Business Associations and Securities LES 305

Flashcards based on key concepts from the Business Associations and Securities LES 305 lecture notes.

What is a security?

A financial instrument that holds monetary value and can be traded.

What does the 1933 Securities Act require?

Accurate disclosure of financial information and registration with the SEC.

What is the key distinction between the 1933 Securities Act and the 1934 Securities Exchange Act?

The 1933 Act addresses initial offerings while the 1934 Act regulates secondary market transactions.

What is the importance of the Howey Company case?

It helps to determine whether an arrangement is considered a security.

What limitation does SEC Regulation Crowdfunding impose on individual investments?

Annual limitations on investments by individual investors.

What is the penalty for violations under the 1933 Act?

Imposes personal liability on the signer of registration statements.

What case exemplifies the issues with registration statements under the 1933 Act?

Escott v. BarChris highlights overstatement of profits and inadequate disclosures.

What is required for an insider to violate Section 10(b) of the 1934 Act?

The insider must trade on nonpublic material information.

What is the Business Judgment Rule?

Directors and officers are held to a standard that requires them to make informed decisions.

What is piercing the corporate veil?

Lifting the corporate protection when corporate formalities are not observed or there is co-mingling of funds.

What does 'pass-through' tax treatment mean?

Entities like S corporations and partnerships pass income directly to their owners for tax purposes.

What must a partnership agreement include?

A written agreement that outlines sharing profits and responsibilities.

What are the main characteristics of a C Corporation?

It is taxed as a separate entity, must pay corporate income taxes, and dividends are taxed again at the shareholder level.