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TABLE OF CONTENTS Acknowledments . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . ? 1.01 PURPOSE OF TEXT . . . . . . . . . . . . . . . . . . . . . . ? 1.02 OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 1.03 SELECTED SECURITIES LAW RESEARCH SOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 2 DEFINITION OF A ?SECURITY? . . . . . . . . . . ? 2.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . ? 2.02 OVERVIEW OF KEY U.S. SUPREME COURT DECISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 2.03 KEY ISSUES FOR ?INVESTMENT CONTRACT? ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] ?Solely from the Efforts of Others? . . . . . . . . . . [B] ?Expectation of Profits? . . . . . . . . . . . . . . . . . [C] The ?Common Enterprise? Requirement . . . . . . . ? 2.04 APPLICATION OF THE HOWEY TEST TO SPECIFIC VENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Limited Partnerships . . . . . . . . . . . . . . . . . . [B] General Partnerships . . . . . . . . . . . . . . . . . . [C] Limited Liability Companies . . . . . . . . . . . . . . [D] Property Interests Combined with Service Contracts . . . . . . . . . . . . . . . . . . . . . . . . . [E] Franchises . . . . . . . . . . . . . . . . . . . . . . . . ? 2.05 THE RISK CAPITAL TEST . . . . . . . . . . . . . . . . . . ? 2.06 DEBT SECURITIES . . . . . . . . . . . . . . . . . . . . . . . [A] Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . [B] Certificates of Deposit . . . . . . . . . . . . . . . . . Chapter 3 ISSUER EXEMPTIONS FROM REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 3.01 EXEMPT SECURITIES FROM REGISTRATION . . . . . xi 0011 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 49 ? 3.02 WHY PERFECT A TRANSACTIONAL EXEMPTION? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 3.03 TRANSACTIONAL EXEMPTIONS?INTRODUCTORY POINTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 3.04 THE BURDEN OF PROOF FILE, SEC STAFF NOACTION LETTERS AND RESCISSION OFFERS . . . . . . . . [A] Burden of Proof File . . . . . . . . . . . . . . . . . . [B] SEC Staff No-Action Letters . . . . . . . . . . . . . . [C] Rescission Offers . . . . . . . . . . . . . . . . . . . . . ? 3.05 THE SECTION 4(2) PRIVATE OFFERING EXEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 3.06 RULE 506 OF REGULATION D . . . . . . . . . . . . . . . ? 3.07 RULES 507 AND 508?SUBSTANTIAL COMPLIANCE STANDARD AND FILING OF FORM D . . . . . . . . . . . . . . ? 3.08 THE MEANING OF ?GENERAL SOLICITATION? . . . . ? 3.09 THE LIMITED OFFERING EXEMPTIONS . . . . . . . . . [A] The Section 4(6) Exemption . . . . . . . . . . . . . . [B] The Section 3(b) Exemptions . . . . . . . . . . . . . [1] Rule 504 . . . . . . . . . . . . . . . . . . . . . . . [2] Rule 505 . . . . . . . . . . . . . . . . . . . . . . . [3] Rule 701 . . . . . . . . . . . . . . . . . . . . . . . [4] Regulation A . . . . . . . . . . . . . . . . . . . . . ? 3.10 COMPARATIVE CHART . . . . . . . . . . . . . . . . . . . . ? 3.11 RULE 1001?THE ?CALIFORNIA? EXEMPTION . . . . . ? 3.12 NASAA?MODEL ACCREDITED INVESTOR EXEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 3.13 INTRASTATE OFFERINGS . . . . . . . . . . . . . . . . . . [A] The Section 3(a)(11) Exemption . . . . . . . . . . . . [B] The Rule 147 Exemption . . . . . . . . . . . . . . . . [C] ALI Federal Securities Code . . . . . . . . . . . . . . ? 3.14 THE SECTION 3(a)(9) AND 3(a)(10) EXEMPTIONS . . . ? 3.15 INTEGRATION OF OFFERINGS . . . . . . . . . . . . . . . ? 3.16 STATE ?BLUE SKY? LAW EXEMPTIONS . . . . . . . . . ? 