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What is the Securities Act of 1933
- Prohibits fraud
- Stabilizes the securities industry by requiring disclosure of all essential information relating to the issuance of securities to the investing public
What are the requirements under the Securities Act of 1933
- Registration - detailed financial information, intended use of the proceeds, disclosures (interests of directors or officers and pending lawsuits)
- Prospectus - provide investors with a prospectus that describes the security being sold and the risk attached to the security
What is the securities act of 1934
- regulation and registration of securities exchanges, brokers, dealers, and national securities associations
- continues disclosure system (assets in excess of $10 mill and 500 or more shareholders)
What is SEC Rule 10b-5 of the 1934 act
- A rule of the SEC that prohibits the commission of fraud in connection with the purchase or sale of any security.
- Make an untrue statement or omit a material fact in the statements that would be misleading
- Trying to prevent insider trading
What is SEC rule 10(b)
forbids the use of any manipulative or deceptive mechanism in violation of SEC rules and regulations.
What rules are there to prevent insider trading
SEC Rule 10(b), SEC Rule 10b-5, and SEC Rule 16(b) all from the 1934 Act
What does Section 16(b) of the 1934 Act do
- Requires officers, directors, and shareholders owning 10% or more of the issued stock of a corporation to turn over the corporation all short-term profits realized from the purchase and sale or sale and purchase of corporate stock within any six-month period
- Prevent corporate insiders from taking advantage of inside information
What is state securities laws/blue sky laws
regulates the offer and sale of securities within state borders
What is corporate governance
involves a set of policies specifying the rights and responsibilities of the various participants in a corporation and selling out the rules and procedures for making decisions on corporate affairs.
What issues does corporate governance address
conflicting interest between corporate ownership (shareholders) and corporate control (management and officers)
What does the Sarbanes-Oxley Act do
Increase corporate accountability by imposing strict disclosure requirment and harsh penalties for violation of securities law