biz org class 18

Dodd Frank Act

SOX Act

the 1933 and 1934 Acts - responses to the Great Depression: in the early 1930's the country was in a depression and it's not clear if the market crash caused the depression but it was clear that it's easy for the populace view to blame Wall Street for everything. the response was the executive response (SOX response to Enron, Dodd Frank to the risky Wall St trading, the Roosevelt responses as seen in Jones v. Harris.

33 Act is about disclosure: companies have to disclose information about their business and capital structure. they engage in the disclosure by filing an S-1 form with SEC. this form is drafted by accountants and lawyers together, and is filed and inside the form is a doc called the prospectus, which is a shorter document that is given to potential shareholders and contains info about the company. shareholders will decide whether to invest based on the prospectus

some state laws do prohibit risky ventures. some ventures like apple were procluded by state law. but under federal law, risky offerings aren't prohibited. all the info needed about the company so that the investor can make an informed decision: that's the goal of the Act is to create the info so that investors can make informed decisions. also, it's to help companies raise capital under the 33 and 34 acts. but the primary goal is to give investors the information they need.

primary market: sale of securities from the primary market.



about both disclosure and regulations.

see section 2.1 of 1933 Act: laundry list of items that are considered to be included in definition of securities. this continues

LLCs: an unincorporated business structure which combines favorable tax treatment of partnerships with the limited liability of a corporation.
- more flexibility of management than either a corp or GP
- members
- operating agreement is a contract that governs organization, structure and management

what if you're dealing with an interest that is not a stock option? what if you're dealing with an investment instrument of a different kind?

robinson v. glynn doesn't involve a corporation, it involves an LLC. as a member of an LLC, you have the same status as a shareholder in a corporation because you are shielded from personal liability.glenn made misrepresentations of giaphone technologies when he sold the phone to robinson, but the trial court gave summary judgment to glenn. why???not called stock, doesn't have characteristics of stock,

is there a transaction underwhich a person invested money?
is there an investment of money in a common enterprise?
is there an investment where investor expected profits to be derived from the (significant) efforts of others (that would make the venture a success or failure)?

common enterprise requirement: idea that there's a pooling of interest and investment for a common enterprise, as opposed to a single investor who invests in a kind of scheme or something.

is an investor passive ro active?
if active, doesn't need the protection of federal securities laws. has all the information required because of participation in the management of the business. but if passive investor, do need the protection.

general partnerships are not investment contracts because you're becoming a partner so you don't need a protection from S-1 registration because you have that information directly. as a limited partner, you don't have any right ot participate in management, and so it is an investment contract and therefore it is a security for S-1 protection.