Chat with AIExam 32: Investor Protection, E-Securities, and Wall Street Reform
Discuss briefly the changes brought by the JOBS Act to security law regulations governing IPO registration.
(39) 
VerifiedThe JOBS Act creates a new class of public company and a new category of issuer under federal securities laws called the emerging growth company (EGC).EGC status is often referred to as the IPO on-ram.By qualifying as an EGC,the company is exempt from a broad range of requirements typically imposed on companies pursuing an IPO.The main benefits for qualifying as an EGC are:
• An EGC may submit a confidential draft registration statement with SEC for review by the SEC staff.The registration has to be made public only 21 days after the issuer conducts a "road show," that is,members of the company make a presentation of the offering to the public.This confidential filing allows companies,if they choose to do so,to withdraw a proposed IPO without having to have had to disclose confidential business information.
• An EGC is subject to dramatically reduced IPO communication restrictions in that an EGC may communicate with institutional accredited investors to "test the waters" to see if there is enough interest in its IPO before going forward with it.Previously,this type of communication would have been illegal.This new rule allows an EGC to see if an IPO is advantageous before committing to issue securities.
• An EGC needs only to provide two years of audited financial statements when filing an IPO registration to issue securities,instead of three years of audited financial statements that would have previously been required,and is still required of larger companies that do not qualify as an EGC.
• Frees an EGC from the restriction of the Sarbanes- Oxley Act that prohibits investment banks and research analysts of the same firm from communication with each other.Under the JOBS Act,analysts may publish research reports during an EGC's registration even if the analysts are part of the investment bank underwriting the IPO.
• Allows EGCs to file for registration of securities using a streamlined process and requires less disclosure of financial information than for non-EGC IPOs.The act also exempts EGCs from certain disclosure requirements of executive compensation required of larger firms completing an IPO.
The courts apply the ________ in determining whether an arrangement is an investment contract.
(36) VerifiedA
Regulation A is a regulation that permits an issuer to sell $50 million of securities pursuant to a simplified registration process.
(34) VerifiedTrue
Many issuers of securities employ investment bankers,which are independent securities companies,to sell their securities to the public.
(35) Discuss briefly how the STOCK Act holds members of the Congress,government officials,and judges liable to insider trading.
(33) The ________ imposes liability under Section 10(b)and Rule 10b-5 on an outsider who misappropriates information about a company,in violation of his or her fiduciary duty,and then trades in the securities of that company.
(34) An accredited investor is defined as any natural person who has individual net worth or joint net worth with a spouse that exceeds $1 million,to be calculated by excluding the value of the person's primary residence.
(37) The ________ is a federal statute primarily designed to prevent fraud in the trading of securities after they are issued.
(34) Interests in oil,gas,and mineral rights are classified as ________.
(35) ________ is a provision of the Securities Exchange Act of 1934 that prohibits the use of manipulative and deceptive devices in the purchase or sale of securities in contravention of the rules and regulations prescribed by the SEC.
(30) ________ allows issuers to raise capital from an unlimited number of accredited investors without having to register the offering with the SEC.
(27) The primary purpose of securities law is to promote full disclosure to investors and to prevent fraud in the issuance and trading of securities.
(42) A(n)________ is an exemption from registration that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.
(32) The Insider Trading Sanctions Act is a federal statute that permits the SEC to obtain a civil penalty of up to ten times the illegal benefits received from insider trading.
(35) A(n)________ is an exemption from registration which states that securities transactions not made by an issuer,an underwriter,or a dealer do not have to be registered with the SEC.
(28) Utilities Ltd.decided to go public by an initial public offering.It sold securities,some of which were bought by James Jefferson.Six months later,Mr.Jefferson sold the Utilities shares he had purchased to Martha Graham and Mark Franco.Two years later,Mr.Jefferson bought back the Utilities shares from Ms.Graham and Mr.Franco and made a profit out of both transactions.Who is the issuer in this scenario?
(32) The ________ is a federal statute that primarily regulates the issue of securities by companies and other businesses.
(41) Adopting rules that further the purpose of the federal securities statutes is a responsibility of the Securities and Exchange Commission.
(27) A(n)________ is submitted along with the registration statement to the SEC,and also used as a selling tool to help prospective investors evaluate the financial risk of an investment.
(37) EDGAR is the electronic data and record system of the Securities and Exchange Commission.
(42) 
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