bus law final chapters

the government has some power to regulate what land can be used for, including the height and size of buildings, population density limits, requiring green areas, etc. This is known as

zoning

tenancy in common

ownership in which each owner has an undivided interest in the property. if one owner dies their interest goes to their estate or heirs

fee simple

simplest form of ownership, extends to the skies & center of the Earth

Life estate

right to be a tenant for one’s life terminates upon their death

joint tenancy

ownership in which two or more persons have the same interest in the undivided possession of the property. if one owner dies, their interest passes to the other owner

special warranty deed

promises only that the property was not encumbered during the ownership by the grantor

quitclaim deed

a conveyance that passes whatever interests the grantor had in the property

warranty deed

promises the seller is conveying good, clear title to the property

this document is the means by which the owner of property has legal possession of the property

title

this document serves as the primary way to transfer ownership interests in a property

deed

companies & financial institutions base their credit policies on five factors we discussed in class. List them & explain how decisions ab whether to extend credit & determine an interest rate are made

1. Capital: Amt of money debtor is seeking
2. Capacity: whether or not the individual will be able to repay the loan
3. Character: the reputation of the debtor
4. Collateral: what the debtor has that can be used as a “downpayment” for the loan; what the banks have a right to keep or take from the debtor should they fail to pay
5. Conditions: the economic state of the business the debtor is involved in

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banks make their decisions to loan money or extend credit to individuals based on how risky they would be as a client. ex: candidate known fro borrowing money and not being able to pay it back, the bank is much less likely to grant them a loan. the riskier the client the higher their interest rate will be & if they are too risky, the bank will not loan to them at all

You have been hired to serve as an ombudsperson for a troubled corporation called Walls Fairgo. The company has been beset by ethical problems, generally involving employees exploiting customers for profit. The government has demanded that action be taken to clean up the company and ensure nothing like this happens again. \n \n How do you fix these problems? How do you ensure they will not happen again?

help the company identify and address the root causes of the ethical problems they have been facing, and to implement effective measures to prevent such issues from occurring in the future. Here are some steps I would recommend:


1. Conduct a thorough investigation:
2. Develop a code of conduct
3. Establish an ethics hotline:
4. Implement a system of accountability:
5. Foster a culture of transparency and trust:

Walls Fairgo can demonstrate a commitment to ethical behavior and prevent future ethical problems from occurring. It will take time and effort, but by working together, the company can rebuild its reputation and regain the trust of its customers and employees.

securities overview

* financial backbone of US economy
* efficient operation of the securities market is critical to growth
* business operations rely on securities for financing operations
* securities main investment for pension funds

Securities

may be **debt** of certain forms, primarily money borrowed by a corporation usually as a note or bond that can be traded

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may be **equity** the most well known being common stocks traded on stock exchanges

Debt Financing

* occurs when a company incurs debt that has to be repaid to those who purchase it (bond holders). these bond are often traded on the securities market as debt securities
* Debt instruments sucha as bonds must specify:
* amt of the debt
* length of debt period
* debt repayment method
* rate of interest charged to the sum borrowed

Equity Financing

Companies also raise funds through the sale of company stock. Purchasers of the stock gain an ownership interest in the corporation & have a claim on its future profits.

the company has no specific obligation to repay shareholders the amt they have invested

origins of securities regulation---- State Level

Blue Sky laws were enacted to prevent the sals of worthless securities

origins of securities regulation---- Federal Level

began following stock market crash of' ‘29 to prevent manipulation & end abusive processes

Securities Regulation ----Securities Act of 1933

* Regulates the public offerings of securities when they are first sold
* Requires investors be given material information about new securities

Securities Regulation --Securities Exchange Act of 1934

* Regulates trading in existing securities and imposes disclosure requirements on corporations that have issued publicly held securities
* Regulate securities markets and professionals

Securities & exchange commission (SEC)

* agency charged w/ enforcing & administering federal securities laws
* independent agency that has 5 members appointed by the President for 5 yrs
* staff composed of attorneys, accountants, financial analysts & examiners

What Qualifies as a Security

any certificate of interest of participation in temporary or interim certificate for receipt for, guarantee of or warrant or right to subscribe to or purchase any of the foregoing

