Regulation of Securities: SEC Answer Book, Fourth Edition

Regulation of Securities: SEC Answer Book, Fourth Edition is your complete guide to understanding and complying with the day-to-day requirements of the federal securities laws that affect all public companies.

Using a question-and-answer format similar to that which the SEC has embraced, this valuable desk reference provides concise, understandable answers to the most frequently asked compliance questions, and ready access to key statutes, regulations, and court decisions. Designed for both beginners and seasoned professionals, the volume contains approximately 1,400 pages organized in 23 self-contained chapters. Each chapter covers the basics before moving into the nuanced details, meeting the needs of those who seek a general understanding of a topic as well as those grappling directly with critical issues. Twice-yearly supplements keep the book current in this rapidly evolving field.

Whether you are a lawyer, accountant, corporate executive, director or investor, you’ll be able to quickly find concise answers to essential questions about the Dodd-Frank Act, Exchange Act registration and reporting, executive compensation disclosure, derivatives disclosure, management’s discussion and analysis, audit committee responsibilities, Sarbanes-Oxley, electronic filing, interactive financial data, tender offers, proxy solicitations, insider trading, going private transactions, shareholders’ rights, SEC investigations, criminal enforcement, securities class actions, and much more!

Chapter 1. Introduction to Securities Regulation

• Federal Securities Laws
• Definition of Security
• Securities Act of 1933
• Securities Exchange Act of 1934
• Securities and Exchange Commission
• SEC Rules and Interpretations
• No-Action Requests
• The Securities Industry
• Public Company Accounting Oversight Board

Chapter 2. Electronic Filing

• Overview
• Electronic Filing Requirements
• Hardship Exemptions
• Preparing Electronic Submissions
• Modular Submissions and Segmented Filings
• XBRL
• Using Interactive Data

Chapter 3. Periodic Reports

• Introducing Exchange Act Reporting
• The Integrated Disclosure System
• Disclosure Controls and Procedures
• Annual Report—Form 10-K
• Quarterly Report—Form 10-Q
• Distribution Report—Form 10 -D
• Section 302 Certification of Annual and Quarterly Reports
• Section 906 Certification of Periodic Financial Statements
• Accelerated Filing for Larger Companies
• Current Report—Form 8-K
• Transition Report
• Amendments
• Duty to Update
• Confidential Treatment of Information
• Enforcement
• Recordkeeping and Accounting

Chapter 4. Disclosure Items

• Introduction
• Using Plain English
• Non-GAAP Financial Measures—Item 10(e)
• Performance Graph—Item 201(e)
• Management’s Discussion and Analysis—Item 303
• MD&A for Off-Balance Sheet Arrangements—Item 303(a) or (c)
• Market Risk of Owning Derivatives—Item 305
• Internal Control over Financial Reporting (SOX 404)—Item 308
• Executive Compensation—Item 402
• Security Holdings of Beneficial Owners—Item 403
• Related Person Transactions—Item 404
• Insider Reporting Delinquencies—Item 405
• Code of Ethics—Item 406
• Corporate Governance—Item 407
• Risk Factor Disclosure—Item 503(c)
• Exhibits—Item 601
• Environmental Disclosure
• Scaled Disclosure for Smaller Reporting Companies

Chapter 5. Reporting Beneficial Ownership under Sections 13(d) and 13(g)

• Overview
• Subject Securities
• Beneficial Ownership
• Acquisition of Securities
• Formation of a Group
• Schedule 13D
• Schedule 13G
• Amendments
• Enforcement

Chapter 6. Insider Reporting under Section 16(a)

• Introduction
• How and When to Report
• Electronic Filing and Website Posting
• Joint and Group Reporting
• Enforcement
• Officers and Directors
• Beneficial Owners
• Trusts and Trustees
• Derivative Securities
• Equity Swaps
• Issuer Disclosure of Reporting Delinquencies—Item 405

Chapter 7. Short-Swing Profit Liability under Section 16(b)

• Overview
• Six-Month Period
• Purchase and Sale
• Standing to Sue
• Statute of Limitations
• Calculation of Profits
• Indemnification or Tax Deduction for Profits Disgorged?
• Exemptions
• Prohibition of Short Selling under Section 16(c)

Chapter 8. Audit Committee

• Overview
• Administering the Accounting Engagement
• Proxy Statement Disclosure
• Pre-Filing Review of Quarterly Financials
• Auditor Required Communications with Audit Committee
• Financial Expert Disclosure
• Up-the-Ladder Reporting
• Improper Influence on Conduct of Audits
• Listed Companies’ Audit Committees
• Liability
• Whistleblower Protections

Chapter 9. Executive Compensation

• Introduction
• Compensation Committee
• Say on Pay Vote
• Golden Parachute Vote
• Pay vs. Performance
• Pay Disparity Disclosure
• Hedging by Employees and Directors
• Compensation Clawbacks
• Compensation Restrictions for Covered Financial Institutions
• Broker Discretionary Voting