3.17 EXTRATERRITORIAL APPLICATION?REGULATION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] General Conditions . . . . . . . . . . . . . . . . . . . [B] Issuer Safe Harbor?Rule 903 . . . . . . . . . . . . . [C] Resale Safe Harbor . . . . . . . . . . . . . . . . . . . xii TABLE OF CONTENTS 0012 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 74 [D] The 1998 Regulation S Amendments . . . . . . . . . [E] Facilitating Global Trading . . . . . . . . . . . . . . Appendix Limited Offering Materials . . . . . . . . . . . . . . . . . Chapter 4 THE REGISTRATION PROCESS . . . . . . . . . . ? 4.01 OVERVIEW OF THE REGISTRATION PROCESS . . . . . ? 4.02 FRAMEWORK OF SECTION 5 . . . . . . . . . . . . . . . . [A] Issuer Classifications . . . . . . . . . . . . . . . . . . [B] The Pre-Filing Period . . . . . . . . . . . . . . . . . . [1] Overview . . . . . . . . . . . . . . . . . . . . . . . [2] Conditioning the Market (?Gun-Jumping?) . . . [3] Rules 163 and 163A . . . . . . . . . . . . . . . . [4] Effect of Rule 135 . . . . . . . . . . . . . . . . . . [5] Transactions Between Market Professionals . . . . . . . . . . . . . . . . . . . . . [6] Rules 137, 138, and 139 . . . . . . . . . . . . . . [C] The Waiting Period . . . . . . . . . . . . . . . . . . . [1] Overview . . . . . . . . . . . . . . . . . . . . . . . [2] Free Writing Prospectus . . . . . . . . . . . . . . [3] Media . . . . . . . . . . . . . . . . . . . . . . . . . [4] The Rule 134 Limited Public Notice . . . . . . . [5] Roadshows . . . . . . . . . . . . . . . . . . . . . . [6] SEC?s Power of Acceleration . . . . . . . . . . . [D] The Post-Effective Period . . . . . . . . . . . . . . . . [1] Overview . . . . . . . . . . . . . . . . . . . . . . . [2] Access Equals Delivery . . . . . . . . . . . . . . . [E] Chart of Time Periods . . . . . . . . . . . . . . . . . ? 4.03 THE ?MISLEADING? PROSPECTUS . . . . . . . . . . . . . ? 4.04 ?GOING PUBLIC??PROS AND CONS . . . . . . . . . . . ? 4.05 A BRIEF LOOK AT THE PROCESS OF A PUBLIC OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 4.06 STATE ?BLUE SKY? LAW . . . . . . . . . . . . . . . . . . . Chapter 5 DISCLOSURE, MATERIALITY AND SARBANES-OXLEY . . . . . . . . . . . . . . . . . . . . . . . . . . ? 5.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS xiii 0013 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 105 ? 5.02 THE INTEGRATED DISCLOSURE FRAMEWORK . . . . [A] Registration Forms . . . . . . . . . . . . . . . . . . . [B] Shelf Registration . . . . . . . . . . . . . . . . . . . . ? 5.03 THE MANDATORY DISCLOSURE SYSTEM DEBATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 5.04 ?PLAIN ENGLISH? DISCLOSURE . . . . . . . . . . . . . . ? 5.05 DISCLOSURE OF ?FORWARD-LOOKING? INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Rule 175 . . . . . . . . . . . . . . . . . . . . . . . . . [B] The PSLRA Safe Harbor . . . . . . . . . . . . . . . . [C] Management Discussion and Analysis (?MD&A?) . . . . . . . . . . . . . . . . . . . . . . . . . ? 5.06 DISCLOSURE OF INFORMATION FOCUSING ON DIRECTOR/OFFICER INTEGRITY OR COMPETENCY . . . . ? 5.07 QUALITATIVE ECONOMIC MATERIALITY . . . . . . . . ? 5.08 THE SARBANES-OXLEY ACT . . . . . . . . . . . . . . . . [A] Introduction . . . . . . . . . . . . . . . . . . . . . . . [B] CEO and CFO Certifications . . . . . . . . . . . . . [C] Audit Committee . . . . . . . . . . . . . . . . . . . . [1] Audit Committee Independence . . . . . . . . . . [2] Audit Committee Financial Expert . . . . . . . . [D] Improper Influence on Audits . . . . . . . . . . . . . [E] Forfeiture of Bonuses and Profits . . . . . . . . . . . [F] Officer and Director Bars . . . . . . . . . . . . . . . [G] Insider Trading During Blackout Periods . . . . . . [H] Disclosure of Off-Balance Sheet Transactions . . . . [I] Prohibition of Loans to Directors and Officers . . . [J] Reporting of Insider Transactions . . . . . . . . . . [K] Management Assessment of Internal Controls . . . [L] Senior Financial Officer Code of Ethics . . . . . . . [M] Real-Time Disclosure . . . . . . . . . . . . . . . . . . [N] Accounting Oversight Board . . . . . . . . . . . . . . [O] Auditor Independence . . . . . . . . . . . . . . . . . . [1] Non-Audit Services . . . . . . . . . . . . . . . . . [2] Audit Committee Pre-Approval of Permitted Non- Audit Services . . . . . . . . . . . . . . . . . . . . [3] Audit Partner Rotation . . . . . . . . . . . . . . [4] Report to the Audit Committee . . . . . . . . . . xiv TABLE OF CONTENTS 0014 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 136 [5] Cooling-Off Period . . . . . . . . . . . . . . . . . [P] Attorney Professional Responsibility . . . . . . . . . [1] ?Up-the-Ladder? Reporting . . . . . . . . . . . . [2] Qualified Legal Compliance Committee . . . . . [Q] Financial Analysts? Conflicts of Interest . . . . . . . [R] Remedies and Criminal Penalties . . . . . . . . . . . [1] Statute of Limitations . . . . . . . . . . . . . . . [2] Whistleblower Civil Remedy . . . . . . . . . . . [3] Insider Trading During Blackouts ? Disgorgement of Profits . . . . . . . . . . . . . . . . . . . [4] No Discharge of Securities Fraud Debts in Bankruptcy . . . . . . . . . . . . . . . . . . . . . . [5] Court Order Freezing Certain Extraordinary Payments . . . . . . . . . . . . . . . . . . . . . . . [6] Fair Funds Provision . . . . . . . . . . . . . . . . [7] SEC Equitable Relief . . . . . . . . . . . . . . . . [8] Criminal Sanctions . . . . . . . . . . . . . . . . . Chapter 6 RESALES AND REORGANIZATIONS . . . . . . . ? 6.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . ? 6.02 THE CONCEPT OF ?UNDERWRITER? . . . . . . . . . . . [A] The Presumptive Underwriter Doctrine . . . . . . . [B] Participating in the Underwriting Effort . . . . . . ? 6.03 DISTRIBUTIONS BY CONTROLLING PERSONS OR AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Effecting a ?Distribution? . . . . . . . . . . . . . . . . [B] Secondary Offerings . . . . . . . . . . . . . . . . . . . ? 6.04 PURCHASING FROM AN ISSUER WITH A VIEW TOWARDS DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . [A] Holding Period . . . . . . . . . . . . . . . . . . . . . . [B] Restrictive Legends?Change in Circumstances . . . . . . . . . . . . . . . . . . . . . . [C] Sales by Pledgees . . . . . . . . . . . . . . . . . . . . ? 6.05 RULE 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Background . . . . . . . . . . . . . . . . . . . . . . . . [B] Provisions of the Rule?Overview . . . . . . . . . . . [C] Certain Sales by Non-Affiliates . . . . . . . . . . . . TABLE OF CONTENTS xv 0015 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 169 [1] Restricted Stock . . . . . . . . . . . . . . . . . . . [2] Nonrestricted Stock . . . . . . . . . . . . . . . . . [D] Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 6.06 THE SECTION ?4(1-1/2)? EXEMPTION . . . . . . . . . . . ? 6.07 RULE 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Requirements . . . . . . . . . . . . . . . . . . . . . . . [B] Criticism . . . . . . . . . . . . . . . . . . . . . . . . . ? 6.08 CORPORATE REORGANIZATIONS . . . . . . . . . . . . . [A] In General . . . . . . . . . . . . . . . . . . . . . . . . [B] Rule 145?Ramifications . . . . . . . . . . . . . . . . [C] ?Downstream Sales? . . . . . . . . . . . . . . . . . . . [D] ?Spin-Offs? . . . . . . . . . . . . . . . . . . . . . . . . Chapter 7 DUE DILIGENCE AND SECURITIES ACT LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 7.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . ? 