Business Structure Chapter 21 Vocabulary Terms PDF

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Business Structure Chapter 21 Vocabulary Terms

Asset Acquisition - Form of takeover in which another firm buys all the assets of a firm and gains control through control of the firm’s property. If structured property, the acquirer avoid liability for the debts of the acquired business. Blue-Sky Law - State law regulating sale of securities. Blue-Sky Laws - State laws regulating the sale of securities. Comment/Deficiency Letter - SEC response to registration filing; requires additional information or clarification on proposed offering. Consolidation - A form of merger in which two firms unite and become known by a new name. Due Diligence - Under the Securities Act of 1933, a defense for filing a false registration statement that requires proof that the individuals involved did all they could to uncover the truth and could not have discovered the false statements despite a thorough review of all relevant information. Exemption - Securities and transactions that do not have to be registered with the SEC under the Securities Act of 1933. Foreign Corrupt Practices Act (FCPA) - Federal law prohibiting bribes in foreign countries and requiring the maintenance of internal controls on accounting for firms registered under the Securities Exchange Act of 1934. Howey Test - Created by the U.S. Supreme Court; it defines a security as an investment in a common enterprise that earns profits from the efforts of others. Hostile Takeover - A takeover not favored by the target’s management. Insider Trading and Securities Fraud Enforcement Act of 1988 - Act increasing the Securities Exchange Act of 1934 penalties for insider trading. Insider - A corporate officer or director or other executive with access to corporate information that is not available to the public. Material Misstatement - A statement of fact that would influence an individual’s decision to buy or sell. Merger - Process of combining firms so that one firm becomes a part of the other and only one firm’s name is retained. Merit Review - Process at the state level of reviewing securities registrations to determine whether they are good investments. Prospectus - A document describing the nature of securities and the company offering them. Proxy Solicitations - The process of seeking voting rights from shareholders.

Red-Herring Prospectus - A prospectus issued before the effective date of a securities registration statement; permissible to release these before the registration statement is effective so long as a disclaimer that it is not an offer to sell securities is noted in red on the prospectus. Registration Statement (S-1) - A filing with the SEC disclosing all the necessary information about a securities offering under the 1933 Securities Act. Rule 10b-5 - SEC rule prohibiting fraud in relation to the sale of securities. Section 10(b) - Antifraud provision of the Securities Exchange Act of 1934. Section 16 - Section of the Securities Exchange Act of 1934 that regulates sales and purchases of shares by directors, officers, and 10 percent of shareholders. Securities Act of 1933 - The federal law governing the initial issuance and sale of securities to the public. Securities Exchange Act of 1934 - The federal law governing the secondary sales of securities, the markets, and the firms dealing with securities. Securities Exchange Act of 1934 - The federal law governing secondary sales of securities, the markets, and the firms dealing with securities. Securities and Exchange Commission (SEC) enforcement of federal securities law.

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Securities - Investment of money in a common enterprise with profits earned largely from the efforts of others. Short-Swing Profits - Profits made by corporate insiders during a period of less than six months between purchase and sale. Takeover - A takeover of one firm by another firm when the target firm solicits or agrees to the takeover. Tender Offer - Offer to more than 10 percent of the shareholders of a firm for the purchase of their shares; generally part of a takeover effort. Tippee - Party who receives inside information about a corporation or its securities and uses the information to trade securities. Tombstone Ad - Ad run in newspapers announcing an upcoming securities offering; permissible after the registration statement is filed but not yet effective; must indicate it is not an offer for sale. Williams Act - Federal law governing the tender offer process. 10-K Form - Annual report filed with the SEC; required of all 1934 Act firms. 10-Q Form - Quarterly report filed with the SEC; required of all 1934 Act firms. 8-K Form - A filing required by the SEC under the 1934 Securities Act; an 8-K is filed by a registered company within ten days of a significant or material event affecting the company (e.g., a dividend being suspended).

“Fair-Disclosure Rule” (Regulation FD) - Federal securities regulation that requires publicly traded companies to distribute information to the market as a whole and not to selected investment firms, analysts, or investors; a means of distributing to the market in a fair and open fashion the financial reports and pending and evolving issues of publicly traded company....