BLAW 3310 MILLER FINAL EXAM STUDY GUIDE 2026
Security - Answers -debt (bonds and loans) or equity (stock) that provides capital for
business operations
What is specified in a debt instrument? - Answers -- amount of debt
- length of debt period
- debt repayment method
- rate of interest
Equity Financing - Answers -raising funds through sale of company stock in which
purchaser gains an ownership interest.
Securities and Exchange Commission (SEC) - Answers -the agency charged with
enforcing and administering federal securities laws
Origins of Security Regulations - Answers -due to concerns of fraud, where promoters
used to go door-to-door offering worthless securities with nothing backing them other
than the "blue sky"
Blue Sky Laws - Answers -State laws that regulate the offer and sale of securities.
Howey Test - Answers -Originated from the SEC v. Howey case, which classifies an
investment as a security if it meets all 4 of these elements:
- an investment of money
- in a common enterprise
- with an expectation of profits
- generated by the efforts of persons other than the investors
Registration Statement - Answers -- used to acquire new security offering and has 2
parts: the prospectus and detailed information required by the SEC
- must be filed with SEC and be approved before cash is accepted by the offeror
Prospectus - Answers -- a document providing the legal offering of the sale of security
- condenses the longer registration statement
Information in Prospectus - Answers -- security issuer's finances and business
- purpose of offering
- plans for the funds
- risks involved
- promoter's managerial experience
- certified financial statements
, Exemptions from Registration - Answers -- private placement
- Regulation D
- well-known season issuers (WKSIs)
- crowdfunding
Private Placement - Answers -- when securities are sold to investors without
registration with the SEC
- no more than 35 unaccredited investors, and any number of accredited investors is
allowed
Regulation D - Answers -companies may issue stock directly to accredited investors
and raise up to $5M in 12 months without need of registration
Accredited Investors - Answers -- Investors deemed by the SEC to be sophisticated
and wealthy enough to evaluate investment opportunities without prospectus
- only they can participate in private placement offerings
Well Known Seasoned Issuer (WKSI) - Answers -- securities issuers that have $700M
in market capitalization or have offered at least $1B in debt securities previously
- do not need to wait for SEC to review registration agreement after sending it
Crowdfunding - Answers -- Using the Internet to appeal to potential donors who might
support fundraiser's purpose
- maximum amount allowed is $1,000,000
Proxy - Answers -permission given by a shareholder to another party to vote one's
shares in the manner instructed
Tender Offer - Answers -- when company wants to take over another company, it
makes an offer that is appealing
- stockowners of target company are offered stock by company or cash
Bernie Madoff video - Answers -- largest ponzi scheme in history
- lasted decades, making about $65B
- arrested in 2008
Ponzi Scheme - Answers -using cash from newer investors to pay off older ones
Misstatements - Answers -issued information about securities that misleads a
reasonable investor in investment decisions
Elizabeth Holmes and Theranos - Answers -- was said that with just a drop of blood,
Theranos' Edison test could detect diseases and other conditions
- didn't have proof of it working but she had the backing of many big names, lending her
credibility
- many articles came out exposing the Edison, and things began to unravel
Security - Answers -debt (bonds and loans) or equity (stock) that provides capital for
business operations
What is specified in a debt instrument? - Answers -- amount of debt
- length of debt period
- debt repayment method
- rate of interest
Equity Financing - Answers -raising funds through sale of company stock in which
purchaser gains an ownership interest.
Securities and Exchange Commission (SEC) - Answers -the agency charged with
enforcing and administering federal securities laws
Origins of Security Regulations - Answers -due to concerns of fraud, where promoters
used to go door-to-door offering worthless securities with nothing backing them other
than the "blue sky"
Blue Sky Laws - Answers -State laws that regulate the offer and sale of securities.
Howey Test - Answers -Originated from the SEC v. Howey case, which classifies an
investment as a security if it meets all 4 of these elements:
- an investment of money
- in a common enterprise
- with an expectation of profits
- generated by the efforts of persons other than the investors
Registration Statement - Answers -- used to acquire new security offering and has 2
parts: the prospectus and detailed information required by the SEC
- must be filed with SEC and be approved before cash is accepted by the offeror
Prospectus - Answers -- a document providing the legal offering of the sale of security
- condenses the longer registration statement
Information in Prospectus - Answers -- security issuer's finances and business
- purpose of offering
- plans for the funds
- risks involved
- promoter's managerial experience
- certified financial statements
, Exemptions from Registration - Answers -- private placement
- Regulation D
- well-known season issuers (WKSIs)
- crowdfunding
Private Placement - Answers -- when securities are sold to investors without
registration with the SEC
- no more than 35 unaccredited investors, and any number of accredited investors is
allowed
Regulation D - Answers -companies may issue stock directly to accredited investors
and raise up to $5M in 12 months without need of registration
Accredited Investors - Answers -- Investors deemed by the SEC to be sophisticated
and wealthy enough to evaluate investment opportunities without prospectus
- only they can participate in private placement offerings
Well Known Seasoned Issuer (WKSI) - Answers -- securities issuers that have $700M
in market capitalization or have offered at least $1B in debt securities previously
- do not need to wait for SEC to review registration agreement after sending it
Crowdfunding - Answers -- Using the Internet to appeal to potential donors who might
support fundraiser's purpose
- maximum amount allowed is $1,000,000
Proxy - Answers -permission given by a shareholder to another party to vote one's
shares in the manner instructed
Tender Offer - Answers -- when company wants to take over another company, it
makes an offer that is appealing
- stockowners of target company are offered stock by company or cash
Bernie Madoff video - Answers -- largest ponzi scheme in history
- lasted decades, making about $65B
- arrested in 2008
Ponzi Scheme - Answers -using cash from newer investors to pay off older ones
Misstatements - Answers -issued information about securities that misleads a
reasonable investor in investment decisions
Elizabeth Holmes and Theranos - Answers -- was said that with just a drop of blood,
Theranos' Edison test could detect diseases and other conditions
- didn't have proof of it working but she had the backing of many big names, lending her
credibility
- many articles came out exposing the Edison, and things began to unravel
