Business Law, Chapter 42: "Investor Protection, Insider Trading, and Corporate Governance" flash cards

Investment Contract

(42-1a) A transaction in which a person invests in a common enterprise reasonably expecting profits that are derived primarily from the efforts of others (securities law definition).

Prospectus

(42-1b) A written document required by securities laws when a security is being sold. The document describes the security, the financial operations of the issuing corporation, and the risk attaching to the security.

Free-Writing Prospectus

(42-1b) A written, electronic, or graphic communication associated with the offer to sell a security and used during the waited period to supplement other information about the security.

Accredited Investor

(42-1e) A sophisticated investor, such as a bank, insurance company, investment company, executive officers and directors, and any persons whose income income or net worth exceeds certain limits.

Investment Company

(42-1e) A company that acts on the behalf of many smaller shareholders-owners by buying a large portfolio of securities and professionally managing that portfolio.

Mutual Fund

(42-1e) A specific type of investment company that continually buys or sells to investors shares of ownership in a portfolio.

Direct Public Offering

(42-1e) (Also referred to as a direct listing) The sale of a private company’s shares directly to the public without going through an investment banking firm. Simply put, no new shares of stock are created.

Special Purpose Acquisition Company

(42-1e) A blank-check investment vehicle that raises capital through initial public offerings for as yet unspecified investments in private firms at a later date.

SEC Rule 10b-5

(42-2a) A rule of the Securities and Exchange Commission that prohibits the commission of fraud in connection with the purchase or sale of any security.

Insider Trading

(42-2a) The purchase of sale of securities on the basis of information that has not been made available to the public.

Tippee

(42-2a) A person who receives insider information.

Short-Swing Profit

(42-2a) A profit earned by a purchase and sale, or sale and purchase, of the same security within a six-month period.

Blue Sky Law

(42-3) A state law that regulates the offer and sale of securities.

Corporate Governance

(42-4) A set of policies specifying the rights and responsibilities of the various participants in a corporation and spelling out the rules and procedures for making corporate decisions.

Stock Option

(42-4a) A right to buy a given number of shares of stock at a set price, usually within a specified time period.