6.02 THE REGISTERED OFFERING?FRAMEWORK OF SECTION 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Parties Subject to Section 11 Liability . . . . . . . . [B] Elements of the Section 11 Right of Action . . . . . [C] Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . [1] General . . . . . . . . . . . . . . . . . . . . . . . . [2] Due Diligence ? Overview . . . . . . . . . . . . [3] Due Diligence Standard . . . . . . . . . . . . . . ? 7.03 CONTRIBUTION AND INDEMNIFICATION . . . . . . . . ? 7.04 DUE DILIGENCE IN THE REGISTERED OFFERING CONTEXT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Directors . . . . . . . . . . . . . . . . . . . . . . . . . [B] Signatories . . . . . . . . . . . . . . . . . . . . . . . . [C] Attorneys . . . . . . . . . . . . . . . . . . . . . . . . . [D] Delegation of Due Diligence . . . . . . . . . . . . . . [E] Underwriters . . . . . . . . . . . . . . . . . . . . . . . [F] Accountants . . . . . . . . . . . . . . . . . . . . . . . ? 7.05 IMPACT OF THE INTEGRATED DISCLOSURE SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 7.06 DIRECTOR SIGNING OF FORM 10-K . . . . . . . . . . . ? 7.07 SHELF REGISTRATION . . . . . . . . . . . . . . . . . . . . xvi TABLE OF CONTENTS 0016 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 199 ? 7.08 SECTION 12(1) (AS NOW AMENDED SECTION 12(a)(1)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 7.09 SECTION 12(2) (AS NOW AMENDED SECTION 12(a)(2)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Overview . . . . . . . . . . . . . . . . . . . . . . . . . [B] The Meaning of ?Seller? . . . . . . . . . . . . . . . . [C] Secondary Liability . . . . . . . . . . . . . . . . . . . [D] Limited to Public Offerings . . . . . . . . . . . . . . [E] The Reasonable Care Defense . . . . . . . . . . . . . [F] Indemnification and Contribution . . . . . . . . . . . [G] Affirmative Defense of Section 12(b) . . . . . . . . . Appendix Due Diligence Checklist (Public Offering) . . . . . . . . Chapter 8 SECTION 10(b) AND RELATED ISSUES . . . . . ? 8.01 OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 8.02 STANDING: THE PURCHASER-SELLER REQUIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 8.03 REQUISITE CULPABILITY LEVEL . . . . . . . . . . . . . [A] Private Damages Actions . . . . . . . . . . . . . . . . [B] SEC Actions for Injunctive Relief . . . . . . . . . . . [C] ?Recklessness? . . . . . . . . . . . . . . . . . . . . . . [D] State Court Reaction . . . . . . . . . . . . . . . . . . ? 8.04 PLEADING REQUIREMENTS . . . . . . . . . . . . . . . . ? 8.05 THE ?MANIPULATION? OR ?DECEPTION? REQUIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Breach of Fiduciary Duty Not Sufficient . . . . . . [B] Federal Claims Premised on Breach of Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . [1] Post-Santa Fe State Court Decisions . . . . . . [2] Post-Santa Fe Federal Court Decisions . . . . . [3] Caveats . . . . . . . . . . . . . . . . . . . . . . . . [4] Summation . . . . . . . . . . . . . . . . . . . . . . ? 8.06 THE RELIANCE REQUIREMENT . . . . . . . . . . . . . . [A] Generally . . . . . . . . . . . . . . . . . . . . . . . . . [B] The ?Fraud on the Market? Theory . . . . . . . . . [1] Characteristics of an ?Efficient? Market . . . . . [2] Rebutting the Fraud on the Market Presumption of Reliance . . . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS xvii 0017 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 231 [C] The ?Fraud to Enter the Market? Theory . . . . . . [D] Plaintiff Due Diligence . . . . . . . . . . . . . . . . . [1] The ?Bespeaks Caution? Doctrine . . . . . . . . [2] Reliance on Oral Statements Inconsistent with Written Offering . . . . . . . . . . . . . . . . . . ? 8.07 CUMULATIVE REMEDIES . . . . . . . . . . . . . . . . . . ? 8.08 STATUTE OF LIMITATIONS . . . . . . . . . . . . . . . . . ? 8.09 MEASURE OF DAMAGES . . . . . . . . . . . . . . . . . . . ? 