Mississippi State BL 3223 Law of Commercial Transactions Test 4 Haley Brown

Securities

any instrument evidencing corporate ownership (stock) or debt (bonds)

Stock

A share of ownership in a corporation.

Bond

A security that evidences a corporate (or government) debt.

Securities Act of 1933

governs initial sales of stock by businesses by requiring that investors receive significant information concerning securities offered for public (or private) sale

prospectus

a disclosure document that describes the security being sold, the financial operations of the issuing corporation, and the investment or risk attaching to the security

financial operations

background (age of company, products for sale), properties, certified by independent accountant

Issuing corporation

the business that is selling or "issuing" its shares of stocks to the public

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts.

T/F - The Securities Act of 1933 requires a corporation selling public securities to register with the SEC

True

Securities and Exchange Commission (SEC)

a U. S. Government agency that protects investors and regulates security markets

registration statement

contains financial operations, is filed with SEC, filed electronically with EDGAR

EDGAR

Electronic Data Gathering, Analysis, and Retrieval - primary system for companies submitting documents in accordance with security laws

Initial Public Offering (IPO)

the process by which a corporation can sell its stock to the general public

Penalties for violating Securities Act of 33

Criminal violations (5 years prison, $10,000 fine) and Civil Lawsuits (SEC can sue, force a profit refund, file an injunction, investor can sue)

injunction

an order by a judge that restrains a person from continuing a specific action

Securities Exchange Act of 1934

provides for continuous periodic disclosures by publicly held corporations to enable the SEC to regulate subsequent trading

SEC Rule 10b-5

prohibits the commission of fraud in connection with the purchase or sale of any security

Material Information

information that is essential in deciding whether to engage in a particular transaction

dividend

a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).

insider trading

The purchase or sale of securities on the basis of information that has not been made available to the public.

insider

someone who has access to confidential information and a duty not to disclose that information

Penalties for violating the Securities Exchange act of 34

Criminal Violations (20 years prison, 5 Mil fine) and Civil Lawsuits (SEC can sue, investor can sue)

negotiable instrument

A signed writing that contains an unconditional promise or order to pay an exact sum of money, on demand or at an exact future time, to a specific person or order, or to bearer.

Uniform Commercial Code (UCC)

Body of laws governing commercial transactions in the United States.

Drawer

writer of the negotiable instrument

Drawee

the bank on which a negotiable instrument is drawn

Payee

A person to whom a check is written

Unconditional

payment cannot be conditioned on the occurrence or nonoccurrence of some event

promissory note

a written promise to pay a specified amount of money

order

directs a third party to pay the instrument as drawn

If words and numbers don't match

words outweigh numbers

demand instrument

any instrument that does not state any time for payment.

postdating

writing a future date on a check