Fund Bus Law Chap 37

Chapter Review

1. A security is any transaction in which the buyer invests money in a common enterprise and expects to earn a profit predominantly from the efforts of others.

2. Before any offer or sale, an issuer must register securities with the SEC, unless the securities qualify for an exemption.

3. These securities are exempt from the registration requirement: government securities, bank securities, short-term notes, nonprofit issues, insurance policies, and annuity contracts.

4. The following table compares the different types of securities offerings:

5. If a final registration statement contains a material misstatement or omission, the purchaser of a security offered under that statement can recover from everyone who signed it.

6. The 1934 Act requires public companies to make regular filings with the SEC.

7. Under §16, insiders who buy and sell or sell and buy company stock within a six-month period must turn over to the corporation any profits from the trades. They must also disclose any trades they make in company stock.

8. Section 10(b) prohibits fraud in connection with the purchase and sale of any security, whether or not the issuer is registered under the 1934 Act.

9. Section 10(b) also prohibits insider trading.

10. Under the Foreign Corrupt Practices Act, it is a crime for any U.S. company to make payments to foreign officials to influence a government decision. This statute also requires reporting companies to keep accurate records.

11. The NSMIA prohibits states from regulating securities offerings that are:

• Traded on a national exchange

• Exempt under Rule 506, or

• Sold to “qualified purchasers.”

12. Any securities offerings not covered by the NSMIA must comply with state securities laws, which are varied and complex.