Howey Test

establish by U.S. Supreme Court, provides investment is a security if it contains 4 basic elements


1. An investment of money
2. In a common enterprise
3. With an expectation of profits
4. Generated by the efforts of persons other than the investors

\* securities issued by banks & religious & charitable organizations as well as insurance policies & annuity contracts are exempt

Truth in Securities Principles &&&&& Offering Securities to Investors

* Before a security is sold, sellers must disclose to prospective investors all material information about the security, its issuers, and the intended use of the funds raised. \n
* Material information is relevant information an investor would want to know about a company- its background, executives, and plan of operations.
* Goal is to protect investors, as in the Latta case from the textbook.

The Registration Statement

**Prospectus**: a document providing the legal offering of the sale of the security; must contain the security issuer’s finances and business, the purpose of the offering, the plans for the funds collected, the risks involved in the business venture, the promoters’ managerial experience and financial compensation, and financial statements certified by independent public accountants.

* Regulation S-K- contains more detailed information.
* The costs of registration can be substantial.

Exemptions from Registration

* Government bonds
* Private placements
* Qualified Institu

Publicly held companies must file:

* annual 10-k reports
* 10-q reports w/ unaudited financial information & 8-k reports whenever significant financial developments occur

Publicly held companies must provide:

material info to the public, rather than favoring some investors & analysts

Proxies

permission given by a shareholder to another party to vote his shares in the manner he instructs

Tender Offers

when an acquiring company offers stock in the acquiring company, cash, or some combination in exchange for their story

Securities Fraud

* Failure to follow disclosure requirements.
* False and misleading information in the original registration materials and/or later disclosures, such as public statements made by corporate representatives. Overly optimistic statements can qualify.
* Anyone involved in the fraudulent disclosures can be liable, from directors of the company to the experts that helped to prepare them.
* SEC can also recommend the DOJ bring criminal charges.

Sarbanes Oxley Act

* Requires the CEO and CFO of large companies with publicly traded stock personally certify that financial reports made to the SEC comply with SEC rules and the information in the reports is accurate.
* Knowingly making a misstatement is a crime, with fines of up to $5 million and up to 20 years in prison.
* Established the Public Company Accounting Oversight Board, which has authority to set accounting standards and discipline CPAs for misconduct.

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Insider trading

* buying & selling of stock y persons who have access to information not yet made public
* misappropriation of private info gives insiders an unfair adv
* involves material & non-public info

SEC prosecution

* Can prosecute insiders for acting on material and non-public information.
* The SEC brings about 50 cases each year.
* One famous case involves SAC Capital Advisors, which had to pay a $616 million penalty.

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***Chiarelli*** (Supreme Court Caselaw)

if defendant is not a corporate insider, but just lucky to get advance info, not securities fraud to use that information

***Dirks*** (Supreme Court Caselaw)

must be manipulation or deception which involve inherent unfairness, for it to qualify as insider trading

Insider trading Santions Act of 1984

can seek treble the amt gained or loss avoided as well as criminal penalties

Insider Trading & Securities Fraud Enforcement Act of 1988

increased max fine to $1 million & prison term to 10 yrs for ppl ($5 for willful violations) & $25 million for corporate non-willful violations. also allowed up to 10% bounces for informants

The investment company act

* gives SEC control over structure of investment companies
* most common investment it Utah fund
* only applies to investment companies that offer securities to the public
* registration, annual reporting,& min payments (90% of dividends) are some req

Investment adviser

person who for compensation engages in the business of advising others…as to the advisability of investing in, purchasing, or selling securites

* regulates brokers, dealers, persons who by & sell securities for themselves & advisers, who charge fees for investment advice
* conflicts must be disclosed, markups are limited, churning & scalping forbidden

Stock Market Regulation

* Trillions of dollars in securities are bought and sold on the NYSE and other exchanges.
* Congress gave the SEC the power to regulate.
* Most disputes between investors and professionals are arbitrated.
* Dodd-Frank increases regulatory oversight of the financial markets, provides more power to \n deal with systemic risk.

