Chapter 17 Financial and Securities Regulation

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  1. Blue sky laws
    Securities law enacted by States
  2. Controlling person
    The person who has the control of, or is controlled by the issuer of securities
  3. Due diligence defence
    A defense that experts may assert in a 1933 Securities Act cases involving the failure to register securities or the failure to provide accurate documents. The expert utilizing this defense attempts to prove his or her reasonable investigation into all available information
  4. Insider
    A person who owns 10% or more of a company or who is a director or officer of the company. This term is also used to describe a person possessing nonpublic information
  5. Issuer
    The term in securities law for an individual or business organization offering a security for sales to the public
  6. JOBS Acts
    Jumpstart Our Business Startups; act of 2012 eases federal regulations of initial public offerings to promote investment in startup companies
  7. Misappropriation theory
    The legal doctrine supported by the SEC and courts that any person who shares nonpublic information with another party who trades on the information violates the securities laws if that information was intended to be kept confidential.
  8. Posteffective period
    This is the period which the securities may be sold. This period usually follows a 20-day waiting period
  9. Prefiling Period
    This is that period of time prior to the filing of a registration statement with the SEC
  10. Private securities Litigation Reform Acts (PSLRA)
    A 1995 federal statute that limits the recovery for securities violations against third parties who are not directly responsible for the violation. For example, only the SEC can pursue these claims. This law also requires lead plaintiffs in class-action securities suits and restricts recovery of damages and attorney's fees.
  11. Prospectus
    The legal documents required by the 1933 Securities Act to be made available to potential purchasers of securites
  12. Registration statement
    The legal document required to be filled with the SEC prior to securities being offered for sales to the public
  13. Sarbanes-Oxley Act of 2002
    The law enacted to correct inadequacies in the law that existed and allowed numerous examples of corporate fraud. In essence, through increased criminal sanctions and specific requirements, this law attempts to make corporate CEOs more responsible.
  14. Scienter
    With knowledge; particularly, guilty knowledge
  15. Securities Act of 1933
    The federal law the regulates (through disclosure requirements) the initial sale of securities to the public
  16. Securities and Exchange Commission (SEC)
    The federal administrative agency that regulates the securities industry
  17. Securities Exchange Act of 1934
    The federal law that regulates sales (other than the initial sale) of securities. This law governs the resale of securities whether by individuals or through brokers and exchanges
  18. Security
    Under the securities law, an investment in which the investor does not participate in management
  19. Seller
    In commercial law, a person who sells or contracts to sell goods
  20. Short-swing profits
    The proceeds gained by an insider buying and selling, or vice versa, securities within a six-month period, Such profits are considered to be illegal
  21. Tippee
    A person who learns of nonpublic information about a security from an insider
  22. Tombstone ad
    An ad announcing the public offering of securities; these usually run during the waiting period
  23. Underwriter
    The party that, in securities law, guarantees the issuer that the securities offered for sale will be sold.
  24. Waiting period
    As it relates to an initial public offering of securities, this is the period of time that follows the filing of documents with the SEC and that precedes when the securities can be sold. Unless the SEC objects and extends this period of time, the waiting period lasts only 20 days.
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Chapter 17 Financial and Securities Regulation
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