Download Overview of Blue Sky Laws, Federal Securities Acts, and Securities Characteristics and more Slides Business Management and Analysis in PDF only on Docsity! Chapter 20 Securities Law Docsity.com INTRODUCTION • Blue sky laws • Federal securities laws – Securities Act of 1933 – Securities Exchange Act of 1934 – Securities Investor Protection Act of 1970 – Foreign Corrupt Practices Act of 1977 – Insider Trading Sanctions Act of 1984 – National Securities Markets Improvement Act – Private Securities Litigation Reform Act Docsity.com Escott v. BarChris Construction Corp. Landmark Case • BarChris filed a registration statement that contained material false statements and material omissions • BarChris, the signers of the registration statement, the debentures, the underwriters, and the corporations’ auditors were held liable Docsity.com Exemptions to the Securities Act of 1933 • Exemptions include – Small offering exemptions (Reg. D) – Private offering exemptions (Reg. D, Rule 506) – Intrastate offering exemptions (Rule 147) • Exempt securities include – Government issued securities – Stock dividends – Stock splits Docsity.com Liability under the 1933 Act • Criminal – Department of Justice • 5 years in prison • $10,000 fine • Civil – Sec/ALJ hearing • Consent order • Cease and desist order – SEC/federal district court • Injunction • Recovery of profits • Civil money damages – Private parties/court • Monetary damages Docsity.com Insider Trading and Fraud • Officers, directors, and key employees obtain advance inside information about matters that can affect the future value of stock • Insider trading is prohibited by the 1934 Act • Sec. 16 defines insiders are directors, officers, and owners of more than 10% of any one class of stock • Any profit made within a six month period is illegal Docsity.com Section 10(b) and Rule 10b-5 • Section 10(b) – Makes it unlawful to use in the purchase or sale of any security any manipulative or deceptive device prohibited by SEC regulations • Rule 10b-5 – Makes it unlawful for any person through the use of any means of interstate commerce to defraud or mislead anyone in the purchase or sale of any security Docsity.com Disclosure • Key to liability under Rule 10b-5 – A substantial likelihood that a reasonable investor would find its disclosure significant • Timing of disclosure under Rule 10b-5 – Insiders should refrain from trading on information for a reasonable waiting period Docsity.com Other Securities Laws • Securities Investor Protection Act of 1970 • Foreign Corrupt Practices Act • Insider Trading Sanctions Act • Insider Trading and Securities Fraud Enforcement Act • Securities Enforcement Remedies and Penny Stock Reform Act of 1990 • National Securities Markets Improvements Act of 1996 • Private Securities Litigation Reform Act Docsity.com State Securities Laws • Blue sky laws • Uniform Securities Act Docsity.com International Considerations • Attitudes toward securities – No international agreements have been made regarding stock markets – US has criminalized some violations of securities laws – Other countries have not done this – International Securities Enforcement Act allows the SEC to cooperate with other countries to regulate markets and transactions Docsity.com
