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Assessment 2: Report on Required Legal and Regulatory Information to Seek Finance for A New Venture (Individual) 1500 words Students need to prepare a scholarly paper focused on the material they gained in this course to show that they have a detailed knowledge of the legal and regulatory information needed to obtain financing for a new venture NOTE FOR TFTH: In this assessment we have to create a business and we need to show that our business will need a money, and who will be the one from whom we will borrow the money and we have to show how we gonna pay the borrowed money and also what legal documents will we attach for the those. Please let me know , I have attached supporting powerpoints . if any confusion PowerPoint Presentation ENT 301: finance for entrepreneurs Related Law for Obtaining Venture Financing WEEK 06 COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 WARNING This content was reproduced and communicated by or on behalf of the Crown Institute of Higher Education. The content in this correspondence could be subject to Copyright Act 1968 (the Act). Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Do not remove this notice. 2 CROWN INSTITUTE OF HIGHER EDUCATION Learning Objectives Discuss the types and sources of external financing available by life cycle stage Identify five relevant components of the federal securities laws and explain what is meant by blue-sky laws Describe the process for determining whether securities must be registered Describe what is involved in registering securities with the S E C Identify some of the securities that are exempt from registration with the S E C Identify some transaction exemptions granted under the Securities Act of 19 33 Describe and discuss how the S E C’s Regulation D serves as a securities registration “safe harbor” and explain differences in Rules 504, 505, and 506 Describe Regulation A and explain how and when it is used Explain how the JOBS Act of 2012 impacted several S E C registration exemptions CROWN INSTITUTE OF HIGHER EDUCATION Overview of Federal Securities Laws (1 of 2) FIGURE: Federal and State Securities Regulatory Objectives and Laws CROWN INSTITUTE OF HIGHER EDUCATION Overview of Federal Securities Laws (2 of 2) Securities Act of 19 33: main body of federal law governing the creation and sale of securities Securities Exchange Act of 19 34: deals with the mechanisms and standards for public security trading Investment Company Act of 19 40: provides a definition of “investment company” Investment Advisers Act of 19 40: focuses on people and organizations that seek to provide financial advice to investors and defines “investment adviser” CROWN INSTITUTE OF HIGHER EDUCATION State Securities Regulations In addition to federal restrictions, issuers must also consider restrictions imposed by the various states State Securities Regulations are referred to as “Blue Sky” Laws State laws are designed to protect individuals from investing in fraudulent security offerings CROWN INSTITUTE OF HIGHER EDUCATION Role of Federal Securities Law Federal laws frequently are predicated on some offending behavior’s affecting more than one state (e.g., fraudulent interstate transactions). This focus is due to “state-rights” traditions and the notion that an infraction confined to one state is a state, not a federal, matter. CROWN INSTITUTE OF HIGHER EDUCATION Federal: Securities Act of 19 33 Important aspects of the act relate to securities fraud 19 33 Act sets requirements for registering securities with federal government 19 33 Act sets nature and authority of the Securities Exchange Commission (S E C) with whom registrations are filed CROWN INSTITUTE OF HIGHER EDUCATION What is a Security? The term “security” means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, investment contract, put and call options…. One need not actually sell a security to trigger the securities laws, one need only offer to sell the security CROWN INSTITUTE OF HIGHER EDUCATION Why Does “Security” Designation Matter? Securities Act of 19 33 sets formal rules required in offering and selling securities Unless your security is exempted, Section 5 of the 19 33 Act requires you to file a registration statement with the S E C Unless a registration statement is in effect, it shall be unlawful for any person to make use of any means of transportation or communication in interstate commerce or of the mails to sell a security through the use of any prospectus, or to deliver such security CROWN INSTITUTE OF HIGHER EDUCATION Registering Securities with S E C Costly and time-consuming process Usually done with investment banking professionals and legal counsel Common “remedy” for a “fouled up” securities offering is a “rescission “ of the offering—where all funds are returned to the investors To avoid rescission—either register or make sure you are exempted from