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Regulation of Securities,

Corporate Governance, and Financial Markets

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Chapter Overview + ,"&(-#./0'1234(#34(5.1$&(16(%"&($'78#'9(#34( 5&.134#'9(5&.2'7%7&5(8#'/&%5(#34(%"&('1:&(16( '&02:#%1'9(#0&3.7&5(73(&361'.&8&3%

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5&66*78902)&":

Overview of the Securities Market

A&.2'7%7&5(%'#35#.%7135(1..2'(73(%?1(5&%%7305B( !" #$%&'()*+(,&*+(-%#.&)/&0$)1$&234)/%44%4&4%55&6()7)/+5& )443%4&+/8&(%)443%4&69&4%13()#)%4&#6&(+)4%&1+')#+5.&+/8&

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5&66*78902)&":

Defining a Security + A%1./5(#34(-1345(#'&($&'"#$5(%"&(815%(?&::E/31?3( %9$&5(16(5&.2'7%7&5(%"#%(#'&('&02:#%&4(-9(6&4&'#:(#34( 5%#%&(:#?D

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5&66*78902)&":

Defining a Security

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5&66*78902)&":

Modern Application of the Howey Test

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Parties in the Securities Market <$%&4%13()#)%4&*+(-%#&93/1#)6/4&#$(637$&#$%&)/#%(+1#)6/&69& #$(%%&'+(#)%4=&)/;%4#6(4.&)443%(4.&+/8&)/#%(*%8)+()%4" 8 9#'()*-0) "0(%)((:&#1%"%0(*60#%50-+%*,(&0%&#'()*+(#*%;")(7%-#% *,(%'".6(%-5%*,(%)(460&*$<% 8 9))6(0) "0(%*,-)(%&#)*&*6*&-#)%"#7%(#*&*&()%*,"*%)(..%)(460&*&()%*-% &#'()*-0)<% 8 9#*(0+(7&"0&() "0(%5&#"#4&".%&#)*&*6*&-#)%*,"*%/0-'&7(%)(0'&4()% 5-0%&#'()*-0)%"#7%&))6(0)%0(."*(7%*-%)(460&*&()%*0"#)"4*&-#)<

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5&66*78902)&":

Equity Instruments > ?6**6/&4#61-&@+546&1+55%8&16**6/&4$+(%4A. ! "#$%$&"'($)"("*+%$,(-.#"/($-(01,2"#$'(31'"4(-#($)"(5+//"#$( 0/-6%$13%&%$,(-6($)"(5-201#,7(

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5&66*78902)&":

Equity Instruments + G'&6&''&4(5%1./ ! =#%".*(0#"*&'(%5-0+%-5%(>6&*$%*,"*%,")%.())%0&):%*,"#% 4-++-#%)*-4:%;(4"6)(%&*%,")%4(0*"&#%>6")&?7(;*%5("*60()%&)% /0(5(00(7%)*-4:<%

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5&66*78902)&":

Debt Instruments ! "#$%&''$#()*$+,') ! "#$"#%#&'%()($"*+,%#('*($)-(.)/0()(/#"'),&(%1+(*2(+*&#-(3$",&/,$)45( $41%()//"1#6(,&'#"#%'(*7#"()&()8"##691$*&(',+# $#",*6:(

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5&66*78902)&":

Debt Instruments

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5&66*78902)&":

Peer-to-Peer Lending

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5&66*78902)&":

Securities and Exchange Commission + A&.2'7%7&5(#34(H>."#30&(!188755713JAH!K( ! *,(%5(7(0".%"7+&#&)*0"*&'(%"1(#4$%4,"01(7%2&*,%06.(+":&#1@% (#5-04(+(#*@%"#7%"7A67&4"*&-#%-5%5(7(0".%)(460&*&()%."2)<%

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5&66*78902)&":

EDGAR + ,"&(3#%713#:(.:&#'730"125&(75(8#4&(#=#7:#-:&(%1(%"&( $2-:7.(%"'120"(%"&(AH!O5(.18$2%&'(4#%#-#5&(/31?3( #5(HPQRSD(

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5&66*78902)&":

The Securities Act of 1933

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5&66*78902)&":

Registration

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5&66*78902)&":

Exemptions from Registration + F3(1'4&'(%1(#5575%(-2573&55(=&3%2'&5(5&&/730(58#::&'( #8123%5(16(.#$7%#:(6'18(%"&($2-:7.(73=&5%8&3%( .188237%9;(%"&(5&.2'7%7&5(:#?5(#::1?(#(328-&'(16( &>&8$%7135(6'18('&075%'#%713(61'(58#::&'(7552&'5D

+ T1'(#(328-&'(16(&.13187.;(:&0#:;(#34(1%"&'($'#.%7.#:( '&#5135;(815%(-2573&55&5(166&'(%"&7'(5&.2'7%7&5(13(#3( &>&8$%(-#575D

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5&66*78902)&":

The Securities Act of 1934

+ A&.2'7%7&5(H>."#30&(R.%(16()UVW ! C(16."*()%*,(%)".(%-5%)(460&*&()%;(*2((#%&#'()*-0)%"5*(0 "#% &#'()*-0%/604,")(7%&*%50-+%"%;6)&#())%(#*&*$%&))6(0<%

+ S&02:#%&5(-'1/&'5;(4&#:&'5;(5&.2'7%7&5(#551.7#%7135;( -'1/&'#0&(67'85;(#34(1%"&'(-2573&55(&3%7%7&5(%"#%(#'&( &30#0&4(73(%"&(5#:&(16(5&.2'7%7&5(-&%?&&3(73=&5%1'5D

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5&66*78902)&":

Insider Trading + X"&3(#(.1'$1'#%&(73574&'("#5(#..&55(%1(7361'8#%713( 31%(#=#7:#-:&(%1(%"&(0&3&'#:($2-:7.;(%"&(73574&'(8#9(31%( %'#4&(73(%"&7'(.18$#39O5(5%1./(13(%"&(-#575(16(%"&( 73574&(7361'8#%713D

+ F3574&'5(73.:24&(&>&.2%7=&5;(8#3#0&'5;(.1'$1'#%&( .1235&:;(.1352:%#3%5;(&8$:19&&5;(-'1/&'5;( #..123%#3%5;(=&341'5;($#'%3&'5;(#34(&=&3(8#N1'7%9( 5"#'&"1:4&'5D

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Securities Regulation by States: Blue-sky Laws

+ R(8#N1'7%9(16(5%#%&5("#=&(#41$%&4(#::(1'(52-5%#3%7#::9( #::(16(%"&(M3761'8(A&.2'7%7&5(R.%D

+ ,9$7.#:($'1=757135(73.:24&($'1"7-7%713(#0#735%(6'#24(73( %"&(5#:&(16(5&.2'7%7&5;('&075%'#%713('&<27'&8&3%5(61'( -'1/&'5(#34(4&#:&'5;(&>&8$%7135;(.7=7:(:7#-7:7%9(61'( 7552&'5(6#7:730(%1(.18$:9;(#34('&8&47&5(61'(4&6'#24&4( 73=&5%1'5D

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The Sarbanes-Oxley (SOX) Act of 2002

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+ ,"&(:#?(#785(%1(51:=&(5$&.767.(8&."#3758(6#7:2'&5(73( #..123%730(8&%"145(#34('&<27'&5("70"&'(:&=&:5(16( 6742.7#'9('&5$1357-7:7%7&5(61'(%"15&(73=1:=&4(73(.1'$1'#%&( 01=&'3#3.&D

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Reforms in the Accounting Industry + ,"&(AIY(R.%(5&&/5(%1(73.'&#5&(#247%1'(734&$&34&3.&B ! +"#7"*-0$%0-*"*&-#%-5%"67&*&#1%/"0*#(0)@ ! ;"##&#1%"44-6#*&#1%5&0+)%50-+%/0-'&7&#1%#-#"67&*&#1% 4-#)6.*&#1%)(0'&4()%5-0%/6;.&4%4-+/"#&()%5-0%2,&4,%&*% /0-'&7()%"67&*&#1@% ! 0()*0&4*&#1%"44-6#*&#1%5&0+%(+/.-$(()%&#'-.'(7%&#%"67&*&#1% 50-+%.("'&#1%*,(%"67&*&#1%5&0+%*-%1-%*-%2-0:%5-0%"#%"67&*% 4.&(#*<

!"#$%&'()*+*,-,.*/01%2345&66*78902)&":;*<66* %&'()=*%>=>%?>8;*@"*%>#%"890)&":*"%*8&=)%&A9)&":* 3&)("9)*)(>*#%&"%*3%&))>:*0":=>:)*"B*/01%234

Financial Reporting

> <$%&CIJ&D1#&*+-%4&-%,&16('6(+#%&699)1%(4&*6(%& +1163/#+25%&96(&9)/+/1)+5&(%'6(#)/7&2,&(%K3)()/7&#$+#&1$)%9& %L%13#);%&699)1%(4&+/8&1$)%9&9)/+/1)+5&699)1%(4&'%(46/+55,& 1%(#)9,&#$%&+113(+1,&69&+55&(%K3)(%8&CH?&9)5)/74" > C%#4&4#+/8+(8)M%8&9)/+/1)+5&(%'6(#)/7&96(*+#4&+/8&(%4#()1#& 1%(#+)/&#,'%4&69&+1163/#)/7&*%#$684&#$+#&+(%&/6#& #(+/4'+(%/#&#6&+38)#6(4

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5&66*78902)&":

Corporate Governance

+ G2-:7.(.18$#37&5(825%(8#73%#73(#247%(.1887%%&&5( .18$15&4(&3%7'&:9(16(734&$&34&3%(47'&.%1'5(

+ ,"&(.1887%%&&(825%(.13%#73(#%(:&#5%(13&(47'&.%1'(?7%"( 52667.7&3%(673#3.7#:(#.28&3(%1($'1-&(#247%5(73(4&$%"D

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5&66*78902)&":

Emergency Escrow

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!"#$%&'()*+*,-,.*/01%2345&66*78902)&":;*<66* %&'()=*%>=>%?>8;*@"*%>#%"890)&":*"%*8&=)%&A9)&":* 3&)("9)*)(>*#%&"%*3%&))>:*0":=>:)*"B*/01%234

5&66*78902)&":

Whistleblowers

+ G#'%7&5(%"#%(.188237.#%&(7361'8#%713('&:#%730(%1(#39( 7::&0#:(.1342.%(73(673#3.7#:('&$1'%730(1'(.1'$1'#%&( 01=&'3#3.&(#'&($'1%&.%&4(#0#735%(#39('&%#:7#%713D

!"#$%&'()*+*,-,.*/01%2345&66*78902)&":;*<66* %&'()=*%>=>%?>8;*@"*%>#%"890)&":*"%*8&=)%&A9)&":* 3&)("9)*)(>*#%&"%*3%&))>:*0":=>:)*"B*/01%234

5&66*78902)&":