U.S and Trans-Border Securities Regulation

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PIPE—Private Investment in Public Equities (cont’d) Watch for “toxic convertibles” or “death spirals”! If a PIPE deal is not structured properly, an issuer may throw the issuer’s stock into an irreversible “death spiral.” For example, a small percentage of structured PIPEs involve convertible securities with floorless reset conversion features. The floorless price reset features create an incentive for investors of toxic convertibles to short-sell the stock, driving the stock price down and allowing them to obtain more shares upon conversion of the toxic convertibles. These potential issuances of additional shares cause further downward pressure on stock price, throwing the issuer’s stock into a tailspin. (c) 2013 Michael K. Krebs All Rights Reserved 90
Session 6 (Part 2) – Private Placements by Publicly Traded Companies Nasdaq Rule 5635(d) Be mindful of Nasdaq Rule 5635(d) – The “20% Rule” Shareholder approval required prior to issuance of securities in connection with a transaction other than a public offering if: issuance or potential issuance of common stock (or securities convertible into or exercisable for common stock), together with sales by officers, directors or “Substantial Shareholders,” are ≥ 20% of common stock or ≥ 20% of voting power outstanding before issuance; and price per share in private placement is < than greater of book or “market” value Note also that Nasdaq often will question whether offering registered with SEC – such as a “registered direct” offering – in fact is a bona fide “public offering” (c) 2013 Michael K. Krebs All Rights Reserved 91
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U.S and Trans-Border Securities Reg
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Overarching concepts 1) “Issuer
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Interstate Commerce Within U.S.? In
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Interstate Commerce (cont’d) Simi
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Interstate Commerce (cont’d) Reg.
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Interstate Commerce (cont’d) F3 o
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Materiality (cont’d) Basic v. Lev
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Materiality (cont’d) Matrixx Init
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GAAP (vs. IFRS) IFRS - “Internati
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Securities Act Overview How would y
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Securities Act Overview (cont’d)
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Section 5 §5(c) It is unlawful …
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Stocks Key Components of §2(a)(1)
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Section 4 §4 exempts some transact
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What is a “Security”? Very broa
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Section 2(a) of the ’33 Act §2(a
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Promissory Notes Many extensions of
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Reves v. Ernst & Young, 494 U.S. 56
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What is a “Security”? Loan Part
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Howey Test for Investment Contracts
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Howey Test - Applied: SEC v. ETS Pa
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Howey Test - Applied: SEC v. Edward
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The Reves Test compared to the Howe
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Partnership and LLC Interests Invol
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What is a “Security”? Common St
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Stock in Closely Held Businesses P
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Guarantees as Securities §2(a)1-
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Dodd-Frank Act (July 2010) Changes
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Securities exempt from §5 registra
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Government Securities §3(a)2 Impor
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Commercial Paper -- §3(a)3 “Any
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Exempt Bank Securities (cont’d) T
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Limits on Bank Securities Exemption
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Private Placements §4(2), §3(b) S
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Basic Principle Underlying the Secu
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What is a “sale”? § 2(a)(3) -"
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What is a “sale”? Special Situa
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What is a “sale”? Special Situa
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Implications of SEC registration? W
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Lessons from Facebook IPO 1. Prepar
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Lessons from Facebook IPO 2. Potent
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Exempt Transactions How do “start
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Exempt Transactions Private placem
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Our Focus in Session 2 Private pla
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Session 2 - Exempt Transactions Fun
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4(2) - Private Placements transacti
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4(2) Analysis 1953 Ralston Purina S
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Private Placements - Regulation D 1
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Regulation D - Important JOBS Act C
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Private Placements - Regulation D H
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Private Placements - “Crowdfundin
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Crowdfunding Portal A funding porta
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Sample Restrictive Legend THE SHARE
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Session 2 - Exempt Transactions Mer
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Session 2 - Exempt Transactions Mer
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Session 2 - Exempt Transactions Eme
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Session 2 - Exempt Transactions Eme
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Intrastate Offerings - and Rule 147
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Rule 701 Rule 701 (Benefit Plans/C
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Rule 701 (cont’d) Value of optio
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Session 2 - Private Placements Goog
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Session 2 - Private Placements Goog
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Session 3 Agenda Planning for an In
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Planning for an IPO Restrictions on
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Section 5 Rubric 5(c) It is unlawfu
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Session 3 - What Can Be Done During
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How are the rules different for a W
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WSKI S-3 Eligibility General Instru
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WSKI S-3 Eligibility (cont’d) 5.
