Security Regulation

Security Regulation Securities Include: Stock options, limited partnership interests, warrants, investment contracts, collateral-trust securities • General PTP interests are not considered a security Blue Sky Laws – State laws regulating securities in addition to 1933/34 Acts 1933 Act • Prospectus = required to be provided to every potential buyer ○ Considered part of the registration statement • Registration Statement includes: ○ Description of the issuers business and property, a description of management, a description of the security to be issued and its relationship to the issuers other securities, and the issuers most recent audited F/S • Filing becomes effective 20 days after filing (allows for sale of securities) ○ Waiting period (20 days): Oral offers = OK….. Sales = Disallowed • Fraud Provisions = apply to all securities, whether exempt or not • Tombstone Ad = info on where to obtain prospectus (cannot make offer to sell) • Exempt Securities- may be resold any # of times and not be subjected to the registration/prospectus requirement of the Act ○ Bank securities ○ Savings & Loan Associations ○ Governmental Purposes ○ Not-for-Profit ○ Intrastate offerings (80% of biz in-state, buyers live instate)  Any resales of an issue made to a resident of another state within nine months following the last sale will void the intrastate exemption for the entire issue ○ Insurance policies & Annuities (Insurance companies = not exempt) ○ No Sales Transactions ○ ST Commercial Paper (maturing in < 9 months) ○ Small issues (Reg. A- <$5m in 12 month period)  “offering circular” required • Exempt Transactions ○ Transactions made by person other than Issuer, Underwriter, Dealer

Security Regulation ○ Reg. D- Private Offerings

○ Reg. D time requirement: Notify SEC w/in 15 days of first sale 1934 Act (focuses on secondary offerings) Required for: 1. Companies with >$10m in assets and >500 stockholders 2. Brokers/Dealers in interstate commerce 3. Securities listed on a national exchange ○ Security Definition: “must represent interest in a company” ○ CD’s are not considered a security ○ Reporting requirements: ○ 10-K- must contain audited F/S. File w/in 90 days of year end ○ 10-Q- file w/in 45 days of quarter end, include review by CPA’s ○ 8-K- Specific important event. 4 biz-day time limit ○ Tender offer- offeror must report (5%+ purchase of equity) ○ Insiders (>10% owners)- required to report to SEC ○ Proxy- notify SEC 10 days prior to solicitation ○ Short Swing Profit Provision ○ Stock sold by insider in <6 months