US-CN Companies & Securities Law Assignment

SEC IPO Rules of Securities Exchange Act of 1934 There are some important sections of Securities Exchange Act of 1934, which often be cited in opinions and orders of securities fraud cases. Section 10(b) Section 10(b) of Securities Exchange Act of 1934 provides that “It shall be unlawful … (a) To effect a short sale … of any security … in contravention of such rules and regulations as the commission may prescribe … (b) To use or employ, in connection with the purchase or sale of any security … any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the commission may prescribe.” Section 14 Section 14(a) of Securities Exchange Act of 1934 provides that “It shall be unlawful for any person, by use of the mails … or otherwise … to solicit or permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to Section 12 of this title.” Section 2...

Schedule 13D the identity and background of the acquirer and any group member the source and the amount of funds for making the purchases the number of the target's shares held by the acquirer any arrangements the acquirer has with others concerning shares of the target the acquirer's purposes for the acquisition and his intentions with regard to the target Regulations of substantive term of tender offer The tender offer must be open to all shareholders of the same class for at least 20 business days. Rule 14d-10(a)(1), Rule 14e-1(a) The offer must remain open for an additional 10 business days after any change in the offering price or the percentage of securities being sought. Rule 14e-1(b) Shareholders can withdraw their shares (revoke their tenders) at any time while the tender offer is open. Rule 14d-7. The shareholder must be paid the best price paid to any other shareholder during the tender offer, and if the bidder offers consideration alternatives (such as...

"Buried Facts" Doctrine "Bespeaks Caution"Doctrine PSLRA Safe Harbor No actual knowledge The plaintiff fails to prove the defendant had actual knowledge that the forward-looking statement was false. This safe harbor applies to oral or written forward-looking statements and immunizes reckless or negligent forwardlooking statements from private liability. Immateriality The forward-looking statement was immaterial. This safe harbor focuses attention on whether the forward-looking statement is too “soft” to be material and opens the door to the judicial “bespeaks caution” doctrine as a separate basis for immunity. Cautionary statements The forward-looking statement “is identified as a forwardlooking statement and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the forward-looking statement.” This safe harbor provides the clearest protection because...

Exchange Act §14(a) The Exchange Act authorizes the SEC to promulgate rules to curb management abuses in the solicitation of proxies identified during congressional hearings leading up to the Exchange Act. Rule 14a-3(a) Any person (including management) who solicits proxies from public shareholders must file with the SEC and distribute to shareholders (whether record or beneficial owners) specified information in a stylized proxy statement. Rule 14a-6 Definitive copies of proxy materials must be filed with the SEC when first mailed to shareholders. In addition, preliminary proxy materials must be submitted for SEC review at least 10 days before being sent to shareholders. Liability for Proxy Fraud Federal courts have laid out the elements of a federal proxy fraud case: Misrepresentation or omission There must be a misrepresentation or misleading omission of fact. Opinions are also actionable if they misstate the speaker's true beliefs and mislead about the subject ma...

Market manipulation araise when a pool of investors holding securities in a particular stock accomplish real and sham transactions to create the appearance of rising price in that stock. When investors enticed by the price movement began to buy at the inflated price, the pool would sell. Eventually, the emptiness of the price rise would be exposed and the price would be collapse. The pool would obtain handsome profit (buy low, sell high), while the investors would bear loss (buy high, sell low).  The Exchange Act addresses market manipulation in a variety of ways: Specific prohibitions Exchange Act §9(a) The Exchane Act prohibits creating misleading appearances of active trading in all securities, and OTC securities amended by Dodd-Frank to include Express private action Exchange Act §9(e) The Exchange Act authorizes a private cation for persons injured by market manipulation prohibited by Exchange Act §9. The plaintiff must prove that the defendant acted willfully and ...

Insider Trading There are two critical issues for securities laws in relation to insider trading: what information constitute insider information not to be used for trading and who is insider which is required to be prohibited for trading. information In cases related to insider trading, SEC and courts do not establish quatity standard for insider trading, to avoid further fraud. insider Examples of Insiders Insiders Insiders who obtain material, nonpublic information because of their corporate position—directors, officers, employees, and controlling shareholders—have the clearest 10b-5 duty not to trade. Constructive (or temporary) insiders Outsiders with no relationship to the company in whose securities they trade also have an abstain-or-disclose duty when aware of material, nonpublic information obtained in a relationship or trust or confidence. See O’Hagan. The outsider’s breach of confidence to the information source is deemed a deception that occurs “in co...