ITT: Securities Regulation

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MCFC
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ITT: Securities Regulation

Postby MCFC » Sat Apr 11, 2015 3:16 pm

Here we ask and hopefully get answers about topics in Securities Regulation.

I am having trouble with the 4 (1 1/2) exemption. How is it different from Rule 144? When would you want to use it?

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Avian
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Re: ITT: Securities Regulation

Postby Avian » Sun Apr 12, 2015 7:03 pm

It's for control persons who cannot satisfy Rule 144 for any number of reasons, e.g., exceeds volume limits, reporting company not current in filings, non-reporting company doesn't satisfy (c) disclosure requirements, not the right form of transaction under (f).

timmyd
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Re: ITT: Securities Regulation

Postby timmyd » Sun Apr 12, 2015 7:29 pm

In our class we are just finishing up with liability under the 33 Act. 12(a)(1) basically allows recession of sale for a violation of section five. Pinter v. Dahl talks about who a "seller" is for provisions of this liability scheme. In that case they came up with a standard whereby solicitors could potentially be held liable, in other words they could sellers or offerors. It seems the finding of liability under 12(a)(1) is premised on a violation of section five. How can solicitors such as lawyers, or people other than underwriters, dealers, or issuers be liable under 12(a)(1) if they are exempt from sectionsfive in the first place? The court in that case never addresses this and neither did my prof. When I asked this question he didn't really understand it so I'm obviously missing something.

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MCFC
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Re: ITT: Securities Regulation

Postby MCFC » Sun Apr 12, 2015 7:47 pm

We are only just starting civil liability, but doesn't it provide for liability for any person who is a seller of a security that was supposed to be registered but was not?

Thank you, Avian.

timmyd
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Re: ITT: Securities Regulation

Postby timmyd » Sun Apr 12, 2015 7:52 pm

Yes, thats it a nutshell. "in general-
any person who
(1) offers or sells a security in violation of section 5...
shall be liable"
section 4(a)(3) says the provisions of section five shall not apply to transactions by any person other than an issuer, underwriter, or dealer....
If someone is exempt from section five how can they sell in violation of it? I understand that the plain meaning supports the interpretation you just mentioned and the one that court goes with, however, I was just surprised that this argument doesn't even come up.

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MCFC
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Re: ITT: Securities Regulation

Postby MCFC » Sun Apr 12, 2015 7:55 pm

This may be helpful re:civil liability, though I'm not sure it squarely answers your question. http://www.wlrk.com/docs/OutlineofSecur ... es2013.pdf

timmyd
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Re: ITT: Securities Regulation

Postby timmyd » Sun Apr 12, 2015 8:23 pm

Doesn't squarely address it but thats an awesome outline. Thanks for that.

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Avian
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Re: ITT: Securities Regulation

Postby Avian » Sun Apr 12, 2015 9:30 pm

The following is only my best guess since I'm only currently taking Securities Regulation now as well.

I think that you may be confusing the violation issue with the issue of liability for the improper solicitor. The actual legal "transaction" in this case is not between the solicitor (Dahl) and the buyer, it is between the issuer (Pinter) and the buyers. This is what gives rise to the section five violation and 12(a)(1) liability. If Dahl had been selling his own unrestricted Pinter stock it is obvious that the transaction would not have been subject to section five. But here the question was whether Dahl was in effect one of the people that the buyers had "purchased" the securities "from" in a transaction with Pinter that violated section five.

I can see why you were confused because of the way you framed it. It took me a little while to identify the problem because if you think of the relevant transaction as being between Dahl and the buyers it does lead to an apparent conflict with 4(a)(1). I suppose you could try to argue that they should be treated as two transactions, one between Dahl and the buyers, and one between Pinter and the buyers. This seems to be getting too clever though since Dahl was not making an offer to sell, he was only touting the investment. The key was the Court's finding that a solicitation with an improper motivation makes it fair to say that the buyers "purchased from" Dahl given the importance the Court places on the solicitation phase of a purchase.

timmyd
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Re: ITT: Securities Regulation

Postby timmyd » Sun Apr 12, 2015 9:45 pm

Thats a very good and helpful explanation. I appreciate it.

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Re: ITT: Securities Regulation

Postby timmyd » Sun Apr 12, 2015 9:56 pm

Just adding some more:
That is indeed a well reasoned response and obviously the one court and interpreters of this statute abide by; so much so that the conflict I sensed probably didn't appear to them to be a conflict at all. I would probably still make the argument if I was the "seller's" attorney, but distinguishing between transaction liability and who is a relevant person in terms of the liability scheme makes total sense. At any rate, this a is a good thread.




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