Financial and Securities Regulation

NUMBER YOUR ANSWERS AND COPY THE QUESTIONS HIGHLIGHTED IN RED IN YOUR ANSWERS.

FAILURE TO FOLLOW THIS INSTRUCTION WILL INCUR A 3-POINT POINT REDUCTION FOR THIS TOPIC DISCUSSION.

THIS TOPIC HAS 2 SHORT CASES:

CASE 1:

Two former roommates from college contact you about an opportunity to make big money. Their idea is to start a business to market a new video game system (the computer science major developed the software, the engineer created the hardware). They estimate it will take $5 million to $10 million to begin production, and they want to raise money by selling shares in the company to investors. They think their product is superior, and they are aware of the time factor. They want to get started as soon as possible. Your field of expertise is securities marketing.

1. Can the three of you just begin advertising for investors?
2. What steps must be followed to comply with the law?
3. How much time is needed before potential investors can be approached legally?

CASE 2:

You and two partners operate a graphics design and printing company. The success of this business relates to the high-quality service and products you provide to your clients. To move to the next level requires a considerable financial investment in computer software and hardware. You and your partners are considering forming a corporation and offering to sell stock to the public. You anticipate raising at least $40 million in new capital.

Discuss the following questions:

1. What requirements of the Sarbanes-Oxley Act will you have to meet?
2. What is involved in offering a new company’s stock for sale to the public?
3. Are there aspects of doing business as a publicly traded company that are different from operating as a partnership?