8.10 IN PARI DELICTO DEFENSE . . . . . . . . . . . . . . . . ? 8.11 CONTRIBUTION, PROPORTIONATE LIABILITY, AND RELATED ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . ? 8.12 THE PRIVATE SECURITIES LITIGATION REFORM ACT (PSLRA): CLASS ACTION REFORM AND RELATED ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Class Action Reform . . . . . . . . . . . . . . . . . . [B] Sanctions for Abusive Litigation . . . . . . . . . . . [C] Stay of Discovery and Preservation of Evidence . . . . . . . . . . . . . . . . . . . . . . . . . [D] Auditor Disclosure of Corporate Fraud . . . . . . . ? 8.13 EXTRATERRITORIAL JURISDICTION . . . . . . . . . . . [A] Transnational Fraud . . . . . . . . . . . . . . . . . . [B] Securities Act Registration . . . . . . . . . . . . . . . [C] Tender Offers . . . . . . . . . . . . . . . . . . . . . . Chapter 9 ALTERNATIVE REMEDIES . . . . . . . . . . . . . . ? 9.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . ? 9.02 IMPLIED RIGHTS OF ACTION?IN GENERAL . . . . . . [A] Pre-1975 Approach . . . . . . . . . . . . . . . . . . . [B] The Cort Formulation and Its Apparent Demise . . . . . . . . . . . . . . . . . . . . . . . . . . ? 9.03 AVAILABILITY OF IMPLIED RIGHTS OF ACTION UNDER SELECT STATUTES . . . . . . . . . . . . . . . . . . . . ? 9.04 SECTION 17(a) OF THE SECURITIES ACT . . . . . . . . [A] Generally . . . . . . . . . . . . . . . . . . . . . . . . . [B] Supreme Court Decisions . . . . . . . . . . . . . . . . [C] Availability of Implied Right of Action . . . . . . . . ? 9.05 SECTION 14(a) OF THE EXCHANGE ACT . . . . . . . . [A] Elements of Private Right of Action . . . . . . . . . xviii TABLE OF CONTENTS 0018 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 262 [B] A Look at Virginia Bankshares . . . . . . . . . . . . [C] Contexts Where Proxy Provisions Apply . . . . . . . ? 9.06 SECTION 29(b) OF THE EXCHANGE ACT . . . . . . . . ? 9.07 SECTION 18 OF THE EXCHANGE ACT . . . . . . . . . . ? 9.08 THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT (RICO) . . . . . . . . . . . . . . . . . . . ? 9.09 STATE SECURITIES AND COMMON LAW REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Obstacles to State Law Relief . . . . . . . . . . . . . [1] Overview . . . . . . . . . . . . . . . . . . . . . . . [2] The Securities Litigation Uniform Standards Act (SLUSA) . . . . . . . . . . . . . . . . . . . . . . . [B] Advantages of State Claims . . . . . . . . . . . . . . Chapter 10 SECONDARY LIABILITY . . . . . . . . . . . . . . . ? 10.01 AIDING AND ABETTING LIABILITY . . . . . . . . . . . ? 10.02 APPLICATION OF CENTRAL BANK OF DENVER TO THE SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 10.03 DISTINGUISHING PRIMARY FROM SECONDARY CONDUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Primary Liability Where the Secondary Actor Speaks . . . . . . . . . . . . . . . . . . . . . . . . . . . [B] Primary Liability Where the Secondary Actor Drafts a Misstatement . . . . . . . . . . . . . . . . . . . . . [1] Pre-Central Bank Case Law . . . . . . . . . . . . [2] Post-Central Bank Case Law . . . . . . . . . . . [C] Primary Liability Where the Secondary Actor Participates in the Misrepresentation . . . . . . . . . . . . [D] Engaging in a ?Scheme to Defraud? . . . . . . . . . [E] Duty to ?Blow the Whistle? . . . . . . . . . . . . . . ? 10.04 CONTROLLING PERSON LIABILITY . . . . . . . . . . . ? 10.05 RESPONDEAT SUPERIOR LIABILITY . . . . . . . . . . Chapter 11 ISSUER AFFIRMATIVE DISCLOSURE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 11.01 OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 11.02 IMPACT OF THE ?MD&A? REQUIREMENTS . . . . . . ? 11.03 RUMORS AND THIRD PARTY STATEMENTS . . . . . . TABLE OF CONTENTS xix 0019 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 292 ? 