Securities Regulation Outline - Rose
Securities Regulation – Spring 2012 (Rose) Outline
Class 1 Slides
Federal Securities Regulation Seeks to:
1. Increase the amount of information available to investors about issuers through mandatory disclosure rules; and
2. To deter fraud (so the information disclosed is credible).
Ultimate Goal: The accurate pricing of securities, which is essential to a well-functioning economy.
How Securities Differ Importance of capital markets to society Importance of investment decisions to individuals Heightened concerns about irrationality Heightened informational asymmetries due to intangibility Collective action problems
Type of Security Cash Flow Rights Liquidation Rights Voting Rights
Common Stock (equity) jr Residual and discretionary dividend Residual Yes
Preferred Stock (equity) Fixed and discretionary div. (cumulates if not paid) Medium Contingent
Bonds (debt) sr Fixed and Certain interest payments Highest None
Capital Markets Overview
• Terminology o Primary Market: Issuer -- Investor
• Governed primarily by Securities Act of 1933
• Private placements
Issue or sale of securities that are not a public offerings
• Doesn't require as much disclosure
• IPOs
First time a company achieves public company status
• Seasoned public offerings
• Other offerings
• Major players
Broker-Dealers
Underwriters
• Typically in IPO buy stock from issuer and sell it to the public at a higher price (the difference = compensation)
• Offer advice on how to price the securities and promote them
Attorneys
Accounting Firms
• Audit financial statements
• Lend reputational capital
Institutional Investors
• Participate in IPOs
• e.g., insurance companies, mutual funds, public pension funds o Secondary Market: Investor -- Investor
• Governed primarily by Securities Act of 1934
• Volume of shares: secondary distribution
• Plays out in national securities exchanges
e.g., NYSE, AMEX, NASDAQ
• Provide important
Class 1 Slides
Federal Securities Regulation Seeks to:
1. Increase the amount of information available to investors about issuers through mandatory disclosure rules; and
2. To deter fraud (so the information disclosed is credible).
Ultimate Goal: The accurate pricing of securities, which is essential to a well-functioning economy.
How Securities Differ Importance of capital markets to society Importance of investment decisions to individuals Heightened concerns about irrationality Heightened informational asymmetries due to intangibility Collective action problems
Type of Security Cash Flow Rights Liquidation Rights Voting Rights
Common Stock (equity) jr Residual and discretionary dividend Residual Yes
Preferred Stock (equity) Fixed and discretionary div. (cumulates if not paid) Medium Contingent
Bonds (debt) sr Fixed and Certain interest payments Highest None
Capital Markets Overview
• Terminology o Primary Market: Issuer -- Investor
• Governed primarily by Securities Act of 1933
• Private placements
Issue or sale of securities that are not a public offerings
• Doesn't require as much disclosure
• IPOs
First time a company achieves public company status
• Seasoned public offerings
• Other offerings
• Major players
Broker-Dealers
Underwriters
• Typically in IPO buy stock from issuer and sell it to the public at a higher price (the difference = compensation)
• Offer advice on how to price the securities and promote them
Attorneys
Accounting Firms
• Audit financial statements
• Lend reputational capital
Institutional Investors
• Participate in IPOs
• e.g., insurance companies, mutual funds, public pension funds o Secondary Market: Investor -- Investor
• Governed primarily by Securities Act of 1934
• Volume of shares: secondary distribution
• Plays out in national securities exchanges
e.g., NYSE, AMEX, NASDAQ
• Provide important