1. 2007 David K. Linnan SECURITY REGULATION BASICS Prof David K. Linnan LAWS #600 September 11, 2007

2. 2007 David K. Linnan FED VS STATE UNDERSTANDING DIFFERENT UNDERLYING THEORIES Disclosure-based regulation (ultimately anti- fraud), federal Securities Act of 1933 & Securities Exchange Act of 1934 Traditional qualitative “blue sky” regulation (ultimately buyer protection), most state securities laws OVER TIME SOME FEDERALIZATION IN LAWS CUTTING BACK PRACTICALLY ON BLUE SKY JURISDICTION

3. 2007 David K. Linnan FEDERAL FEDERAL SECURITIES REGULATION ACTUALLY 5-7 STATUTES PAST IN 1930s, BUT CHANGING FINANCIAL SECTOR ISSUES Securities Act of 1933 Securities Exchange Act of 1934 (including now Williams Act) Trust Indenture Act of 1937 Investment Company Act of 1940 Investment Advisers Act of 1940 [SRO schemes under 1934 Act, NASD, NYSE, etc.] [Securities & Exchange Commission as independent regulatory agency] PUBLIC UTILITIES HOLDING COMPANY ACT OF 1935 AND GLASS- STEAGAL ACT SEPARATING COMMERICAL AND INVESTMENT BANKING ESSENTIALLY GONE WITHIN PAST 20 YEARS

4. 2007 David K. Linnan STATE BLUE SKY LAWS SC Title 35 South Carolina Uniform Securities Act of 2005 SC largely has uniform legislation (NAASA trade group), except SC Securities Division has been moved from Sec of State to Attorney-General’s Office (parallel state grand jury aspect now, as with Home Gold Inc.)

5. 2007 David K. Linnan PROCESS OFFERING & SALE OF A SECURITY 1933 Act picture, extremely broad jurisdictional provisions: if it is a security and it is offered (much less sold), register or find an exemption (or both in practice), and antifraud coverage in any case under 1934 Act (10b-5) Full registration process vs non-public offerings like Regulation D these days

6. 2007 David K. Linnan SECURITY SECURITY OFFERED OR SOLD Broad definition of a security, what is it under 1933 Act? Different 1933 Act Section 4 registration exemptions, of which most important for our purposes is 4(2) (non-public offerings)

7. 2007 David K. Linnan QUESTIONS TYPES What is public versus non-public offering, meaning what is purpose of registration process? (Ralston Purina) What is a security (Orange Grove Tracts) MORE TO COME IN SECURITIES REGULATION IN LAST 2-3 WEEKS OF COURSE