Business Law Newsletters
Companies which otherwise are attractive acquisition targets may have contingent liabilities that are difficult to assess. For example, a paint manufacturer may have used ingredients that later prove to be toxic. Present and future liability of the manufacturer for damages from sales of products with those ingredients may be anticipated, but the scope and cost of that liability may be too difficult to determine to support an acquisition value for the manufacturer.
Institutional investment managers must report to the Securities and Exchange Commission on Form 13F those securities registered under Section 13(f) of the Securities Act of 1933 over which the investment managers exercise discretion.
Brokers and dealers engaging in securities transactions are required to maintain various records for varying periods under Securities and Exchange Commission rules. For example, "blotters" reflecting all purchases and sales of securities must be retained for six years. Copies of sale or purchase confirmations must be kept in an easily accessible place for two years and then for an additional year thereafter.
Rules issued by the Securities and Exchange Commission under the Securities Exchange Act of 1934 define and regulate "penny stocks." Penny stocks are defined in Rule 3a51-1 as unregistered stocks priced at less than five dollars issued by a company with net tangible assets of less than $2 million after being in operation for three years or less than $5 million after being in operation less than three years.
An insider of a public company who trades in the company's stock while aware of material but nonpublic information about the company is presumed to be trading on the basis of that information in violation of Securities and Exchange Commission Rule 10b-5. To counter that presumption, companies may adopt Rule 10b5-1 Trading Plans.