What were the 2 major corporations?
East India Company
Hudson Bay Company
What invention lead to to more corporations being created and why?
James Watts creates the Locomotive
- improves transportation (railroads)
- corporations can meet more customers
Articles of Incorporation?
- corporation’s own constitution
- details how they will operate
-Articles of Corporation laws vary from State to State
Derivative Action?
- law suit filed by shareholders
- against someone who has financially harmed corporation
- shareholders can only file if Board of Directors chose not to take action on person when shareholders asked them
2 reasons a share-holders proposal may be rejected?
- proposal is repetitive
- proposal is Rarely Successful (b/c only hold small number of shares)
What does SEC have to do under the Securities Exchange Act of 1934 regarding a proxy solidification?
What about if there is no Proxy Solidification?
- disclose certain information about nominees for Board of Directors
- Disclose the matter actually being voted on
- Disclose consequences of each decison
- Disclose the interest of the party soliciting the proxy vote in the first place
No Proxy
- give notice of shareholder’s meeting
- tell agenda of meeting
Securities for Expense bond
- share holders have to put up money
- when corporation is suing defendant
- money is for defendant’s legal fees in case corporation loses case and has to pay them
Difference between Directors and Managers of a corporation?
Directors
-conduct overall strategy of corporation
Managers
- conduct legal activities
- conduct day to day business activities
- OFTEN are members of BOD
Council of Institutional Investors? (CII)
-hold corporate executives accountable for their actions
Duty of Due Care
- executives should always act to protect corporations interest
- doesn’t mean it’s the ethical RIGHT decision
Corporate Opportunity Doctrine
- before Corporate executive can turn down business opportunity
- have to disclose potential deal to corporation
- cannot act alone
What did the “33 Act” regulate?
What does the “34 Act” regulate?
33 Act
-SEC regulates initial sale of stock to public
34 Act
-resale of stock on Secondary Market
What’s a prospectus?
- “look us over, buy us”
- registration detailing the stock to be sold later (initial public offering)
What’s a Red Herring?
-“Red = STOP”, “Fish = something is fishy”
- is prospectus that hasn’t been given final approval
- printed in red by Brokers
-Brokers try to convince their buyers to buy it
If you want to sell stock to the public, what are the 2 things you are required to do?
Prospectus
-your stock, what’s in it and all that
Regulation S-K
- documents showing proof
- to back up what you said in prospectus
3 Prong Test of Howey?
- investment of money?
- into a common enterprise?
- with the expectation of Profits?
Blue Sky Laws?
Investor complaining about money they thought they invested in a security
- Judge said, “there’s not anything behind that except the blue sky.” - nothing is there
- Blue Sky Laws = Securities Law
- Came from Kansas
farmers
10-Q report?
8-K report?
10-Q
- is update of health on existing prospectus
- results can sway a market
- comes out every 3 months
8-K
-any big announcement about corporation
EX: CEO died
What is the “Short-Swing Profits rule” and who does it apply to?
- if make capital gain buying/selling your personal own stock in company in 6month period
- then have to return profits to Company Treasury
Applies to all
- shareholders holding 10% or more ownership
- directors
- officers
Statue of Limitations on Insider Trading Sanctions Act?
YES
-5 years
Williams Act of 1968?
a. Basically, If you’re going to try to take over a company then you have to go through a formal tender offer through the SEC
b. Any prospective purchase of more than five (5%) percent of a company’s sock must file a tender offer proposal with SEC
d. If the board of the target company opposes (hostile takeover), board must also file statements with the SEC
e. All takeover offers must be put on the table for at least twenty (20) days
f. Shareholders who agreed to sell have seven (7) days after the offer expires to withdraw shares from sale
Insider Trading Rule - Section 10(b)
Rule 10b-5 applies to any situation where misappropriation of material insider information for profits happens, no statutory definition of insider trading
Another name for Securities Law?
Blue Sky Law