11.04 DISCLOSURE OF MERGER NEGOTIATIONS . . . . . . ? 11.05 DISCLOSURE OF ?SOFT? INFORMATION . . . . . . . . [A] Generally . . . . . . . . . . . . . . . . . . . . . . . . . [B] Application to ?Merger? Context . . . . . . . . . . . [C] The ?Bespeaks Caution? Doctrine . . . . . . . . . . . [D] The Private Securities Litigation Reform Act?Safe Harbor for Certain Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . ? 11.06 DUTY TO UPDATE . . . . . . . . . . . . . . . . . . . . . . ? 11.07 REAL-TIME DISCLOSURE . . . . . . . . . . . . . . . . . . ? 11.08 REGULATION FD . . . . . . . . . . . . . . . . . . . . . . . [A] Purposes of Regulation FD . . . . . . . . . . . . . . . [B] Scope of Regulation FD . . . . . . . . . . . . . . . . . [C] Meaning of ?Material? and ?Nonpublic? . . . . . . . [D] Intentional or Non-Intentional Selective Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . [E] Methods For Making Public Disclosure . . . . . . . [F] Exclusions for Registered Offerings . . . . . . . . . . [G] SEC Enforcement, No Private Remedy . . . . . . . ? 11.09 RESPONDING TO AUDITOR REQUESTS . . . . . . . . Chapter 12 INSIDER TRADING . . . . . . . . . . . . . . . . . . ? 12.01 OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 12.02 SUPREME COURT DECISIONS OF THE EARLY 1980s?CHIARELLA AND DIRKS . . . . . . . . . . . . . . . . . ? 12.03 THE MISAPPROPRIATION THEORY . . . . . . . . . . . [A] United States v. O?Hagan . . . . . . . . . . . . . . . [B] Family and Other Personal Relationships . . . . . . ? 12.04 ?POSSESSION? VS. ?USE? . . . . . . . . . . . . . . . . . . ? 12.05 RIGHT OF ACTION FOR CONTEMPORANEOUS TRADERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 12.06 DAMAGES AND PENALTIES . . . . . . . . . . . . . . . . [A] Damages?Section 10(b) Actions . . . . . . . . . . . [B] Penalties . . . . . . . . . . . . . . . . . . . . . . . . . ? 12.07 RULE 14E-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 12.08 THE MAIL AND WIRE FRAUD STATUTES . . . . . . . ? 12.09 BLACKOUT PERIODS?INSIDER TRADING PROHIBITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . xx TABLE OF CONTENTS 0020 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 319 ? 12.10 SECTION 16??SHORT-SWING? TRADING . . . . . . . . [A] Overview . . . . . . . . . . . . . . . . . . . . . . . . . [B] Relevant Issues . . . . . . . . . . . . . . . . . . . . . [1] Beneficial Ownership and the Concept of Attribution . . . . . . . . . . . . . . . . . . . . . . [2] Directors . . . . . . . . . . . . . . . . . . . . . . . [3] Officers . . . . . . . . . . . . . . . . . . . . . . . . [4] Ten Percent Beneficial Owners . . . . . . . . . . [5] Objective Approach vs. Pragmatic Approach . . . . . . . . . . . . . . . . . . . . . . . Chapter 13 BROKER-DEALER REGULATION . . . . . . . . . ? 13.01 OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 13.02 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . [A] Key Supreme Court Decisions . . . . . . . . . . . . . [B] Aftermath of McMahon and Rodriguez . . . . . . . [C] Arbitration Today . . . . . . . . . . . . . . . . . . . . ? 13.03 SPECIAL CONCEPTS OF FRAUD FOR BROKER-DEALERS . . . . . . . . . . . . . . . . . . . . . . . . . . ? 13.04 CONFLICTS AND SCREENING PROCEDURES . . . . . [A] In General . . . . . . . . . . . . . . . . . . . . . . . . [B] The Need for Reinforcement Measures . . . . . . . [C] Regulatory Treatment of Chinese Walls . . . . . . . ? 13.05 SECONDARY LIABILITY?FAILURE TO SUPERVISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 14 CORPORATE CONTROL ACQUISITIONS AND CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 14.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . ? 