Harvard University Securities Regulations Worksheet

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Harvard University

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Some questions have multiple parts and should be answered in one to two paragraphs. Single questions should be answered in approximately one to one and a half pages.

Question 1

The SEC has just proposed the following changes to federal securities law. Briefly discuss the significance of each proposed change.

  1. The elimination of the prospectus delivery requirement under § 5 of the Securities Act.
  2. Repeal of the periodic disclosure requirements and establishment of only an annual disclosure requirement.
  3. Automatic effectiveness of a registration statement 20 days after its initial filing, regardless of SEC comments and subsequent amendments.

Question 2

Eric Trojan is a licensed securities broker. On January 1, he had lunch with his good friend Sarah Bruin, the vice president of communications for clothing retailer LA Apparel, Inc. During lunch, Sarah mentioned that LA Apparel was almost ready to announce the completion of the acquisition of its largest competitor, Westwood Clothing Corporation.
Near the end of their lunch, Eric’s client Jason Laker dropped by the table to say hello. Eric mentioned to Sarah that Jason owns shares of LA Apparel and Eric quipped with a big smile that Jason should watch out for some big news in the coming days. After hearing this, later that afternoon, Jason called Eric and instructed Eric to buy 1,000 more shares of LA Apparel at $40 per share.
Five days later, LA Apparel announced its acquisition of Westwood Clothing and, within hours, the price of LA Apparel’s stock increased to $45 per share.
Discuss the liability, if any, of Eric, Sarah and Jason under Rule 10b-5 of the Exchange Act.

Question 3.

The United States regime of securities regulation is irretrievably broken. Agree or disagree and explain your rationale.

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Explanation & Answer

Please view explanation and answer below.

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Securities Regulations Question and Answer

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Question 1: Significance of the Proposed Changes

Part 1
Legally, the prospectus is a selling document, legal offering, or registration statement,
which must be delivered to everybody buying the securities considered the investors. On the
other hand, § 5 of the Securities Act allows buyers or investors to sue sellers or issuers for selling
or offering non-exempt security minus registering such securities. Meaning, this section enables
all issuers to register their non-exempt security with the SEC (Security and Exchange
Commission); hence it controls the distribution and timeline process for issuers or sellers
offering such securities for sale (The U.S Securities and Exchange Commission, n.d). Therefore,
considering the prospectus delivery requirement under this section of the Security Act, investors
have benefits of fair and full revelation and civil remedies for misleading and false disclosure
and breach of the prospectus delivery requirement.
So, if the prospectus delivery requirement under section 5 of the Security Act gets
eliminated due to proposed changes, the registration benefits get furthered. In case the
Commission proceeds with making the registration systems and schemes flexible sufficient, the
capital markets’ dynamic evolution is accommodated. For example, this legal elimination comes
with the inclusion of registered and private offerings (The U.S Securities and Exchange
Commission, n.d). Since conditions within the securities market might shift swiftly,
organizations might find a variation in the relative attractiveness of having registered security
rather than the private offering. For instance, an organization filling and delivering this
registration statement or prospectus for the first public offering might find few possible buyers
making the registered security worthwhile. Contrarily, an organization starting a private security

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provision might find enough investors interested in justifying making a registered security
provision.
Part 2
First of all, public disclosures remain overtly accessible via the SEC’s portals. Therefore,
when organizatio...


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