registration CROWN INSTITUTE OF HIGHER EDUCATION Important Points to Remember In securities law, “ignorance is no defense” Security regulators may alter your investment agreement to the benefit of the investors Securities Act of 19 33 gives the S E C broad civil and some criminal procedures to use in enforcement It is worth your time to investigate whether securities can be issued under an exemption from the registration requirement CROWN INSTITUTE OF HIGHER EDUCATION Digression: What is Securities Fraud? It is unlawful for a person in the offer or sale of securities: to employ any device, scheme, or artifice to defraud to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon the purchaser CROWN INSTITUTE OF HIGHER EDUCATION Securities Fraud Digression It shall be unlawful for any person…to publish, give publicity to, or circulate any notice, advertisement, article….which, though not purporting to offer a security for sale, describes such security for consideration received from an issuer, underwriter, or dealer without fully disclosing the receipt of such consideration Securities otherwise exempted from registration are not exempted from fraud provisions CROWN INSTITUTE OF HIGHER EDUCATION JOBS Act of 2012 Summary of Relevant Innovations: Class of firms designated “Emerging Growth Company” face different registration requirements (less transparency) General advertising and solicitation allowed for Reg D 506 offerings (more information to come on 506 offerings) Internet “crowdfunding” for securities up to $1 million “Regulation A Plus” as competitor to Regulation A Forced registration limit raised from 500 to 2000 shareholders CROWN INSTITUTE OF HIGHER EDUCATION Overview FIGURE: Process to Determine Whether Securities Must Be Registered with the S E C CROWN INSTITUTE OF HIGHER EDUCATION Back to SEC Registration: Exemptions (1 of 2) Two Basic Types of Exemptions Security Transaction Security Exemptions Government securities Securities issued by banks and thrift institutions Certain securities issued by insurance companies Certain not-for-profit organization securities Certain securities involved in bankruptcy proceedings Intrastate Offering Exemption (issuer must assure that offerees and purchasers are in the issuer’s home state) CROWN INSTITUTE OF HIGHER EDUCATION Back to SEC Registration: Exemptions (2 of 2) Transaction Exemptions Private Offering Exemption (transactions by an issuer not involving any public offering are exempted) Accredited Investor Exemption (investors who have sufficient financial expertise and wherewithal to make intelligent informed investment decisions are exempted) CROWN INSTITUTE OF HIGHER EDUCATION SEC Versus Murphy Case (19 80) Considerations identified in determining an offering is a private placement: Number of offerees must be limited Offerees must be sophisticated Size and manner of offering must not indicate widespread solicitation Some relationship between offerees and issuer must be present CROWN INSTITUTE OF HIGHER EDUCATION Accredited Investor Exemption Accredited Investor Definition Includes: Banks, insurance companies, investment companies Any person who qualifies as an accredited investor (on the basis of financial sophistication, net worth, knowledge, and experience in financial matters) CROWN INSTITUTE OF HIGHER EDUCATION Private Placements: SEC’s Regulation D Because of the uncertainty about what constitutes a non-public offering, the S E C provides some “safe harbor” conditions that, when met, result in guaranteed exemption as a private placement Regulation D (or Reg D for short) took effect in 19 82 and provides the basis for “safe harbor” as a private placement CROWN INSTITUTE OF HIGHER EDUCATION CROWN INSTITUTE OF HIGHER EDUCATION Assessment 2: Report on Required Legal and Regulatory Information to Seek Finance for A New Venture (Individual) 1500 words Students need to prepare a scholarly paper focused on the material they gained in this course to show that they have a detailed knowledge of the legal and regulatory information needed to obtain financing for a new venture NOTE FOR TFTH: In this assessment we have to create a business and we need to show that our business will need a money, and who will be the one from whom we will borrow the money and we have to show how we gonna pay the borrowed money and also what legal documents will we attach for the those. Please let me know , I have attached supporting powerpoints . if any confusion PowerPoint Presentation ENT 301: finance for entrepreneurs Related Law for Obtaining Venture Financing WEEK 06 COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 WARNING This content was reproduced and communicated by or on behalf of the Crown Institute of Higher Education. The content in this correspondence could be subject to Copyright Act 1968 (the Act). Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Do not remove this notice. 