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Other Categories of Issuers under S
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Emerging Growth Companies An issuer
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What is a Foreign Private Issuer? A
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Other Categories of Issuers under S
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How are gun jumping rules different
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The “Elephant in the Corner” -
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Rescission rights under Section 12(
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Strict liability under Section 11 S
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Section 11 Plaintiffs Who may sue u
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Section 11 Defendants Scope of join
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Section 11 Defenses (cont’d) Out
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Section 11 Due Diligence Defense Wh
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BarChris Section 11 Due Diligence D
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Section 11 Due Diligence Defense (c
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What about Section 12(a)(2)? Establ
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Was Gustafson v. Alloyd Co. correct
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When might control persons be vicar
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“Aiding and Abetting” (cont’d
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Indemnification or Contribution und
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Criminal Liability Under the Securi
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Litigation concerning violations of
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IPO Securities Litigation (cont’d
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IPO Securities Litigation (cont’d
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IPO Securities Litigation Refusal t
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IPO Securities Litigation 2009 Sett
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Related Antitrust Case Contemporane
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Alleged Antitrust Law Violations S
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U.S. Supreme Court Rules Securities
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Session 4 Agenda How does a company
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Basic Principles Underlying the Sec
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Understanding SEC Disclosure Regime
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Session 4 Life Cycle of a Typical I
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Session 4 Life Cycle of A123 System
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Timeline (cont’d) Session 4 Life
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Session 4 - Understanding SEC Discl
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Session 4 -Understanding SEC Disclo
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SEC Regulation S-K Reg. S-K, Rule 1
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Don’t Forget Regulation C! For ex
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What did Facebook Disclose? USE OF
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What did bluebird bio Disclose? USE
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What did LinkedIn Disclose? LINKEDI
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luebird bio Disclosure regarding Em
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What did Graña y Montero Disclose?
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Another Overarching Principle - Int
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“Three Amigos” of Integrated Di
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Primary ’33 Act Examples of Incor
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What is meant by the phrase “plai
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“Plain English” (cont’d) In d
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What did Grana y Montero Corp. Do?
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A Few Words About “Free Writing
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“Free Writing” (cont’d) In c
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After the Road Show . . . Do underw
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After the Road Show . . . The “Gr
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When/how must a prospectus be deliv
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Session 5 Agenda How does a company
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Session 5 - Understanding SEC Regis
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Review of S-3 Eligibility Why does
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S-3 Eligibility (cont’d) 3. Regis
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S-3 Eligibility (cont’d) Current
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Understanding SEC Registration Regi
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Objectives of Integrated Disclosure
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Review of Regulation S-K Reg. S-K,
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Objectives of Integrated Disclosure
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Primary ’33 Act Examples of Incor
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10-K Disclosure: Geography Part I:
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10-K Disclosure: MD&A Objective of
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Session 5 - Understanding SEC Regis
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Shelf Registrations and Due Diligen
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A Few Words About the Automatic She
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“Registered Direct Offering” A
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Advantages of a “registered direc
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“Confidentially Marketed Public O
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Elements of CMPOs (cont’d) Confid
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Elements of an “at the Market Off
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Elements of an “at the Market Off
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Core Principles (cont’d) 4. Discl
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Core Principles (cont’d) 7. Issue
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Resale of Securities • How do inv
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Exempt Transactions - Key Principle
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Session 6 - Resale of Securities St
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Primary Ordinary Course Trading Exe
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Pivotal Role of “Underwriter” C
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Resale of Securities How do investo
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Resale of Securities Rule 144 - “
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Resale of Securities Rule 144(a)(3)
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Session 6 - Resale of Securities St
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Who are Control Persons? Control Pe
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Control Persons/Affiliates Rules of
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Resale of Securities Rule 144 - Eff
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Session 6 - Resale of Securities Ru
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Securities Exchange Act Overview (c
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Securities Exchange Act Overview (c
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Registration and Reporting Under Se
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Session 7 - Registration and Report
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A few words about “holders of rec
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A few words about “holders of rec