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Food & Drug Administration (FDA)

* $5 billion annual budget
* 1/3 devoted to food safety, sanitation & processing
* 1/3 devoted to the study of marketed drugs & new drug evaluations
* rest supports study of biological product, veterinary products, medical devices, radiological products, cosmetics, & National Center for Toxicological Research

(cough syrups, asbestos the insulation thing)

Food & Drug Safety Concerns:

* food poising, unsafe food or drugs, false advertising of food & drugs
* sanitation of meat, poultry & eggs
* tens of millions of ppl are sickened annually from food borne diseases, 3000 die annually

Book: “The Jungle” by Upton Sinclair

Food Quality Protection

* FDA is to to ensure “reasonable certainty of no harm” (no more than one-in-a-million lifetime chance of cancer) from any source that affects foods, raw or processed whether added directly or indirectly
* Food Safety Modernization Act (FSMA) strengthens food safety powers

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Nutrition Labeling & Education Act

* req. FDA to issue nutrition labels for hundreds of thous. of prod
* must meet standard for words commonly used so consumers can learn more ab what they are buying
* explain to basic level
* avg ppl read 6th grade level
* sticker under foot to remove toxins (false)
* health claims that are not well established such as that product reduces heart disease or cancer, may not be made unless sufficiently documented by the seller

Food, Drug, & Cosmetic Act of 1938

* prohibits sale of any drug until FDA gives approval
* FDA determines which drugs can only be obtained w/ permission of physician

Kefauver Amendment of 1962

* req. FDA to approve drugs based on their proven effectiveness --not just on safety. (risk benefit evaluation)
* costs more than $1 billion & takes an avg of 14-15 yrs to develop new drug & to clear all FDA regulatory hurdles

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Federal Trade Commission (FTC)

* estabilishd century ago to help enforce anti-trust laws
* devotes resources to its Bureau of Consumer Protection
* has 5 member commission, who decide by issue a complaint (isn’t common). Many complaints settled by consent decrees

Consumer Protection

handles deceptive business advertising & marketing practices

Deception Acts or Practices

1. misrepresentation or omission of info in communications to consumers
2. likely to mislead reasonable consumer
3. is material, likely to be misleading to the detriment of consumers

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Unfair Acts or Practices

1. causes substantial harm to consumers
2. injury is harmful in its net effects
3. consumers cannot reasonably avoid injury

(FDAC looks for)

Advertising Claims

* Ad must be truthful & nondeceptive
* Advertisers have evidence to back cliam
* Ads cannot be unfair

Advertising Substantiation

must have reasonable basis for any claims

False Advertising & the Lanham Act

* false designation of origin, false or misleading description of fact, representation
* cause confusion, mistake, deceive as to affiliation, connection of person w/ another person, or origin, sponsorship, approval of their goods, services, commercial activities by another person
* in commercial advertising or promo, misrepresents nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, service, commercial, will be liable in civil action by those who believe to be damaged by act

The mail order rule

if company sells merchandise by mail, must ship goods in time stated in its ads

Kids online privacy rule

Children’s Online Privacy Protection (COPPA) rule requires website & service operators to obtain parental consent before collecting personal info ab kid, like photos & IP adresses

(Facebook has gotten in trouble)

State Deceptive Practices Laws

* All states give their attorneys general powers similar to FTC to bring suit against those involved in scams or dubious business practices
* Consumers may also have private rights of action

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Consumer Credit Protection 5 Basic Principles

* creditors must disclose all relevant terms in credit transactions (truth in lending)
* procedures for correcting inaccurate & disputed bills & charges must be provided (fair credit billing)
* credit-reporting agencies must provide accurate info in consumer reports (fair credit reporting)
* creditors may not use certain personal characteristics, sex/race, in determining person’s creditworthiness (equal credit opportunities)
* abusive debt collection techniques are prohibited (fair debt collection practices)

Antitrust Law

* prevent abuse of power
* competition (innovation)

Important Antitrust Consideration

1. avoiding violating antitrust statutes & rules by their own behavior
2. identifying illegal behavior by their suppliers & competitors
3. knowing when competitors wish to merge or combine operations