14.02 GOING-PRIVATE TRANSACTIONS . . . . . . . . . . . . [A] State Law . . . . . . . . . . . . . . . . . . . . . . . . . [B] Federal Law . . . . . . . . . . . . . . . . . . . . . . . ? 14.03 PROXY CONTESTS . . . . . . . . . . . . . . . . . . . . . . ? 14.04 A PRIMER ON THE WILLIAMS ACT . . . . . . . . . . . [A] Introduction . . . . . . . . . . . . . . . . . . . . . . . [B] Legislation . . . . . . . . . . . . . . . . . . . . . . . . [C] Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS xxi 0021 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 350 ? 14.05 DEFINITION OF TENDER OFFER . . . . . . . . . . . . . ? 14.06 CONSTITUTIONALITY OF STATE TAKEOVER STATUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] The CTS Decision . . . . . . . . . . . . . . . . . . . . [B] The ?Third-Generation? Statutes . . . . . . . . . . . [C] Need for Federal Preemption . . . . . . . . . . . . . ? 14.07 DISCLOSURE OF BENEFICIAL OWNERSHIP INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 14.08 SEC TENDER OFFER RULES . . . . . . . . . . . . . . . ? 14.09 SUBSTANTIVE REGULATION OF DEFENSIVE TACTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Federal Law . . . . . . . . . . . . . . . . . . . . . . . [B] State Law . . . . . . . . . . . . . . . . . . . . . . . . . ? 14.10 VIEWS OF COMMENTATORS . . . . . . . . . . . . . . . Chapter 15 SEC ENFORCEMENT . . . . . . . . . . . . . . . . . ? 15.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . ? 15.02 SEC SUBPOENA POWER . . . . . . . . . . . . . . . . . . [A] Overview . . . . . . . . . . . . . . . . . . . . . . . . . [B] Supreme Court Standards . . . . . . . . . . . . . . . [C] Notice to Third Parties . . . . . . . . . . . . . . . . . ? 15.03 PARALLEL PROCEEDINGS . . . . . . . . . . . . . . . . . ? 15.04 SEC ADMINISTRATIVE ENFORCEMENT REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] Cease and Desist Orders . . . . . . . . . . . . . . . . [B] Money Penalties . . . . . . . . . . . . . . . . . . . . . [C] Refusal and Stop Orders . . . . . . . . . . . . . . . . [D] Summarily Suspending Trading in a Security . . . [E] Broker-Dealer Disciplinary Sanctions . . . . . . . . [F] Section 15(c)(4) Disciplinary Proceedings . . . . . . [G] Section 21(a) Reports of Investigation . . . . . . . . ? 15.05 SEC INJUNCTIONS . . . . . . . . . . . . . . . . . . . . . . [A] Standards for Injunctive Relief . . . . . . . . . . . . [B] Implications of Central Bank of Denver and the PSLRA . . . . . . . . . . . . . . . . . . . . . . . . . . [C] Collateral Consequences . . . . . . . . . . . . . . . . [D] Ancillary or Other Equitable Relief . . . . . . . . . xxii TABLE OF CONTENTS 0022 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 380 [E] Modification or Dissolution of SEC Injunctions . . . ? 15.06 OFFICER AND DIRECTOR BARS . . . . . . . . . . . . . ? 15.07 COURT ORDERED MONEY PENALTIES . . . . . . . . . ? 15.08 STATUTES OF LIMITATIONS . . . . . . . . . . . . . . . ? 15.09 PROFESSIONAL RESPONSIBILITY . . . . . . . . . . . . [A] Rule 102(e) [formerly Rule 2(e)] . . . . . . . . . . . . [B] SEC Standards of Conduct . . . . . . . . . . . . . . . ? 15.10 SARBANES-OXLEY ACT ENHANCED ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix SEC Order Directing a Private Investigation GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tables of Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS xxiii 0023 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs J:\VRS\DAT\00834\FM.GML --- Understanding Securities Law --- POST 411 0024 VERSACOMP (4.2 ) ? COMPOSE2 (4.43) 03/30/07 (11:55) NEW LAW SCH. Front Matter SAMPLE for PERFECTBOUND Pubs COMPOSITION RUN COMPLETED --- ERRORS: NONE --- PAGES: 24
Library of Congress Subject Headings for this publication:
Securities -- United States.