Chapter 10. Proxies

• Understanding Proxy Regulation
• “Proxy” Defined
• “Solicitation” Defined
• Exempt Solicitations
• Proxy Statement—Schedule 14A
• Information Statement—Schedule 14C
• Proxy Card
• Annual Report to Security Holders
• Filing Proxy Materials with the SEC
• Delivering Proxy Materials to Shareholders
• Lists of Shareholders
• Shareholder Proxy Access
• Solicitation Before Furnishing a Proxy Statement
• Auditor Independence Disclosure
• Shareholder Communications with Directors
• Proxy Advisory Firms
• Antifraud Provisions

Chapter 11. Shareholder Proposals

• Introduction
• Eligibility to Submit a Proposal
• Procedure for Submitting a Proposal
• Substantive Grounds for Excluding a Proposal
• Procedure for Excluding a Proposal
• Enforcement

Chapter 12. Tender Offers

• Overview
• “Tender Offer” Defined
• Commencement
• Early Commencement for Exchange Offers
• Pre-Commencement Communications
• Preparing and Filing Schedule TO
• Disseminating Schedule TO Information to Security Holders
• Security Holder Protections
• Subsequent Offering Period
• All Holders and Best Price Rules
• Disclosure by the Target—Schedule 14D-9
• Issuer Tender Offers and Repurchases
• Fraud; Inside Information
• Cross-Border Transactions
• Mini-Tender Offers
• State Regulation

Chapter 13. Going Private under Rule 13e-3

• Overview
• Sarbanes-Oxley and Going Private
• Scope of Rule 13e-3
• Subject Persons
• Exceptions to Rule 13e-3
• Schedule 13E-3
• Fairness Disclosure
• Disclosure of Information to Security Holders
• Dissemination Requirements
• Liability

Chapter 14. Selling Restricted Securities under Rule 144

• Understanding Rule 144
• “Affiliate”
• “Person”
• “Restricted Securities”
• “Debt Securities”
• Conditions to be Met
• Current Public Information
• Holding Period for Restricted Securities
• Limitation on Amount of Securities Sold
• Manner of Sale
• Form 144—Notice of Proposed Sale
• Securities of Shell Companies
• Rule 145—Business Combination Transactions

Chapter 15. Private Resales to Institutions under Rule 144A

• Introducing Rule 144A
• Interaction with Other Exemptions
• Eligible Securities
• Eligible Buyers
• Information Requirement
• Notice to Buyer of Reliance on Rule 144A
• Securities Act Liability
• Relation to State Securities Laws
• The PORTAL Market

Chapter 16. Corporate Website

• Overview
• Format and Readability
• Document Delivery
• “Access Equals Delivery”
• Proxy Materials
• Regulation FD Considerations
• Electronic Shareholder Forums
• Offshore Transactions
• Interactive Data
• Liability

Chapter 17. Securities Fraud

• Understanding Rule 10b-5
• Statute of Limitations
• “In Connection with the Purchase or Sale”
• Presumptions of Reliance
• Loss Causation and Economic Loss
• Multiple Defendants
• Contribution and Indemnification
• Forward-Looking Statements
• Stock Repurchases—Rule 10b-18
• Liability for Analysts’ Statements
• Selective Disclosure—Regulation FD
• Regulation FD Enforcement
• Non-GAAP Financial Measures—Regulation G

Chapter 18. Insider Trading

• Overview
• Material, Nonpublic Information
• Classical Theory
• Misappropriation
• Theory Tipper and Tippee Liability
• Rule 10b5-1 Trading Plans
• Enforcement and Penalties

Chapter 19. Insider Trading During Pension Blackouts

• Understanding Regulation BTR (Blackout Trading Restriction)
• Issuers Subject to Trading Restriction
• Individuals Subject to Trading Restriction
• Securities Subject to Trading Restriction
• Transactions Subject to Trading Restriction
• Exempt Transactions
• “Blackout Period” Defined
• Blackout Period Notice Requirements
• Remedies for Violations

Chapter 20. Whistleblower Awards

• Overview
• Definitions
• Payment of Awards
• Eligibility
• Submitting Original Information
• Confidentiality of Submissions
• Claiming an Award
• Appeals
• Anti-Retaliation Protection

Chapter 21. Securities Litigation and Enforcement

• Introduction
• SEC Investigations
• Cooperating with the SEC
• SEC Administrative Proceedings
• SEC Injunctive Actions in Federal Court
• Criminal Enforcement
• Corporate Criminal Liability
• Asserting the Fifth Amendment
• Search and Seizure
• Derivative Actions
• Private Actions Brought Individually or as a Class

Chapter 22. Broker-Dealer Regulation

• Introduction
• Definitions of Broker and Dealer
• SEC Registration
• Forms BD and BDW
• SRO Membership
• SIPC Membership
• State Requirements
• Financial Responsibility
• Duty to Supervise
• Antifraud
• Anti-Money Laundering
• Examination
• Arbitration

Chapter 23. Investment Advisers

• Introduction
• Definition of Investment Adviser
• Family Office
• Registration
• Exemptions from Registration
• Form ADV
• Antifraud
• Fiduciary Duty
• Supervision, Compliance and Recordkeeping
• Form PF
• Enforcement

Table of Cases

Index