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30 Cards in this Set
- Front
- Back
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securities laws are designed to...
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give investor enough info to make intelligent investment decisions
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exists when one person invests money and looks to others to manage the money for profit
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security
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3 questions dealing w/ securities
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1. Is it a common business activity?
2. Is it based on a reasonable expectation of profit? 3. Will these profits be earned through the efforts of someone other than the investor? |
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SEC v. Edwards
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District court finds for SEC
Appellate court reverses Supreme Court reverses again--fixed rate of return does not remove it from SEC |
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administrative agency created in 1934
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SEC
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2 objectives of Securities Act of 1933
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1. require investors receive financial and other significant information concerning securities
2. prohibit deceit, misrepresentations, and other fraud |
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in general, securities sold in the U.S. must be...
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Registered
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Registration Form:
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1. Description of company's properties and business
2. Description of security offered for sale 3. Info about management 4. Financial statements |
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Registration Exemptions:
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1. Private offerings to limited people
2. offerings of limited size 3. intrastate offerings 4. securities of municipal, state, and federal governments |
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What else does SEC regulate?
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-Companies w/ more than $10 million in assets
-disclosure in materials used to solicit shareholders' votes in annual special meetings |
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What does S-OX do?
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-PCAOB
-split auditing and consulting -auditors must be independent -auditors must rotate every 5 years -CEO/CFO verify accuracy -return of bonuses if reports are incorrect -no loans from company to executives -increased penalties -protect whistleblowers |
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How does the stock perform in the market?
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aftermarket performance
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An offering that can be canceled by the lead underwriter if it is not 100% subscribed
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all or none
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buying IPO at offering price and selling immediately on the market
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Flipping
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offering in which a company sells its share directly to public (via internet)
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Direct public offering
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difference between an IPO's offering price and what the members of the syndicate pay for their shares
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gross spread
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gathered by lead underwriter from potential investors to gauge interest prior to IPO
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indication of interest
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investment bank in charge of setting offering price of IPO
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Lead underwriter
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time period after an IPO when insiders at newly public company are restricted by the lead underwriter from selling their shares
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Lock up period
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price that investors must pay for allocated shares in the IPO
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offering price
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a deal in which investors apply for more shares than are available
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oversubscribed
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difference between the offering price and the opening price
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premium
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document which explains all aspects of a company's business
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Prospectus
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time period in which companies in registration are forbidden by SEC to say anything not included in their prospectus
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Quiet period
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group of investment banks that buy shares in an IPO to sell to the public
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Syndicate
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funding acquired during the pre-IPO process of raising money for companies
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Venture capital
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Steps to file IPO:
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1. Act like public company
2. select investment bank, law firm, and accountant 3. prepare the prospectus and file it with SEC 4. syndicate gathers I.O.I. 5. Road Show 6. lead investment bank will gauge interest and set offering price |
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Defenses for Fraud:
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1. Materiality
2. Statue of Limitations 3. Due diligence |
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the argument that any false or misleading information is not material and should not have influenced your decision to make an investment
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Materiality
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a reasonable investigation was conducted into the material facts
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Due Diligence
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