What are the key points of the 1933 Securities Act?
The 1933 Securities Act does the following:
- Governs Initial Public Offerings (not subsequent sales).
- Covers registration statements and accompanying information filed with SEC.
- Information must include audited financial statements & a prospectus.
Note: Even if a company is exempt from registering under the 1934 Act, they still must adhere to the anti-fraud provisions of the Act.
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What entities are exempt from filing registration statements under the 1933 Securities Act?
The following entities are exempt from filing registration statements under the 1933 Securities Act:
- Banks
- Commercial Paper
- Farmers
- Co-ops
- Charities
- Governments
Also exempt are: Securities sold in ONE state; where investors are residents; 80% of business done in one state; and resales can’t occur within 9 months to interstate parties.
What are the key points of the 1933 Securities Act - Regulation A?
An issuer can issue $50M of securities per year and be exempt if they file a notice with the SEC.
Non-issuers (AKA a private individual) can sell $1.5M per year and be exempt.
Under the 1933 Securities Act, Regulation D; what are Rules 504 and 506?
Rule 504 - Max Amount per year: $5MM
Max Investors: Unlimited
Rule 506 - Max Amount per year: Unlimited
Investors must be Accredited
What are the registration form options under the 1933 Securities Act?
The registration form options under the 1933 Securities Act are:
- S-1 - Long Form or
- S-2 and S-3 - Less Detailed and preferred by issuers
Under the 1933 Securities Act - Regulation A, what is the exemption threshold for an issuer if they file a notice with the SEC?
$50MM
Non-Issuers can sell $1.5MM per year and also be exempt
Name the securities registered under the Securities Act of 1933.
The following are securities registered under the Securities Act of 1933:
- Stocks
- Stock Options
- Stock Warrants
- Limited Partnership Interests - General Partnerships not allowed
- Bonds
Who can sue under the Securities Act of 1933?
Purchasers of securities only
Name the Requirements for Accountant to be liable under the Securities Act of 1933.
Damages and Material Misstatements Only.
Reliance on financial statements is not a requirement unless purchased more than a year after the security is registered.
Proving negligence is not a requirement.
Name the Defenses of an Accountant under the Securities Act of 1933.
Under the Securities Act of 1933, the defenses of an accountant are:
- Accountant used Due Diligence.
- Accountant followed GAAS.
- Damages weren’t caused by the accountant’s work.
- Plaintiff knew of the material misstatements.
What does the Securities Act of 1934 govern?
The Securities Act of 1934 governs the trading/selling of securities after the IPO.
What reports must be filed under the Securities Act of 1934?
The following reports must be filed under the Securities Act of 1934:
- Form 10-K Annual Report - Must be audited
- Form 10-Q Quarterly Report - Must be reviewed, but not audited
- Form 8-K - A notice of a material event; Must be filed within four (4) days of the event
Who can sue under the Securities Act of 1934?
Purchases and Sellers of Securities
Name the Requirements for an Accountant to be liable for fraud under the Securities Act of 1934.
- Damages
- Material Misstatements
- Reliance on financial statements
- Scienter or reckless disregard for the truth
What procedures must an Accountant have in place under the Securities Act of 1934?
The accountant must have procedures in place to:
- Determine if Going Concern is an issue
- Determine if any material related-party transactions occurred
- Determine if material illegal acts occurred
Insider trading rules under the Securities Act of 1934 apply to which individuals?
They apply to:
- Officers
- Directors and
- 10% Owners
What are the Proxy Solicitation Requirements under the Securities Act of 1934?
The proxy must give shareholders audited balance sheets from two (2) most recent years.
Requirement holds true even if one class of stock.