Blaw Ch 41

Front 1

Securities Act of 1933 and Securities Exchange Act of 1934 three purposes

Back 1

=Require disclosure
=Impose liability
=Regulate insiders, professional sellers of securities, etc

Front 2

any investment of money in a common enterprise with an expectation of profits solely from the efforts of others

Back 2

security

Front 3

transaction in which a person 1. invests 2. in a common enterprise 3. reasonably expecting profits 4. derived primarily or substantially from others' managerial or entrepreneurial efforts

Back 3

investment contract

Front 4

a written disclosure document that describes the security beign sold, the financial operations of the issuing corp, and the investment or risk attaching to the security

Back 4

prospectus

Front 5

can distribute this during waiting periods,
contains most of the info that will be included in the final prospectus but often does not include a price

Back 5

red herring prospectus

Front 6

can distribute this during waiting periods,
general advertising is permitted, tell the investor where and how to obtain a prospectus

Back 6

tombstone ad

Front 7

any type of written, electronic, or graphic offer that descirbes the issuer or its securities and includes a legend indicating that the investor may obtain the prospectus at the SEC's web site

Back 7

free-writing prospectus

Front 8

defined to include banks, insurance companies, investment companies, employee benefit plans, the issure's executive officers and directiors, and persons whose income or net worth exceeds a certain threshold

Back 8

accredited investors

Front 9

occurs when persons buy or sell securities on the basis of info that is not available to the public

Back 9

insider trading

Front 10

those who receive "tips" from insiders and even remote tippees (tippees of tippees)

Back 10

tippees

Front 11

rewards given by government officials for acts beneficial to the state) to persons providing info leading to the prosecution of insider-trading violations

Back 11

bounty payments

Front 12

can be narrowly defined as the relationship between a corp and is shareholders

Back 12

corporate governance

Front 13

enable someone to purchase shares of the corp's stock at a set price

Back 13

stock options

Front 14

regulate the offer and sale of securities within individual state borders

Back 14

blue sky laws

Front 15

a shareholder receives a preference over all other purchasers to subscribe to or purchase a prorated share of a new issue of stock

Back 15

preemptive rights

Front 16

Defendant must prove that after a reasonable investigation they had reasonable grounds to believe and did believe that the registration statement was true and contained no omission of material fact.

Back 16

due diligence defense

Front 17

The Securities Exchange Act of 1934 requires

Back 17

Registration of Securities
Periodic Disclosures

Front 18

prohibits the use of any manipulative or deceptive device in contravention of any SEC rules

Back 18

Section 10(b)

Front 19

=prohibits misstatements or omissions of material fact.
=Defendant is not liable without scienter, or intent to deceive, manipulate, or defraud.

Back 19

Section 10b-5

Front 20

Rule 10b–5 liability attaches to anyone who trades in securities for personal profit using confidential information misappropriated by a breach of fiduciary duty owed to source of the information
=individual who wrongfully obtains inside info and trades on it for his or her personal gain

Back 20

misappropriation theory

Front 21

requires statutory insiders (officer, director, owner of 10% or more shares) to disclose ownership of their firm’s securities within 10 days of becoming owners and report subsequent transactions within two business days after a trade of the securities
=Strict liability rule! No requirement of intent or actual use of inside information for liability.

Back 21

Section 16(a)

Front 22

does not require that the issuer believe each unaccredited investor "has knowledge and experience in finanical and business matters"

Back 22

rule 505

Front 23

issuer must believe taht each unaccredited investor has sufficient knowledge or experience in financial matters to be capable of evaluating investments and risks

Back 23

rule 506