Securities Regulations Outline
I. The Legal and Institutional Framework of Securities Regulation
A. Introductory Material on Federal and State Regulation
1. Issuer Transactions (Primary)
a. Sale of securities by issuer to investor (33 Act)
b. Private placement of securities (exempt from state law)
2. Secondary (resale) transactions
a. Don’t involve the issuer but are “purchaser to purchaser” transactions
b. 34 Act
3. Federal Securities Laws
a. Securities Act of 1933
1) Congress empowers Federal Trade Commission (FTC) task of registering public offerings of securities.
2) Public offerings must register and provide statement (see below)
3) Prospectus- designed to provide all material necessary for investors to fully assess the security.
b. Securities Exchange Act of 1934
1) Congress created SEC (told them to deal w/ problems areas set out in act).
2) System of continuous disclosure requirements for companies with:
a) Securities on national exchange
b) ↑$10 million in assets and ↑500 shareholders
c) Effective Act 33 registration statement
3) Type of Reports
a) Form 10-K = annual report (audited financial statements)
b) Form 10-Q = quarterly report (unaudited statements)
c) Form 8-K = material development (change in control or assets).
d) Proxy- For shareholders at annual meeting
e) Registration Forms (S1, S2, or S3 companies)
c. Structure of SEC
1) Commissioners
a) 5 Commissioners appointed by Prez. to 5 year terms (staggered)
b) Not more than 3 commissioners same party as Prez.
2) Division of:
a) Corporate Finance- Administers disclosure requirements through registration statements, annual reports, proxy statements, writes no-action letters
b) Market Regulation- Oversees secondary trading markets
c) Investment Management- Oversees investment companies & advisors
d) Enforcement- Conducts investigations & prosecutions.
3) Office of:
a) General Counsel- litigation, legal advice, & interprets statutes & regs.
b) Chief Acc
sted securities are traded through members of the exchange
3) The person on the floor of the exchange is known as a specialist (actually he represents a firm)
4) All trading is funneled through the specialist
5) Limit orders
a) These sell a security at a particular price
b) Lowest sale order – the specialist looks for matches between sellers who wish to sell at a particular price and buyers who wish to buy at that same price
c) If nobody buys the stock in a short period of time, the specialist is to move in and buy the stock just to keep the markets moving to provide liquidity
b. Buy & sell orders executed at central location at best available price.
1) Market Order- Broker executes order promptly at best available price.
2) Limit Order- Broker buys or sells at above/below market price
