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44 Cards in this Set

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  • Back
amount of stock that can be sold pursuant to Rule 144
Listed: greater of 1% of total shares outstanding or average weekly trading volume of the past four weeks.

OTC: 1% of total shares outstanding
pursuant to Rule 144, notice to the SEC is not required when?
when the sale does not exceed 500 shares or the dollar amount does not exceed $10000.
Does Rule 144 apply to the sale of call options?
Yes. And the corporation may not sell call options on its own securities.
Rule 145 ?
Defines certain types of reclassifications as sales that are subject to the registration and prospectus requirements of the Securities Act of 1933. reclassification examples - substitution of one security for another, mergers,
Securities Exchange Act of 1934
(name at 4 things)
main federal law covering the operation of he secondary markets. 1.antimanipulation rules 2.extension of credit 3.registration/regulation of broker-dealers and companies with securities trading in the secondary market (financial disclosures, proxy rules, insider reporting) 4.oversight of self regulatory organizations. some securities exempt from part of Act.
who authorized the creation?
not who, but what. The Exchange Act
SEC charged with what?
enforcing the securities laws and with creating rules to implement those laws.
how do you become a member of the SEC?
appointed by the President with the advice and consent of the Senate
rules concerning the commissioners.
There are 5 commissioners. no more than 3 from the same political party. They must engage in the full time business of the Commission and may not participate in securities transactions during their tenure. Members are appointed for terms of 5 years.
Securities Exchange Act of 1933
registration and sale of new issues.
focus on new issues
is a public company required to register with the SEC?
if total assets of more than $10000000 and more than 500 shareholders. or if its securities trade on a national exchange or Nasdaq.
The Exchange Act
Securities Exchange Act of 1934.
define Insider
director, officer, or owner of 10% or more of the stock of a corporation
Do Insiders report to the SEC?
Yes. required to report to the SEC within ten days of becoming an insider - must report the amount of the issuer's equity securities that they own. also, required to report any changes in their position no later than the second business day following the change in position.
can an insider short the stock
no. not allowed to make short swing profits in the stock of the corporation in which they are insiders.
define swing profits
profits earned within six months of purchase
when a corporation sues an insider for recovery of profit. (insider made a short swing profit in less than six months)
According to SEC, when do you have to notify the exchange that you own x% of an issue.
when you acquire 5% or more of an issue. you must notify the exchange where they are traded, the issuer, and the SEC. (you don't have to notify the shareholders)
securities exchange act, antimanipulation covered in what sections?
9 and 10
primary or secondary offering. if a broker-dealer is participating, then what restrictions?
may not purchase any for its own account. cannot induce any person to purchase the security. may not solicit purchase orders from customers. registered reps can accept unsolicited orders.
painting the type
buy xyz stock at 40 and sell xyz stock at 40 in order to make it appear that there is active trading in an issue
wash sale
two persons acting in concert to buy and sell a security for the purpose of raising or depressing the price.
if you suffer damage from manipulation, can you sue?
yes. sue for recovery of the damages. action must be brought within three years of the manipulative activity and within one year of discovery.
effecting stock transactions to prevent a price decline in an underlying stock in order to prevent the exercise of a put option.
effecting stock transactions to prevent a price advance in an underlying stock in order to prevent the exercise of a call option.
front running
effecting an options transaction based upon non public information regarding an impending block transaction in the underlying stock.
short sales
regulated by ?
can a broker dealer sell a security as a long sale when there is no reasonable basis for believing that the seller owns the security and will deliver it promptly?
no. in this case, must be done as a short sale subject to the plus or zero plus tick rule.
49, 49.10, 49.25, 49.10, 49.10.

zero plus tick?
zero minus tick because 49.10 is less than 49.25.

plus tick example:
49, 49.10, 49.25, 49.35, 49.35
cash dividend payment and relation to plus tick rule
x date is two business days before record date for dividend payment. reduction in price due to cash dividend is not considered a down tick.
Exchange Act Rule 10b-5
unlawful to deceive or leave out a material fact when selling a security
what is public information (so it's no longer insider information)
information must be provided to the financial news media, which must then have a chance to disseminate it.
stop orders
regulated by?
SEC, but they have not issued any regulations regarding stop orders
if a member of a corporation's board of directors tips a relative about a pending takeover involving the corporation and the relative trades on this info. insider trading?
yes. board member and relative have violated insider trading rules. against the Exchange Act.
Insider Trading Act of 1984.
Insider Trading and Securities Fraud Enforcement Act of 1988. broker dealers must establish, maintain, and enforce written policies and procedures to prevent the misuse of material nonpublic information or be liable for a trading violation under the Act.
penalty for insider trading
1.civil penalties up to three times the amount of gain 2.criminal penalties of a fine up to $1 million and/or imprisonment for up to 10 years.(corporations up to $2.5 mil) 3.bounties. the Act allows granting of bounties for information leading to payment of penalties. SEC determines the amount (not to exceed 10% of penalty)
who regulates and enforces credit in the purchase of securities?
Federal Reserve Board. (granted this power from Securities Exchange Act of 1934). The SEC enforces the Feds rules.
SEC Rule 17a-3
broker dealer must maintain records for either 3, 6, or for the lifetime of the broker dealer.
prepared daily. purchases and sales. maintained for six years.
assets and liabilities. maintained for six years. cash and margin accounts for each customer. sales, receipts, etc.
order memorandum
all brokerage orders for past three years.
maintained for three years.
Rule 17a-5
requires broker dealers to file certain financial reports with the SEC monthly, quarterly, and annually. conduct independent audit. audited statements must be sent to customers within 45 days after the broker dealer files the annual report with the SEC.