Chapter 12: The SEC, Securities Laws, Registration, and Filings

Securities and Exchange Commission (SEC)

Independent federal agency, created in 1934, that regulates securities markets and public company reporting

1) Protect Investors, (2) Maintain Fair, Orderly, and Efficient Markets, and (3) Facilitate Capital Formation

SEC Mission

Securities Act of 1933

“Truth in securities law; regulates initial offerings

Securities Exchange Act of 1934

Created the SEC, regulates trading after issuance

Sarbanes-Oxley Act (SOX)

2002 law passed after Enron and WorldCom; created the Public Company Accounting Oversight Board (PCAOB)

Self-Regulation

The pre-SOX system where the AICPA set and enforced the profession’s own rules

American Institute of Certified Public Accountants

AICPA

Public Company Accounting Oversight Board (PCAOB)

Oversees AUDITORS of public companys; 5 members appointed by the SEC, no more than 2 accountants

Financial Accounting Standards Board (FASB)

Private-sector body to which the SEC has generally ceded standard setting

Regulation S-K

SEC rules for NONfinancial disclosures (such as MD&A, officers, and legal proceedings)

Regulation S-X

SEC rules for the form and content of FINANCIAL information

Management Discussion and Analysis

MD&A (of financial condition and results)

Issuer (Registrant)

A company that issues public securities and files with the SEC

Registration Statement

Filing required before securities are first offered to the public

Prospectus

Part 1 of the Registration Statement, given to investors: audited financial statements, use of proceeds, risks, and a description of the business and properties

Division of Corporation Finance

SEC division that reviews registration statements and issues the letter of comments

Letter of Comments (Deficiency Letter)

SEC staff letter requesting changes or clarification

Effective

The SEC’s declaration that a registration is complete and the securities may be sold

Form S-1

DEFAULT registration form; first-time registrants

Form S-3

SHORT form for large, established issuers

Form S-4

Securities issued in a business combination

Form S-8

Employee STOCK plans

Form S-11

For certain REAL ESTATE companies

Regulation D, Rule 504

EXEMPTION for offerings under $10 million in 12 months

Regulation D, Rule 506

Private placement for ANY amount to unlimited accredited investors and up to 35 sophisticated nonaccredited investors

Accredited Investor

An investor who qualifies by wealth or income to buy UNREGISTERED securities

Regulation Crowdfunding

Exemption for offerings up to $5 million to any number of investors

Form 10-K

ANNUAL report with audited financial statements

Form 10-Q

QUARTERLY report with unaudited financial statements

Form 8-K

Current report on a SIGNIFICANT event

EDGAR

The SEC’s electronic filing system