The Sherman Act

* passed in 1890 in response to unpopularity of large business organizations, such as Standard Oil
* Standard Oil controlled ab 90% of oil sales
* language of the Act itself is v. broad

The Clayton Act

* enacted in 1914
* intended to stop certain business practices that allowed a firm to develop into a monopoly
* make practices that “substantially lessen competition or tend to create a monopoly illegal”
* Focuses on actions that show an effort to eliminate competition such as price fixing or price discrimination

Federal Trade Commission Act

* established to investigate & enforce violations of antitrust laws
* unfair methods of competition have been interpreted as any business activity that may tend to create a monopoly by unfairly eliminating or excluding competitors from the marketplace
* Certain industries or types of businesses may be exempt from antitrust laws

Penalties for antitrust violations

* can be civil or criminal, depending on type & severity of violation
* most severe penalties are for Sherman Act violations (can be prosecuted as felonies). violations can be punished w/ fines, prison time or both. private parties who prove Sherman Act violations can sue for treble damages plus court costs & attorneys fees

Equitable remedies for antitrust violations

**Restrain** a company or individuals from certain conduct

**Force** a company to sell part of its assets (break up company;

**Force** company to let others use its patents or facilities (licensing)

**Cancel or Modify** existing business contacts

Per Se Rule

certain business agreements or activities automatically are illegal if found to exist (price fixing)

* seller has market power in trying product
* tied & trying products are separate
* evidence of substantial adverse effect in the tied product market

Rule of reason

not as black & white; court will look @ the facts surrounding business practices before deciding whether they help or hurt competition

\-- US v Apple (selling books @ $9.99 w/ some @ a loss & then agreeing w/ book sellers to raise prices)

Horizontal Mergers

2 firms were competitors before they merged

* standard oil case established rule of reason as method to judge mergers
* was a combination of 72 companies that had joined to control 90% of production, shipping, refining, & selling of oil products

Premerger Notification

1 month notification of the transaction is more than $70 million

Assessment of a firm’s market share

incudes consideration of type of product, product market, geographic market, potential competition, & business realities

The European Union & Antitrust Law

* generally more restrictive & enforced more strictly than their US counterparts
* they focus on protection local competitors & extracting revenue from foreign firms

Horizontal Restrains of Trade

occurs when businesses involved operate @ same level of market & generally in same market

* ex: 3 bulb makes agree to charge similar prices for bulbs or split market on geographical basis

Price Fixing

when firms sell same product & agree to fix price, there is conspiracy that likely violates Sherman Act

Exchanges of Information

competitors share information ab offers or pricing info from customers

Territorial Restrictions

dividing country or state into territories

Vertical Restraint of Trade

concerns relationships b/w buyers & sellers, wholesalers & retailers

Vertical Price Fixing

* v. controversial courts are likely to apply rule of reason test
* pros & cons: smaller businesses cannot compete w/ Walmart & may want to see minimum prices maintained

Vertical Non-Price Restraints

* can restrict business dealings based on territories, size of customers, types of business
* common in franchise agreements
* rule of reason will be applied

Exclusionary practices

those w/ outsized markets power have outsized ability to control market

ex: tie in cases, like Microsoft bundling internet explorer into computers that were sold w/ Microsoft operating systems

Robinson Patman Act

* makes price discrimination, selling same goods to different buyers @ different prices illegal when it lessens competition or creates a monopoly
* **Predatory Pricing**: trying to force a competitor out of a market
* Large volume discounts likely okay

Environmental Regulation

* Federal control essentially began in 1970, when Congress authorized the EPA.
* The EPA is one of the largest federal agencies, with about 17,000 employees and a budget of about $8 billion.

Public nuisance

unreasonable interference w/ a right held in common by the public

* action may be taken by city of state attorney

Private nuisance

substantial & unreasonable interference w/ the use & enjoyment of the land of another

* polluter is injuring one person or a group of ppl who initiate private litigation

Trespass

unauthorized breach of the boundaries of another’s land

negligence

based on breach of duty that leads to damages

strict liability

applies for abnormally dangerous activities such as producing or emitting toxic pollutants

* crop dustin, chemical leakage into groundwater, storing flammable substances in a populated area, & noxious gas emissions are all abnormally dangerous

Riparian water law

allow ppl who live along rivers & bodies of water the right to use water in reasonable amts but req. them to allow water to flow downstream I usable form

* there is no common law right to pollute water
* should costs & benefits of pollution be balance to make economically efficient decisions?

