III. Compliance A. While i nvestigating the shares offered to you by your potent
ID: 446743 • Letter: I
Question
III. Compliance
A. While investigating the shares offered to you by your potential boss, you discover that the company you are considering working for is not registered as required under the Securities Act of 1933. How does this influence you as a potential employee and as a potential shareholder? Be sure to reference any applicable statutes or laws.
B. You know that accepting this job may eventually lead to a promotion into the role of the financial manager. As the potential financial manager, what federal and shareholder requirements would you need to be familiar with in order to ensure that you are being completely compliant?
Explanation / Answer
A.
Securities Act of 1933 helps in regulating the offers and sales of securities in the United States. It is required to ensure that corporations provide sufficient information to its investors regrading sale of securities. Furthermore, it is also crucial to restrict any misrepresentations, fraud, or deceit in the sale of securities.
In the mentioned situation, the company offering shares to the potential employee was not registered under Securities Act of 1933. In this situation, the potential employee might develop a sense of disinterest towards the company from both perspectives, i.e. from the perspective of an employee as well as shareholder. Hence, it is highly possible that the employee might decline the company’s offering.
B.
Although it is crucial for the companies to register under Securities Act of 1933, however exemptions are provided to the unregistered companies under specific situations. This exemption includes non-public offering exemption, regulation D-rules 504, 505 and 506, revised regulation A etc.
Being the potential financial manager, one should be familiar with the federal and shareholder requirements to remain fair and transparent with the shareholders as well as the public. He should always contact with securities lawyer before issuing any offerings. He should also understand that despite of doing any exempt transaction; his company will be subject to antifraud provision of the federal securities law. It means he along with his company would be held liable, in case of any misleading information made by himself or other people regarding the company in written or oral.