Securities Act of 1933 on Purchase of Shares
A. While investigating the shares offered to you by your potential boss, you discover that the company you are considering working for is not registered as required under the Securities Act of 1933. How does this influence you as a potential employee and as a potential shareholder? Be sure to reference any applicable statutes or laws.
As a potential shareholder, I will not invest in this company. The provisions of the Securities Act of 1933 stipulates that failure to register under this Act hinders investors from receiving financial information concerning securities being offered for public sale. Additionally, the omission of this Act exposes the company to the risks of misrepresentations, deceit and other fraud during the sale of securities. Therefore, either the employee or the investor who is protected by the Act (“SEC.gov | Registration under the Securities Act of 1933”, 2017) should buy the shares.
B. You know that accepting this job may eventually lead to promotion into the role of the financial manager. As the potential financial manager, what federal and shareholder requirements would you need to be familiar with to ensure that you are completely compliant?
SEC regulations demand that public limited companies should disclose crucial information about the performance and financial position of their businesses to the company shareholders (“Disclosure Laws and Regulations,” 2017). The shareholders use this information to ascertain whether they funds are being utilized towards meeting the core objective of wealth maximization. Besides, the limited companies are also supposed to disclose their financial statements to the potential investors. The potential investors use this information to make a decision whether to invest in the company when new securities are issued by the company.
Publicly owned business entities are required to prepare two annual reports, one for the Security Exchange Commission and another one for the company stakeholders(“Disclosure Laws and Regulations,” 2017). The annual report provides to the SEC is referred to as Form 10-K. The preparation and contents of this report are strictly in accordance with federal statutes. It contains extensive financial and operating information about the company as well as management notes about the company operations.On the other hand, annual reports to stockholders encompass Board of Directors discussion and analysis about the company’s financial performance and operations results. SEC provides that this report should focus on the key aspects that comprise results of the operations, changes in the financial positions and the current company financial position. Management’s discussion aims at disclosing company’s favorable and unfavorable changes in the industry, results of the business operations, capital resources, liquidity and likely contingencies (“Disclosure Laws and Regulations,” 2017).
Other information contained in the shareholder’s annual report includes a brief description of the business. This description deals with issues such as the condition of the new products, sources of raw materials and major company products and services. Again, company Directors and senior manager of the firm must be disclosed as well specific market data on common stock. (“Disclosure Laws and Regulations,” 2017)