Business Law Case Study

361 WordsAug 31, 20112 Pages
Case Analysis 1 Case Analysis Kaplan University MT311: Business Law I Scott Strauss November 21, 2010 Case Analysis 2 Case Analysis Langley Brothers, Inc., a corporation incorporated and doing business in Kansas, decides to sell no par common stock worth $1 million to the public. The stock will be sold only within the state of Kansas. Joseph Langley, the chairman of the board, says the offering need not be registered with the Securities and Exchange Commission. His brother, Harry, disagrees. The Securities Act of 1933 governs initial sales of stock by business. The act was designed to prohibit various forms of fraud and to stabilize the securities industry by requiring that all essential information concerning the issuance of securities be made available to the investing public. Section 5 of the Securities Act of 1933 broadly provides that unless a security qualifies for an exemption, that security must be registered before it is offered to the public. Issuing corporations must file a registration statement with the SEC and must provide all investors with prospectus (Miller & Jentz, 2008, pg 567). A number of specific securities are exempt from the registration requirements of the Securities Act of 1933. These securities, which can also generally be resold without being registered includes government issued securities, bank and financial institution securities, which are regulated by banking authorities, and short-term notes and drafts. The other exemptions are securities of nonprofit, educational, and charitable organizations, securities issued by common carriers, any insurance, endowment, or annuity contract issued by a state-regulated insurance company, and securities issued in a corporate reorganization in which one security is exchanged for another or in a bankruptcy proceeding (Miller & Jentz, 2008, pg 568). Langley Brothers would

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