MODULE 22 FEDERAL SECURITIES ACTS AND ANTITRUST LAW 103

1. CEO and CFO must give up these bonuses and profits even if wrongdoings were not by them but
also if they were by any other officer or employee
2. Act now requires that any wrongdoing officer give up profits from stock sales or bonuses received
due to stock being overpriced because of false information
(1) Act allows not only that improper gains be recovered but also any remedy needed to protect
investors
3. Attorneys required to report to chief legal counsel or CEO such things as material violations of
se-
curities laws or breach of fiduciary duties
4. Attorneys must report this to audit committee (or another committee) or board of directors if coun-
sel or CEO does not take action
5. Companies must disclose material off-balance-sheet liabilities and transactions
6. Amendments require management disclosure of information needed by users of financial state-
ments to better understand off-balance sheet arrangements involving such things as their business
purpose, market risk, credit risk, liquidity, or other material effects,
7. Pro forma information disclosed to public in financial reports, press releases, etc., must not
contain
any untrue statement of a material fact or omit any material fact
8. Pro forma information must also be reconciled with financial statements prepared in accordance
with GAAP
9. SEC now requires that reports by insiders that disclose their securities holdings must be filed
electronically with SEC to result in earlier public notification and wider public availability of this in-
formation
a. Issuers having corporate Web sites must also post such information quickly
10. New rules require disclosures, both financial and nonfinancial, to aid public in assessing risk
better
pertaining to companies (e.g., disclosing off-balance-sheet financing)
a. Also, aid in purpose of Act to produce reports under Securities Acts that are timely and reliable
11. Internet Securities Offering (ISO) (Direct Public Offerings [DPO])
12. ISO used primarily by small businesses to accumulate capital
13. SEC created electronic database of corporate information
14. Allows access to much data formerly available only to big institutions
(1) Thus tends to levelplaying field between small investors and large investors
(2) Also, tends to levc:l playing field between small and large businesses
15. Allows electronic filing
16. Companies may market securities faster and more cheaply by circumventing paperwork of in-
vestment bankers
17. These securities are typically riskier because often avoid screening processes of various profes-
sionals
18. In general, securities laws and regulations apply to ISO
19. Prospectuses may be placed online
20. Secondary market for securities may also be accomplished on Web sites
21. Electronic Signatures and Electronic Records
22. Federal law specifies that no agreement, record, or signature required by federal securities
laws or
state laws can be denied legal effect because it is electronic record or contains electronic signature
23. Also applies to electronic signatures between investment advisors, brokers, dealers, and customers
24. SEC may specify manner of file retention but may not discriminate against any specific technol-
ogy in effort to promote advances in technology
25. State "Blue-Sky" Laws
26. These are state statutes regulating the issuance and sale of
securities
a. They contain antifraud and registration provisions