1. What is an IPO? What is meant by going public? By going private?
2. a. What information is contained in a registration statement under the 1933 Act?
b. What role in the registration process is played by the prospectus?
c. What are audited financial statements? Describe the three primary financial statements.
3. Explain the general purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934.
4. Assume a midlevel manager learns that his corporation is about to go bankrupt because of about-to-be-disclosed improprieties. He calls his lawyer to ask about his personal exposure. After advising him, the lawyer immediately sells all of her holdings in that stock. Later that day the news breaks and the stock price tumbles 60 percent. Does anyone have insider trading liability?
5. If a corporate officer knowingly omits material adverse information from a corporate communication, by whom might he or she be sued?
Closely related to insider trading is liability for short-swing profits. An insider trading case requires proof that the insider had material inside information and traded to exploit it. A short-swing profit case conclusively presumes that the insider had such information and did unlawfully trade on it anytime the insider engages in any purchase and sale, or sale and purchase, of an equity security issued by the insider’s corporation if both transactions occur within a six-month period. The insider’s actual motive is irrelevant. The goal is to prevent insiders from taking advantage of company information to secure short-term profits.