Banking And Securities Essay

Securities Law Outline – Choi – Spring 2006

1 Introduction 1
  1.I The Basics 1
  1.II Types of Securities 1
    1.II.A Common Stock 2
    1.II.B Preferred Stock 2
    1.II.C Bonds 3
  1.III Capital Market 3
    1.III.A Primary Market Transactions 3
    1.III.B Secondary Market Transactions 4
      1.III.B.1 Securities Exchanges 4
      1.III.B.2 Nasdaq 5
      1.III.B.3 ECNs 5
  1.IV Investment Decisions 5
    1.IV.A Present Discount Valuation 5
      1.IV.A.1 Interest 5
      1.IV.A.2 Present Value 6
    1.IV.B What Risks Matter 6
  1.V Who Provides Investor Information 6
    1.V.A Incentives to Provide Information 6
    1.V.B Argument for Mandatory Disclosure 7
      1.V.B.1 Coordination Problems 7
      1.V.B.2 Agency Costs 7
      1.V.B.3 Positive Externalities 7
      1.V.B.4 Duplicative Information Research 8
      1.V.B.5 Costs of Mandatory Disclosure 8
    1.V.C How does information disclosure matter? 8
      1.V.C.1 Filtering Mechanisms 8
      1.V.C.2 Efficient Capital Market Hypothesis 8
        1.V.C.2.a Weak ECMH 8
        1.V.C.2.b Semi-Strong ECMH 8
        1.V.C.2.c Strong ECMH 8
        1.V.C.2.d Implications of ECMH 9
  1.VI Regulatory Apparatus 9
    1.VI.A Federal Securities Laws 9
      1.VI.A.1 Securities Exchange Act of 1934 (“Exchange Act”) (“’34 Act”) 9
      1.VI.A.2 Securities Act of 1933 (“Securities Act”) (“’33 Act”) 10
      1.VI.A.3 Investment Company Act of 1940 and Investment Advisors Act of 1940 10
      1.VI.A.4 Trust Indenture Act of 1939 10
      1.VI.A.5 Public Utility Holding Company Act of 1935 (PUHCA) 10
      1.VI.A.6 Sarbanes-Oxley Act of 2002 10
    1.VI.B Securities and Exchange Commission (SEC) 11
    1.VI.C Self-Regulatory Organizations (SROs) 12
2 Materiality 12
  2.I What Matters to Investors? 12
  2.II Forward-Looking Information 13
  2.III Historical Facts 14
  2.IV Opinions 15
  2.V Total Mix 16
3 Definition of “Security” 17
  3.I Do Securities Laws Apply? 17...