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 in-
state)
 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