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JOBS Act Change: Holder of Record T
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JOBS Act Change: “Holder of Recor
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Registration and Reporting EDGAR (C
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Origins of Sarbanes-Oxley Act Inten
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Origins of Sarbanes-Oxley Act (cont
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Origins of Sarbanes-Oxley Act (cont
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Impact of Sarbanes-Oxley Certificat
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CEO/CFO Certifications - Penalties
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Impact of Sarbanes-Oxley (cont’d)
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Impact of Sarbanes-Oxley (cont’d)
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Foreign Corrupt Practices Act Enact
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Foreign Corrupt Practices Act (cont
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Reg. FD Overview (cont’d) Reg. FD
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Reg. FD Overview (cont’d) Example
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Reg. FD Overview (cont’d) 3. Requ
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Reg. FD Overview (cont’d) 4. Exce
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Reg. FD Overview (cont’d) Example
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Reg. FD Compliance Programs Element
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Reg. FD Compliance Programs 3. Diss
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Reg. FD Enforcement Who may bring a
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Reg. FD Enforcement SEC has been vi
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Reg. FD Enforcement - Siebel Case S
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Reg. FD Enforcement - Siebel Case C
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Attorney Conduct Rules Under Federa
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MD&A Overview Practical Guidance Pa
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MD&A Overview Objective: “To prov
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MD&A Overview Overview of Item 303:
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MD&A Overview Overview of Item 303
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MD&A Overview Overview of Item 303
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MD&A Overview Elements of MD&A - In
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MD&A Overview Item 303 of Reg. S-K:
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MD&A Overview Item 303 of Reg. S-K:
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MD&A Overview Three-Step Test: 1.
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MD&A Overview When is an effect
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MD&A Overview When is an effect
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MD&A Overview More about SAB 99 (co
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MD&A Overview Cautionary Tales Or
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MD&A Overview Cautionary Tale No. 1
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MD&A Overview • Revenue Recogniti
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MD&A Overview • Operating Expense
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MD&A Overview Concluding observatio
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Session 8 Agenda Part 1 Woe to be a
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Rule 10b-5 and Insider Trading Poli
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Rule 10b5-1(b): Rules 10b5-1 and 10
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Rule 10b5-1 Plans Reason for plans
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Section 16 Reporting and Short-Swin
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Section 402 (a/k/a 13(k)) Prohibite
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Section 306 of Sarbanes Oxley Black
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Proxy Regulation Under Securities E
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Proxy statement as vehicle for soci
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Google: Summary Compensation Table
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Foreign Private Issuers - Securitie
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Foreign Private Issuers - Securitie
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Rule 802 - Exchange Offers and Busi
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Foreign Private Issuer Registration
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Foreign Private Issuers - Exchange
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Level I ADRs Level I ADRs - Traded
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Level III ADRs “Offering Facility
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Session 9 Agenda Part 1 Mergers and
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Mergers and Acquisitions under Exch
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UNITED STATES SECURITIES AND EXCHAN
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CAREY INTERNATIONAL TO BE ACQUIRED
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Rule 13E-4 Transaction: Option Exch
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Rule 13E-4 Transaction: Option Exch
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Schedule 13D Treatment of Derivativ
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Schedule 13D Recent Developments (c
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Rule 10b-5 and Related Matters Basi
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Rule 10b-5 and Related Matters Prim
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Rule 10b-5 and Related Matters Liab
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Rule 10b-5: Basic Elements False o
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Rule 10b-5: “In connection with .
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Compare: Rule 10b-5: “Reliance .
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Rule 10b-5: “Reliance . . .”
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“Loss Causation . . .” (cont’
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Rule 10b-5: “Purchaser/Seller . .
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Rule 10b-5: “Scienter or Fault”
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Rule 10b-5: Recklessness? Post-PSLR
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Rule 10b-5: Recent Developments Rec
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Rule 10b-5: Recent Developments Sec
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Rule 10b-5: Recent Developments Sar
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Rule 10b-5: Statute of Limitations
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Rule 10b-5: Issuer Duty to Update v
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Session 9 - Rule 10b-5 Study Proble
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TO BE ADDED Session 9 - Rule 10b-5
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TO BE ADDED Session 9 - Rule 10b-5
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Insider Trading Liability What is t
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Insider Trading Liability “Classi
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Insider Trading Liability Evolution
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Rule 10b5-2 (cont’d) (1) A person
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Tipper Liability: Insider Trading:
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Tipper/Tippee Liability Study Probl
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Tipper/Tippee Liability Study Probl
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Insider Trading: Non-Equity Securit
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TO BE ADDED Insider Trading: Study
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U.S and Trans-Border Securities Regulation

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