Clean Air Act of 1970

* established federal authority to control air pollution and enforce standards across the country.
* After the EPA sets National Ambient Air Quality Standards (NAAQS), each state develops a State Implementation Plan (SIP).
* The primary enforcement burdens are on the states.
* The regulatory burdens for constructing or renovating an industrial plant will vary based on whether it is built in a clean air area or a dirty air area.
* For toxic pollutants, the goal is a 90% reduction in emissions and a 75% reduction in cancer caused by air pollution.
* Enforced by the EPA and state environmental agencies.

Clean Water Act

* started with the Rivers and Harbors Act of 1886 and 1899 and the Federal Water Pollution Control Act of 1948.
* By 1970, marine life in Lake Erie was almost gone and many rivers were unfit as drinking water sources or for recreation.
* Act was passed in 1972, with an objective of restoring and maintaining the chemical, physical, and biological integrity of the nation’s waters.
* Sets pollution standards, water quality standards, requires permits for discharges, establishes special provisions for toxic chemicals and oil spills, and establishes grants and loans for publicly owned treatment works such as sewage treatment plants.

Clean Water Standards

* Focus is on point source pollution, such as pollution from a pipe.
* Pollution is often treated at publicly owned treatment works.
* Billions of dollars are spent to improve the treatment process.
* Nonpoint source pollution, such as runoff, is also regulated.
* Wetlands are protected areas.
* States are primarily responsible for enforcement.

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Land Pollution

* improperly stored hazardous waste can get into lakes, streams, and groundwater.
* Modern disposal sites are heavily regulated, high-tech operations with monitoring wells, layers of impermeable liners, and other safety measures.

Toxic Substances Control Act

* The EPA tracks tens of thousands of chemicals.
* New chemicals have to be registered and hundreds have been tested for safety.
* Biotechnology, the manipulation of biological processes or living organisms is also subject to regulation.
* Pesticides, used for pest control, are toxic to people and the environment if not properly used.
* The environmental costs and benefits of each product must be considered.

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Resource Conservation & Recovery Act

* Requires generators, who create millions of tons of hazardous waste each year to comply with EPA regulatory programs regarding transportation, storage, treatment, and disposal.
* The owners of treatment, storage, and disposal sites must meet regulations regarding the handling of hazardous wastes.
* Manifest system controls reporting.

Superfund / CERCLA (Omaha & Missouri River pic)

* Passed in 1980, provides the authority to clean up abandoned hazardous sites.
* Sites most in need of cleanup are listed on the National Priority List (NPL).
* Potentially responsible parties can be held jointly and severally liable for cleanup costs.
* For the worst sites, EPA will begin cleanup to protect public health and then rack down liable parties for reimbursement for those costs later.
* Important to have environmental audits performed before purchasing property.

Endangered Species Act (1973)

protects ab 1250 recognized threatened & endangered species in US as well as their habitats. controversial bc there are no clear def.

Global Environmental Issues

* Ozone Layer, Global Climate Change, Habitat Destruction, etc. must be dealt with on an international scale.
* Must work with other nations and international institutions to protect species, their habitats, and the environment.
* Ex: Kyoto Treaty (1997)

International Business

* International trade involves movement of goods, services, capital & personnel around the world, often by multinational enterprises


* creates special financial, political, & regulatory advantages, disadvantages, benefits, & risks

International Law

* Rules and customs can be tracked back at least as far as 1400 BCE for Egyptians involved in trade. Greek and Roman civilizations also had well-developed codes of practice for international trade.


* Current laws are drawn from a variety of national and international sources, such as the World Bank, International Monetary Fund, World Trade Organization

NAFTA (international agreements)

ratified by the US, Canada, Mexico, it went into effect in 1994. it reduced or eliminated tariffs & trade barriers on most North American trade

WTO (international agreement)

international trade system operates to lower & eliminate tariffs & provide mechanisms such as arbitration panels for resolving disputes