2 CROWN INSTITUTE OF HIGHER EDUCATION Learning Objectives Discuss the types and sources of external financing available by life cycle stage Identify five relevant components of the federal securities laws and explain what is meant by blue-sky laws Describe the process for determining whether securities must be registered Describe what is involved in registering securities with the S E C Identify some of the securities that are exempt from registration with the S E C Identify some transaction exemptions granted under the Securities Act of 19 33 Describe and discuss how the S E C’s Regulation D serves as a securities registration “safe harbor” and explain differences in Rules 504, 505, and 506 Describe Regulation A and explain how and when it is used Explain how the JOBS Act of 2012 impacted several S E C registration exemptions CROWN INSTITUTE OF HIGHER EDUCATION Overview of Federal Securities Laws (1 of 2) FIGURE: Federal and State Securities Regulatory Objectives and Laws CROWN INSTITUTE OF HIGHER EDUCATION Overview of Federal Securities Laws (2 of 2) Securities Act of 19 33: main body of federal law governing the creation and sale of securities Securities Exchange Act of 19 34: deals with the mechanisms and standards for public security trading Investment Company Act of 19 40: provides a definition of “investment company” Investment Advisers Act of 19 40: focuses on people and organizations that seek to provide financial advice to investors and defines “investment adviser” CROWN INSTITUTE OF HIGHER EDUCATION State Securities Regulations In addition to federal restrictions, issuers must also consider restrictions imposed by the various states State Securities Regulations are referred to as “Blue Sky” Laws State laws are designed to protect individuals from investing in fraudulent security offerings CROWN INSTITUTE OF HIGHER EDUCATION Role of Federal Securities Law Federal laws frequently are predicated on some offending behavior’s affecting more than one state (e.g., fraudulent interstate transactions). This focus is due to “state-rights” traditions and the notion that an infraction confined to one state is a state, not a federal, matter. CROWN INSTITUTE OF HIGHER EDUCATION Federal: Securities Act of 19 33 Important aspects of the act relate to securities fraud 19 33 Act sets requirements for registering securities with federal government 19 33 Act sets nature and authority of the Securities Exchange Commission (S E C) with whom registrations are filed CROWN INSTITUTE OF HIGHER EDUCATION What is a Security? The term “security” means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, investment contract, put and call options…. One need not actually sell a security to trigger the securities laws, one need only offer to sell the security CROWN INSTITUTE OF HIGHER EDUCATION Why Does “Security” Designation Matter? Securities Act of 19 33 sets formal rules required in offering and selling securities Unless your security is exempted, Section 5 of the 19 33 Act requires you to file a registration statement with the S E C Unless a registration statement is in effect, it shall be unlawful for any person to make use of any means of transportation or communication in interstate commerce or of the mails to sell a security through the use of any prospectus, or to deliver such security CROWN INSTITUTE OF HIGHER EDUCATION Registering Securities with S E C Costly and time-consuming process Usually done with investment banking professionals and legal counsel Common “remedy” for a “fouled up” securities offering is a “rescission “ of the offering—where all funds are returned to the investors To avoid rescission—either register or make sure you are exempted from registration CROWN INSTITUTE OF HIGHER EDUCATION Important Points to Remember In securities law, “ignorance is no defense” Security regulators may alter your investment agreement to the benefit of the investors Securities Act of 19 33 gives the S E C broad civil and some criminal procedures to use in enforcement It is worth your time to investigate whether securities can be issued under an exemption from the registration requirement CROWN INSTITUTE OF HIGHER EDUCATION Digression: What is Securities Fraud? It is unlawful for a person in the offer or sale of securities: to employ any device, scheme, or artifice to defraud to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon the purchaser CROWN INSTITUTE OF HIGHER EDUCATION Securities Fraud Digression It shall be unlawful for any person…to publish, give publicity to, or circulate any notice, advertisement, article….which, though not purporting to offer a security for sale, describes such security for consideration received from an issuer, underwriter, or dealer without fully disclosing the receipt of such consideration Securities otherwise exempted from registration are not exempted from fraud provisions CROWN INSTITUTE OF HIGHER EDUCATION JOBS Act of 2012 Summary