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Securities Regulation
SUNY Buffalo Law School
Westbrook, Amy Deen

 Securities Regulation
Class 1 pp. 1-17
The Basics Introduction into the Securities Markets and Securities Regulation
How to work with securities regulations and how to find the answers to securities questions
Not memorization, need to learn how to find answers and work with issues without being intimidated
Healthy dose of paranoia
Open-book final
Major Themes of the Course
What is a Security?
’34 Act
Private and Public Offerings
Take Broker-Dealer next year when it’s offered
·         Private Sales
Exempts from Securities laws
Buyers too sophisticated, etc to need these laws
Offer private placement to limited buyers to avoid these laws
·         Pre-1929
Blue Sky Laws
Before the stock market crash securities laws were state by state
Can offer these types of securities and not these
Not well enforced and not very functional because of the huge crash
·         1929- Stock Market Crash & After
Confidence lost in financial system because of bad financial instruments sold to public without disclosure
Even the good securities went down with it so nobody wanted to invest
Bad banking
Federal government stepped in to change things
Hoover became president and said we’d have a better, federal system for securities regulation
States still kept Blue Sky Laws, but Federal laws are now on top of those and are supreme
Buzz words
Investor protection through information and disclosure
How do you best accomplish this?
If you tell people what is going on with a particular security they can make the best decision about whether to buy it
Brandeis: Other People’s Money
“Sunlight is said to be the best of disinfectants and electric light the best of policemen.”
You can sell junk if you want to as long as you disclose that it is junk in a language the person can understand
Nobody really reads this stuff, but as long as it’s available to them it’s ok
·         Securities Act of 1933
“1933 Act” was passed first
Gave Congress a lot of say over securities
Lots of little rules
Two basic ideas
Make companies give information
Prohibit fraud or deceit
Trouble for companies
Registration process so companies have to give lots of info to investors
Investors could then make informed judgment about buying it
Exemption- rules to get around these requirements
I.e. if onl

suing the best interest of shareholders
NO fixed monetary claim on the cash flows of a corporation
Receive “residual”-after the claims so all other corporate interest.
Corp. no obligated to.
Corp. can buy back stock or issue dividends (not common distribute assets in liquidation)
Under fiduciary duties corp. has to distribute dividends if there is no better use of capital.
Protected under judgment rule if directors decide not to.
However stocks holders can vote in new board but public shares are spread wide
Tax dividends is a second tax corp. already pay a tax on income.
Common stock has the weakest claim on corporate assets in liquidation.
Pay outs or under absolute priority rule, which common stockholders come last among the holders of a corporation’s securities.
Only after the contracted-for claims of debt holders and preferred shareholders are satisfied will common shareholders receive anything in liquidation.