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replies2.docx1. The security exchange commission (SEC) was formed in 1933 in the wake of the great depression. According to Karmel (1998), the SEC engages in a wide range of regulatory activities and some administrative duties but its reputations is mostly that of a prosecutorial agency. As stated by Seaquist (2012), the securities act of 1933 is only applicable to initial public offerings (IPO). To list an IPO it must first be registered with the SEC. Registration is required by law for a corporation to sell stock to the public (Seaquist, 2012). A California private non-profit university wishing to sell “Shares in Learning” certificates for $500 redeemable for two undergraduate courses or one graduate course would not need to register with the SEC to issue the certificates. There are securities that are exempt from registering with the SEC. As stated by Seaquist (2012), one of the securities are exempt from regulation in the Securities Act of 1933 are securities issued by non-profit religious, charitable, educational, benevolent, or fraternal organizations.
If the University was for-profit and operated in all 50 states and wanted to sell the “Shares in Learning” certificate it would still not need to register with the SEC. The supreme court case SEC v W. J. Howey Co. concluded that an investment contract is a security under the act (Seaquist, 2012). As defined by the “Howdy test” an investment contract meets the criteria for a security if a person invests in a common enterprise and reasonably expects a profit derived from the efforts of others (Seaquist, 2012). The “Shares for Learning” certificates do not pass the Howdy test to qualify as a security as there is no reasonable expectation for profit. Despite the fact that the “Shares for Learning” may be resold without limitation it is not feasible to consider making a profit off of the certificates. It seems unreasonable that one would buy the certificates in the hope that the University's leadership would make an effort to increase the cost of tuition to the point that one could turn a profit from the $500 certificates on higher resell.
References
Karmel, R. S. (1998). Creating law at the securities and exchange commission: the lawyer as prosecutor. Law and Contemporary Problems. 61(1) 33-46. Retrieved from the EBSCOhost database
Seaquist, G. (2012). Business Law for Managers. San Diego, CA: Bridgepoint Education, Inc
2. Both the federal and state governments regulate listing and selling stock to the public. The Securities Act of 1933 and the Securities Exchange of 1934 was implemented to protect investors from fraudulent and deceptive activities.
The securities for Private University will not need to be registered with the Security and Exchange Commission (SEC) because, under the Securities Act of 1933, there are several situations in which securities are exempt from registration. One exemption is that nonprofit educational institutions are exempt from having to register securities as per the Securities Act of 1933 (Seaquist, 2012). Private University is a private, not-for-profit educational institution that qualifies for exemption from having to register the securities.
If the securities are being offered by a private college that does business in all 50 states, they would need to be registered with the SEC due to Rule 147. Rule 147 mandates that “securities are exempt if they are offered for sale solely in one state by a company that does at least 80% of its business in the state” (Seaquist, 2012). If the college does business in all 50 states, it would not qualify for exemption by doing business in at least 80% of business in one state. Some state security regulations may require the company to file with the SEC. Resale of the securities is restricted to residents of the state for nine months after the initial sale. Securities must be registered before they are sold for the first time by filing paperwork (a registration statement) with the Securities and Exchange Commission (SEC). The registration statement must include a description of the security being offered, a description of the company’s properties and business, a description of the company’s management, a financial statement, and a description of pending lawsuits involving the company. A company may not sell or offer to sell a security during the prefiling period. After the company files the registration with the SEC and is waiting for approval, the company may begin with some limited advertisement but may not sell securities during the waiting period. During the waiting period, prospective investors may request a prospectus. Once the SEC approves the registration and it become effective, the company may offer and sell the security during the post-effective period.
References
Seaquist, G. (2012). Business law for managers. San Diego, CA: Bridgepoint Education, Inc.
3. The merger between AT&T and T-Mobile would have violated antitrust law, specifically the Sherman Act of 1890. As stated by Seaquist (2012), to protect the integrity of our markets it is important to not only to regulate the stock market but also to ensure free and fair competition. The Department of Justice (DOJ) according to Besen, Kletter, Morosi, Salop, and Woodbury (2013) the DOJ issued a complaint that contended that an acquisition would create higher prices for mobile wireless customers and the customers could face poorer quality due to less incentive to invest. If the merger had gone through it would have effectively reduced the number of national wireless carriers from four to three. According to Besen, Kletter, Morosi, Salop, and Woodbury (2013), with the addition of T-Mobile, AT&T and Verizon would have accounted for 74% of the value spectrum of wireless customers, and the collective market would have been reduced from 36% to 24%. It would have been unlikely that another carrier would have been able to pick up the market-share vacated by T-Mobile. As stated by Besen, Kletter, Morosi, Salop, and Woodbury (2013), a merger would have likely increased the disadvantage to other carriers due to rising costs and reduced roaming services. As stated by Seaquist (2012), per se violations of the Sherman act include the ability among competitors to price fix or restrict commodities. A merger would have effectively allowed Verizon and AT&T to price fix and eliminate an aggressive price competitor. According to Kaplan (2012), the on-going suit garnered significant government and private opposition. And nine months after it was announced the merger was abandoned.
References
Besen, S. M., Kletter, S. D., Morosi, S. A., Salop, C., & Woodsbury, J. (2013). An economic analysis of the AT&T/T-Mobile merger. Journal of Competitive Law and Economics. 9(1) 23-47. Retrieved from the EBSCOhost database
4. According to Statista (2019), in the last two quarters of 2011, Verizon and AT&T had 64 percent of the market for cellular service while T-Mobile had 10 percent. Had AT&T merged with T-Mobile, it would have given AT&T and Verizon 74 percent of the market which does not leave very much room for competition to grow. This means that the merger would likely have caused a “duopoly” situation (De La Merced, 2019, p. 9) which is different than a monopoly situation as there is still other competition in the market. However, the merger would have limited consumer’s purchases to primarily Verizon and AT&T and the merger would have lessened competition in the market. Not to mention, having such a large share of the market basically cuts out the little guy as they’re not able to continue to keep up with technology due to not having as much business as the two larger companies which means less profits to continue to build on. If we’re basing our thought on the antitrust laws, no, this did not violate them as it did not create a monopoly, which, according to the Federal Trade Commission (FTC), is the conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power" (Monopolization Defined, n.d., p.1).
Had the two companies involved in the duopoly collaborated to raise prices and gouge customers together, this would have been a violation of the antitrust laws since doing so would tend to create a monopoly of sorts. I believe collusion is the correct term to coin in that situation. Another way for this merger to have violated antitrust laws is of AT&T then went on to buy Verizon or vice versa with Verizon buying AT&T.
