Series 79 - Rules & Regulations

Rule 5121

A member firm w/ a conflict of interest may not participate in a public offering unless: the nature of the conflict is prominently disclosed or the member complies with certain net capital, discretionary account and filing information, and a QIU participates in the offering

Rule 5122

Applies primariy to MPOs to prevent potential conflicts of interest and require sufficient disclosures to investors

Rule 5130

Designed to protect the integrity of equity IPOs by requiring underwriters make bona fide public offerings. The rule prohibits the sale of new issues to "restricted persons."

Rule 5141

prohibits any broker dealer firm engaged in a fixed price offering from selling securities to a related person at a discounted price

Rule 5150

provides for specific disclosures that must be made when fairness opinions are provided to a company's public shareholders

Rule 10b-9

issuers & broker dealers must be truthful with the public about the type of underwriting commitment

Rule 10b5-2

a duty of trust or confidence applies when 2 people have a history of sharing sensitive information in confidence and the recipient of the information should reasonably understand that the information should be kept confidential

Rule 13e-3

covers purchases, solicitations and TOs in which the effect is to cause equity securities to be eligible for termination and or delisting

Rule 14a

Specifies the information that must be included in a proxy statement (see page 466)

Rule 14e3

During a TO, prohibits trading in the shares by anyone possessing material non-public information obtained directly or indirectly from the offeror, issuer or officer/director/employee acting for the offeror or issuer

Rule 15c2-4

requires that broker dealers participating in all or none or mini max offerings deposit investor funds in a separate escrow account at an independent bank or any other QFI for the benefit of the investors

Rule 101 (Regulation M)

Permits certain activities by distribution participants during the restricted period including underwriters or other persons who are participating in the distribution

Rule 102 (Regulation M)

Permits certain activities by distribution participants during the restricted period including the issuer or selling shareholders

Rule 103 (Regulation M)

Allows broker-dealers to engage in passive market making transaction in Nasdaq securities.

Rule 104 (Regulation M)

Requires any person making a penalty bid to provide prior notice to regulators of the principal market in which the penalty bid is imposed.

Rule 105 (Regulation M)

Restriction on short sales and purchases during the restricted period and prohibits ANYONE from purchasing securities in a public offering and simultaneously selling short the same securities. The purpose of this rule is to prevent an investor from shorting a significant amount of stock just prior to the pricing of a follow-on offering.

Rule 144

Defines the conditions under which securities that are acquired through an exempt transaction, or are restricted from resale for other reasons, can be sold.

Rule 144A

Makes it easier for companies, both domestic and international, to raise money in U.S. Capital Markets.

Rule 145

Clarifies that business combinations are considered "offers to sell" securities, subject to registration requirements, whether or not a security holder takes action to buy, sell or exchange securities. This rule defines specific types of business combinations: Reclassification, Merger/Acquisition/Consolidation, and Transfer

Rule 147

Intrastate Offering Exemption applies to companies with specific requirements, mostly that the issuer has 80% assets, gross revenues and net proceeds located within 1 specific state (see page 431)

Rule 504

Applies to Regulation D and can be used for offerings of up to $1 Million

Rule 505

Applies to Regulation D and can be used for offerings of up to $5 Million

Rule 506

Applies to Regulation D and can be used for offerings of any size

Regulation A

Authorizes the SEC to exempt small securities offering from registrations if they comply (see page 430)

Regulation D

establishes 3 exemptions from registration for private placements of equity or debt securities (see pg 432)

Regulation FD

Designed to promote the disclosure of material information to individual investors simultaneous with securities market professionals.

Regulation M

Prohibits activities and conduct that could artificially influence the market for a new issue

Regulation S

Securities offerings outside of the U.S. are not subject to the registration requirements of the Securities Act of 1933

Regulation S-K

Instructions for filing forms under the '33 and '34 Acts. Provides guidance on the use of projections and ratings included in the registrations statements

Regulation S-X

Address the form and content of financial statements included in the registrations statements, which must adhere to GAAP standards.

Securities Act of 1933

The Truth in Securities Act with 2 basic objective: To require that investors receive significant and material information concerning securities being offered for public sale; and to prohibit deceit, misrepresentations, and other fraud in the sale of securities to the public.

Securities Exchange Act of 1934

Prohibits fraud in secondary market transactions and requires all securities be registered

USA Patriot Act

Amended and strengthened the Bank Secrecy Act including the development of compliance programs, prohibitions on transactions with foreign shell banks/persons on lists compiled by OFAC, requires mandatory information sharing in response to request by federal law enforcement, and compliance requirements imposed by the U.S. Treasury

Sarbanes Oxley Act of 2002

Requires enhanced standards for U.S. public companies and their directors, executive officers and public accounting firms

Trust Indenture Act of 1939

A law passed in 1939 that prohibits bond issues valued at over $5 million from being offered for sale without a formal written agreement (an indenture), signed by both the bond issuer and the bondholder, that fully discloses the particulars of the bond issue. The act also requires that a trustee be appointed for all bond issues, so that the rights of bondholders are not compromised.

Bank Secrecy Act

requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering.

JOBs Act

Requires the SEC to reduce barriers to capital formation by offering additional ways for issuers to sell securies without SEC registration

Rule 11880

Requires final settlement of syndicate accounts by the syndicate manager within 90 days following the syndicate settlement date.

Rule 2310

Covers underwritings of DPPs and unlisted REITs offered to the public, underwriters are requried to file specific information about the offering with FINRA and receive a "no objections" opinion regarding the offering terms prior to participating in the offering, particularly in bonafide issuer expense; underwriting compensation, and due diligence expenses. This rule limits the total O&O expenses for DPPs and unlisted REITs to 15% of gross offering proceeds.

Rule 5190(e)

Requires broker-dealers to notify FINRA of the intention to impose penalty bids on OTC equity securities, prior to imposing the bid or engaging in the first syndicate covering transaction.

Rule 17a-2

Defines recordkeeping requirements for syndicate group members who engage in stabilizing activities or penalty bids. Records must be maintained for 3 years in total, 2 of which must be easily accessible. The record must include the following: name and class of security, price/date/time of purchase, name and address of the syndicate selling group, commitment of each group member and date when the penalty bid (if any) was in effect.

Rule 2262

requires broker dealers who are controlled by the issuer to disclose to customers the extent of control before entering into a contract with customers for the purchase or sale of the issuer's securities

Rule 2269

requires broker dealers to provide written disclosure to customers of any interest they have in the primary or secondary distribution of securities being offered, sold or advised for a fee