should consider in determining whether to grant acceleration of the effective date. Specifically, the SEC is directed to consider: the adequacy of information made available to the public, the ease with which the terms and features of the securities to be issued can be understood, the ease of understanding the relationship of the securities to be issued to the capital structure, and the ease of understanding the rights of securities holders. Section § 8(a) also requires that the SEC more generally consider the public interest and investor protection.
- One further noteworthy aspect of the decision is the fact that, in the course of its opinion, the SEC emphasized that “it is not this Commission’s function under the Securities Act to approve or disapprove securities * * *. The Act leaves it to the investor, on the basis of the facts disclosed, to weigh the earning prospects of a registered security against the risks involved and to judge for himself whether he wishes to invest his money in it.” This accurately sets forth the direct impact of the 1933 Act. However, the indirect effects of full disclosure cannot be ignored. Detailed disclosures may make a particular offering so unmarketable as to have the effect of precluding a public sale. This type of merit scrutiny can be achieved directly under the state securities laws that permit a merit analysis of the securities in registration.
- The revised shelf registration rule is even more permissive for WKSIs. “Automatic shelf registration” means that when a WKSI files a shelf registration, its effectiveness is automatic. There is a pay-as-you-go structure for registration fees. WKSIs are allowed to file skeletal base registration statements and add the details later. For example, after the effective date, WKSIs can add to their shelf registrations both additional classes of securities and eligible majority-owned subsidiaries. WKSIs do not have to specify the amount of securities to be offered pursuant to the shelf registration. Furthermore, WKSIs are allowed to omit from the shelf registration more information than is allowed for other issuers. For example, WKSIs may omit whether it is a primary or secondary offering. A description of the securities (other than identification of the class of securities) may be omitted as may the names of any selling shareholders and disclosures regarding the plan of distribution. All
- It is ordinarily contemplated that the entire allotment of securities covered by a registered offering will be made available for purchase on the effective date. This is not always the case, however. For example, insiders, promoters or underwriters might receive securities directly from the issuer with an intent to resell at a later date.
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Chapter 18. SEC Enforcement 13 results (showing 5 best matches)
- The Securities and Exchange Commission has a panoply of administrative powers. In fact, the Commission has all administrative powers save one: the SEC does not adjudicate disputes between private parties. The Securities and Exchange Commission has a wide variety of enforcement roles under the various securities acts. With regard to registration statements under the Securities Act of 1933, the Commission has the power to issue stop orders and refusal orders that can be used for defective registration statements. 11934 Act § 8. In addition, the Commission can impose disciplinary sanctions against broker-dealers registered under 1934 Act § 15, against municipal securities dealers pursuant to 1934 Act § 15B, and against government securities dealers under 1934 Act § 15C. The Commission is given broad investigatory and enforcement powers in the courts. The SEC may cooperate with other parties or agencies in litigation under the securities laws.
- Federal Rule of Civil Procedure 9(b) requires that fraud be pleaded with specificity. This heightened pleading requirement applies in SEC actions well as in private suits. However, the enhanced pleading requirements of the Private Securities Litigation Reform Act of 1995 do not apply in SEC actions, only to private actions.
- 1934 Act § 15(b)(4) gives the Commission authority to sanction registered broker dealers by imposing a variety of consequences ranging from censure to revocation of registration. Depending on the severity of the violations, the SEC can also place limits on the registrants’ activities. 1934 Act § 15(b)(6)(A) grants the SEC broad administrative authority over persons associated with brokers and dealers. In particular, the Commission is empowered to hold hearings and impose sanctions against associated persons of broker-dealers, ranging from censure to suspension for up to twelve months and also including bar orders. The Commission can also place limitations on the activities of such associated persons. The Commission has similar administrative enforcement powers with regard to investment advisers. IAA § 203(f). The Commission can impose similar sanctions against municipal securities dealers, 1934 Act § 15B(c)(2), government securities dealers, 1934 Act § 15C(c)(1), and clearing...
- Report of Investigation Pursuant to § 21(a) of the Securities Exchange Act of 1934 and Commission Statement of the Relationship of Cooperation to Agency Enforcement Decisions, Sec. Exch. Act Rel. No. 34–44969, 2001 WL 1301408 (SEC Oct. 23, 2001). The Commission announced that in deciding whether to seek punishment for violations of reporting requirements, the SEC would consider four factors. The SEC will consider: (1) whether a company has a system of internal controls that provides an effective self-policing mechanism; (2) whether the company promptly reported the violations in question; (3) the extent of the company’s cooperation with law enforcement agencies; and (4)
- expanded the SEC’s administrative authority beyond securities . The ability of the SEC to impose administrative sanctions against any person greatly expands the efficiency of many enforcement actions that formerly had to be filed in a federal court. At the same time, targets of administrative enforcement proceedings do not have the extensive rights available to defendants in civil court proceedings, including rights to pretrial discovery, protections of evidentiary rules, access to a jury trial, or a lesser standard for review upon appeal than applies to appeals from administrative orders. In the wake of Dodd-Frank’s expansion of SEC administrative proceedings, a number of respondents raised constitutional challenges to the appointment process for administrative law judges (ALJ’s). (D.C. Cir.2015) (respondent must fully litigate case before SEC prior to raising constitutional challenge). In August 2016, the D.C. Circuit Court of Appeals upheld the constitutionality of the ALJ...
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Summary of Contents 13 results (showing 5 best matches)
- Registration Requirements of the Securities Act of 1933
- Debt Securities and Protection of Bondholders—The Trust Indenture Act of 1939
- Federal Regulation of Investment Companies—The Investment Company Act of 1940
- The Basic Coverage of the Securities Laws
- Liability Under the Securities Act of 1933
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Table of Cases 33 results (showing 5 best matches)
West Academic Publishing’s Law School Advisory Board 9 results (showing 5 best matches)
- Professor of Law Emeritus, University of San Diego Professor of Law Emeritus, University of Michigan
- Professor of Law, Chancellor and Dean Emeritus, University of California, Hastings College of the Law
- Professor of Law, Pepperdine University Professor of Law Emeritus, University of California, Los Angeles
- Earle K. Shawe Professor of Law, University of Virginia School of Law
- Professor of Law and Dean Emeritus, University of California, Berkeley
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Copyright Page 2 results
- The publisher is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Printed in the United States of America
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- Publication Date: March 3rd, 2017
- ISBN: 9781683288299
- Subject: Securities Regulation
- Series: Concise Hornbook Series
- Type: Hornbook Treatises
- Description: This title includes the most recent developments in securities regulation in an accessible format, including the JOBS Act. Authoritative coverage includes the registration process; exemptions; corporate recapitalizations, reorganizations, and mergers; market manipulation; liabilities; Securities Exchange Act of 1934; jurisdictional aspects; broker-dealer regulation and an overview of investment company regulation. This Revised 4th Edition updates the 4th Edition to include recent legal developments regarding insider trading and SEC administrative proceedings, as well as some editorial revisions.