You Decide Essay

1131 WordsSep 30, 20125 Pages
Week 7: Investor Protection and Professional Liability - Lecture Investor Protection and Professional Liability | | Going Public | | The Securities Act of 1933 regulates the issuance of securities by corporations, limited partnerships, and other businesses. The process includes the filing of a registration statement and a prospectus. The registration statement describes: * securities being offered for sale; * the registrant's business; * the members of management of the business; * a description of any pending legislation; * how the proceeds from the sale will be applied; * the degree of competition in the industry; and * any special risk factors. The prospectus is used to market the security and to provide potential investors information to enable them to evaluate the risk of the investment. Small Corporate Offerings | Small corporations need capital too, and the full requirements of the Act of 1933 and SEC rules can be burdensome. To assist these small companies, the SEC adopted the Small Corporate Offering Registration Form (SCOR). Form U-7 is a question-and-answer form which becomes the offering circular. The U-7 questions are drawn so that the services of a security lawyer are not needed. The SCOR offering cannot exceed $1 million, and the offering price of the share may not be less than $5.00. | | | | | Trading in Securities | | While the Securities Act of '33 regulates the original issue of securities, theSecurities and Exchange Act of 1934 regulates the subsequent trading of those securities, the type of trading that takes place every day on stock and bond exchanges. Section 10(b) of the '34 Act prohibits the use of manipulation that contravenes the rules and regulations prescribed by the SEC. SEC Rule 10b-5 prohibits, among other things, the making of "any untrue statement of a material fact or

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