1933 Securities Act
is concerned w/ the original issuance of securities intended for sale to the public. The act's intent is to assure that sufficient info is available to potential investors, not to determine the desirability of the securities.
1934 Securities Act
deals w/ subsequent trading of securities- once stocks are out there what are the ongoing reporting requirements?
Provide unaudited financial statemets
from $0 - $20M, for last 2 yrs
Provide audited financial stmts
up to $50M
a registration must be filed & prospectus made available when -applicable offerings are based on (SPIN):
SPIN- offer securities, Public issue Interstate commerce(between states), No other exemption is available
1933 exemptions ("ACID-BRAINS")
A-A small public offering (<= to $50M over 12months, 20Day notice/waiting period; can advertise to resell C-Commercial paper(mature < 9monts) I-intrastate offerings(@ least 80% of sales are exclusive to state & prin bus., buyers can't resell)
1933 exemptions ("ACID-BRAINS") CONT
D-Reg D(private placement - rule 504<+ to $5M - rule 506= unlimited B-brokerage transaction R-regulated specialized fin industries(saving & loans) A- agengies of the Gov. (reailroads, muni bonds)
1933 exemptions ("ACID-BRAINS") CONT 2
I-insurance contracts/policies(but stock issued by insurance co not exemp) N-not for profit(charity/church) S-stock dividends/splits (exchange w/ existing holders) as long as no commission is paid.
REG D 504
Notification of 15 days from 1st sale, no advertising, resale restriction of 1yr, offer size limit of $5M, must incur w/in 12month period, unlimited investor #, no fin disclosure requirements
REG D 506
Notification of 15 days from 1st sale, advertising allowed if all investors R credited, resale restriction of 1yr,
REG D 506 CONT.
unlimited offer size, NO offer time window, Accredited unlimited investor # but nonaccredited <35, no fin disclosure requirements for accredited but nonaccredited must provide audited financials
1934 Securities Act
if co. is publicly traded on national exchange, has over $10M in assets, & 2000 shareholders(no more than 500 nonaccredited shareholders)
1934 Securities Act
anti fraud provision and file forms 10Q & 10K w/ SEC
In general, Sarbanes-Oxley prohibits the auditor of a public company from performing any nonattest services for that client. There is an exception, however,
for certain tax services provided they are pre-approved by the entity’s audit committee after they have determined that the performance of the service will not impair the auditor’s independence.
Shareholders have the right to:
-Vote on corp-wide matters(changes 2 corp structure) -Transfer shares (ownership) freely -Rec. declared divs -Inspect books & records(4proper purposes) -Have stock appraised -Sue on corps behalf -Rec equity capital upon liquidation (subordinate)
Characteristics of a general partnership
-2 or more partners -4 profit -can B informal -Limited/uncertain duration -Sep. legal entity(sue,be sued,own prop) -Partners have joint & several(no limited liability) 4 partnership debts -Default entity(when other not file) -pass-through entity
A tax preparer may not
endorse or otherwise negotiate a government check issued in relation to a Federal tax liability. Witten may not endorse Romo’s refund check, hold it, or request that 2 checks be issued by the IRS.
The Securities and Exchange Act of 1934 (the 1934 Act) created the SEC and gave it broad powers to regulate the securities industry. Some of the SEC's responsibilities under the 1934 Act include
regulating brokerage Firms, require COs 2 period report fin info, & investigating sec. fraud. If a CO violates provisions of the 1934 Act, the SEC can suspend/revoke a CO's right to sell or trade sec.
According to the Securities Act of 1933 (1933 Act), issuers must file a registration statement with the SEC before they can sell securities to the public.
The prospectus is the main part of the registration stmt & must contain info about the CO's history & ops, business risk, & intended use of the proceeds. Additional financial info, including the audited financial statements, must be provided as well
Under the Securities Act of 1933, a company will lose its status as an emerging growth company at the earliest of
The date on which the entity is considered to be a large accelerated filer,
Any company that has less than $1 billion in revenue as of the end of its most recent fiscal year qualifies as an emerging growth company (EGC). It will cease to qualify as an EGC at the earliest of one of the following:
-5yr anniver of COs IPO -$1B anual rev:the last day of any yr in which annual rev is $1B or more -$1B issued debt:the date the CO has issued >$1B N non-convertible debt N prev 3yrs -date CO qualifies as a large accelerated filer (≥ $700M market cap)
Under the Securities Act of 1933, an initial offering of securities must be registered with the SEC unless
The offering is for $1 million in a 12-month period and made through an SEC-registered intermediary
tender offer rules
A person who has acquired 5% or more of any class of shares must file a report with the SEC under the tender offer rules.
The primary purpose for enacting workers' compensation statutes was to
Enable employees to recover for injuries regardless of negligence.
Elements of workers' compensation
Strict liability for employer, Employees can't sue under tort liability (eg, negligence), Job-related injuries only, Covers all employees (but not independent contractors), Benefits include lost wages, medical expenses, payments to survivors
Workers' compensation laws
guarantee an employee comp(lost wages/medical ex) 4 job-related injury or illness.-primary purpose is 2 impose strict liability on the employer 4 an employee's job-related injury or illness,even if the employer is not @ fault. The goal is 2 maintain the e
Things to remember: Workers' compensation laws
hold employers strictly liable 4 job-relate injuries 2 employees &guarantee them comp. As a trade-off, the injured employees can't sue employers 4 add. damages under common law tort liab(negligence)-injured employee can sue nonemployers under tort liab
Which of the following parties is (are) responsible for enforcing federal air and water quality standards?
Although industry associations&political action groups can take civil action against violators of fed air& water quality standards, the states R primarily responsible 4 enforcing the law. The fed gov has the right 2 enforce the standards if states doesn't
Subpart F income
is taxable income includable by a U.S. taxpayer from a controlled foreign corporation. It generally includes income that has no economic connection to the country of origin.
privity defense
A CPA's duty to act with reasonable care generally runs only to clients and, under the majority rule, to any person or limited foreseeable class of persons whom the CPA knows will be relying on the CPA's work. It does not extend to other parties.
If a CPA recklessly departs from the standards of due care when preparing a tax return, the CPA will be liable based on
Gross negligence(Constructive fraud is sometimes called gross negligence.)
To recover damages under Section 11 of the 1933 Act
the plaintiff must have acquired the securities. Note that the plaintiff need not have been the initial purchaser.
