Business Law Today Study Set 1

Business

Quiz 30 :
Investor Protection, Insider Trading, and Corporate Governance

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Quiz 30 :
Investor Protection, Insider Trading, and Corporate Governance

The important considerations which one should consider before choosing a form of business are as follows: • The ease of opening up : Sole proprietorship and Limited Liability Company are easy to start up without much government filings. Yet, it suffers from the disadvantage of starting the business with one's personal funds. • Business motive : One can open up firms for non-profit with the IRS designation but would require the business to involve in social work and not profiteering. • Ownership title : One can open up company with partnership or public form which will divide the liability and also has the benefit of getting funds from several sources. Yet it suffers from the disadvantage of having too many owners or shareholders which will divide the profit and also cause problem in decision making.

Stocks sold to public are called securities. The Securities Act of 1933 states that all transactions related to securities must be registered with SEC (Security Exchange Commission). Securities are generally in form of Shares, Bonds. Securities may in other forms also like beavers, worms and interests in whiskey. So now it is clear that any form of ownership in any corporation is termed as security. Franchisees, Limited Partnerships in real estate, rights in minerals, oil and gas are other forms of securities. Section 2(1) of the securities act defines the securities in broader perspective. It describes securities 1) Stocks like treasury and common stocks, debentures, bonds, and stock warrants are known as securities 2) Any Stock options, Calls, Privileges, rights to purchase a security or a group of securities in NSE. 3) Any limited partnership contract or any other type of investment contract 4) Any notes and instruments including certificate of deposit. 5) Any small partnership of undivided interest in oil, gas and minerals rights.

Mr JL is right that they do not have to register with SEC. Any organisation who sold stock in the state of Kanas need not be registered with SEC but they have to be registered with State regulators like "Blue Sky". Every state has its own laws related to trading of stocks. For registration a firm has to give disclosures. The method of registration and exemption varies.

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