SECURITIES REGULATION FALL 2006 LOVITCH
Facts might be taken from case discussed carefully in course – purpose is to reduce reward for ability to read quickly – will be given in outline form, not narrative. No multiple choice or true false.
Read questions carefully – will be very focused, he does not want to read everything you’ve ever heard of.
Focus of the course: Cover important sec regs statutes and regulations, what they cover, see how these provisions are related to each other. Understand the questions and see collateral issues. Know where to begin research, understand what you are reading, and efficiently understand constant developments in the area. Requires excruciating detail.
Exam is written and designed to take about 4-4 1/2 hours, no time pressure – total allotted time is 5 hours. Starts at 1230 in Room 106.
With state materials, if we don’t read and discuss, you’re not responsible for it.
Treatise on Securities Regulation – Loss
I. Regulation of the Public Distribution of Securities
A. Introduction – Structure of the Securities Act of 1933 –Advantages Disadvantages of becoming a publicly owned company – Public Distribution Process CB 1-7; 66-85; 85-90; 90-97; 101-103; ’33 §5, §12, §17
1. No person can sell a security unless a registration statement is in effect as to that security §5(a)(1)
a. If you let one of your clients sell a securities w/o a registration statement, then civil liability under section 12(a)(1) – anyone who bought the securities can wait until just before the SOL runs, if the price goes down they can get their money back, or if they sold at a loss, they can sue for damages.
b. *Unless subject to an exemption
2. Any one who sells a security in violation of section 5 (i.e., w/o a registration statement in effect), shall be liable to the person purchasing the security. §12(a)(1)
a. Strict liability – with the exception of loss causation requirements
b. One year statute of limitations – liability under 12(a)(1) subject to 1 year SOL after violation
i. What is purpose of §12(a)(1)? T
will put some of their own shares into the offering to get some immediate $$
Offering of shares by the corporation – primary offering
Offering of shares by existing shareholders (owners) – secondary offering
BOTH can be covered by the same registration statement
Even if there is no secondary offering the primary offering will still provide some liquidity to the owners. It also establishes a market for the owners to later sell shares in an exempt transaction.
Employee Compensation – Offering stock options instead of $$ for start-ups
Creates a public market for employees to sell shares
Also allows them to value the amount of the compensation to the employee
Disadvantages to IPO
Loss of Confidentiality – Registration will require full public disclosure about the company and its owners including: