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Securities Practice and Electronic Technology

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by John R. Hewitt, James B. Carlson


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Securities Practice and Electronic Technology provides complete, practical, hands-on guidance to the legal and regulatory developments spurred by the online revolution. You'll get coverage of the impact on all major securities laws and regulations, plus step-by-step advice on electronic delivery of information to investors, establishing corporate and broker-dealer Web sites, the use of electronic advertising and sales literature, and many other issues.

Securities Practice and Electronic Technology provides unique advice and perspective on how to use the Internet, extranets and other new media when dealing with clients. Other topics include: corporate disclosure and capital formation; electronic offering circulars; electronic roadshows; exempt offerings; shareholder communications; creating, developing and maintaining a corporate Web site; informed consent; overseas investing; security and encryption; alternative trading systems; intellectual property issues; electronic storage requirements under E-Sign; and uniform electronic communications policy.

Book #00647; looseleaf, one volume, 1,220 pages; published in 1998, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-084-5


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  • Availability: Available
  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 1220
  • ISBN: 978-1-58852-084-5
  • Pub#/SKU#: 647
  • Volume(s): 1

Author Image
  • John R. Hewitt
John R. Hewitt is a Director in Gibbons PC in its New York office. A former First Vice-President/Associate General Counsel with Shearson/Lehman Brothers, Mr. Hewitt has served as a Senior Counsel with the Division of Enforcement of the U.S. Securities and Exchange Commission and as an Assistant Attorney General in Ohio counseling the Ohio Division of Securities.  Mr. Hewitt is the 1998 recipient of the Financial Netnews Internet Compliance Person of the Year Award, and is also a member of the editorial board of eSecurities.  He has written and spoken extensively in this field and regularly advises many of the country's largest wire houses and investment banks, as well as leading discount brokers.




Author Image
  • James B. Carlson
James B. Carlson is a Partner of Mayer Brown's New York office and he represents buyers, sellers and management in complex leveraged buy-outs and acquisitions.  He is an Adjunct Professor of Law in Securities Regulation at New York University School of Law and has written extensively on corporate finance and investment banking.

CHAPTER 1
Introduction

§ 1.01 Introduction
§ 1.02 From EDGAR to October 1995
[1] EDGAR
[2] Instinet, Posit, AZX and ATSs
[3] SuperDOT, NASDAQ, SelectNet and SOES
[4] Farmland Industries, Inc.
[5] King & Spalding
[6] Thomson Financial Services, Inc.
[7] Brown and Wood

CHAPTER 2
Corporate Finance

§ 2.01 Electronic Delivery of Information
[1] Introduction
[2] SEC Interpretive Guidance
[3] Privacy and the Internet
[4] CF Disclosure Guidance on Cybersecurity
[5] SEC Statement and Guidance on Public Company Cybersecurity Disclosures
§ 2.02 Electronic Media and the Public Offering and Prospectus Delivery Requirements
[1] Introduction
[2] Definitions
[3] Overview of Reform
[4] Pre-Filing Period
[5] Waiting Period
[6] Post-Effective Period
§ 2.03 Web Site Entanglement
[1] From Web Site to Prospectus
[2] Information Within a Web Site
[3] The “Envelope Theory” and Hyperlinks
[4] Webcasting Company Conference Calls
§ 2.04 Technology and Its Impact on Capital Formation
[1] Primacy of Information
[2] Enhanced Process
[3] Enhanced Materials
[4] Capital Formation via the Internet: Phase Two
§ 2.05 Exempt Offerings
[1] Private Placements
[2] Crowdfunding
[3] Cross-Border Securities Issues
§ 2.06 Direct Public Offerings
[1] Internet Direct Public Offerings
[2] Internet Direct Public Offering Providers
[3] The Due Diligence Dilemma
[4] Direct Stock Plans
[5] “Free” Web Stock Offerings
[6] Auctions
§ 2.07 Resales
[1] Rule 144
[2] Rule 144A
§ 2.08 Bulletin Board Trading on the Internet
[1] Issuer Bulletin Boards
[2] Unaffiliated Third Party Bulletin Boards
[3] Broker-Dealer Considerations
§ 2.09 Blue Sky Requirements

CHAPTER 3
Public Company Communications with Investors

§ 3.01 Corporate Communication and Electronic Media
[1] Mandatory Disclosures
[2] Sarbanes-Oxley Act of 2002
[3] Optional Disclosures
[4] Communications Policies
[5] Combating False Rumors—Cybersmears
§ 3.02 Shareholder Meetings Online
§ 3.03 Proxy Solicitation
[1] Proxy Contests Generally
[2] Electronic Activism in Proxy Contests
[3] Shareholder Choice Regarding Proxy Materials
[4] Proxy Voting System
§ 3.04 Guidance on Companies’ Use of Web Sites
[1] The “Public” Nature of Information on Company Web Sites
[2] Antifraud and Other Exchange Act Provisions
[3] Previously Posted Materials or Statements on Company Web Sites
[4] Hyperlinks to Third-Party Information
[5] Summary Information
[6] Disclosure Controls and Procedures
[7] Format of Information and Readability
§ 3.05 Rule Requirements for Interactive Data in Financial Reporting

CHAPTER 4
The Creation, Development, and Maintenance of a Corporate Web Site

§ 4.01 Introduction
[1] The History and Structure of the World Wide Web
[2] Web Browsers
[3] Addressing on the Web
§ 4.02 The Organization of the Web Site
§ 4.03 Creating Web Pages
[1] HyperText Markup Language
[2] Parts of a Web Page
[3] Web Authoring Tools
[4] Design Basics
§ 4.04 Adding Interactivity to Web Sites
[1] Forms
[2] CGI Scripts
[3] Java
[4] ActiveX
[5] Cookies
[6] XML
[7] ASP
[8] Instant Messaging
§ 4.05 Corporate Web Site Content
[1] Marketing
[2] Investor Information
[3] Selling Product
[4] Responsibilities
§ 4.06 Publicizing Your Web Site
[1] Search Engines
[2] Corporate Communications
§ 4.07 Web Site Maintenance
[1] Monitoring Usage
[2] Updating Content
[3] Page Review and Design Updates
[4] Link Check
§ 4.08 Using the Web in the Disclosure Process
[1] The Collaborative Process
[2] Internet, Intranet, and Extranet
[3] Document Management
[4] Document Management on the Web
[5] Technical Requirements for Collaborative Work
[6] Putting it all Together

CHAPTER 5
The Retail Securities Markets

§ 5.01 Introduction
§ 5.02 Establishing a Retail Broker-Dealer Website
[1] Jurisdictional and Registration Issues
[2] SRO Advertising Rules—Communications with the Public
§ 5.03 Account Opening
[1] Informed Consent
[2] Telephonic Informed Consent
[3] Global Consent
[4] Notice, Access and Delivery
[5] Account Information
[6] Suitability
[7] Regulation S-P—Safeguard Rule
[8] Regulation S-P—Privacy of Consumer/Customer Information
[9] Regulation S-AM: Limitations on Affiliate Marketing
[10] Identity Theft Red Flag Rule
[11] Electronic Signatures
[12] Consolidated Reporting
[13] Money Laundering
§ 5.03A Public Offerings
[1] Wit Capital Letter
[2] Paperless Offerings—American Life Insurance
[3] IPO Road Shows
§ 5.04 Order Execution
[1] Best Execution
[2] Limit Order Display and Quote Rules
[3] Price Improvement
[4] Capacity
[5] Extended Hours Trading
[6] Decimalization
§ 5.05 Research—Communications with the Public
[1] Disclosures
[2] Regulation Analyst Certification
[3] Public Offerings
[4] Rule 15a-6
[5] Electronic Research Tools
§ 5.06 Market Information
§ 5.07 Calculators and Investment Analysis Tools
[1] Investment Analysis Tool
[2] Interactive Financial Games
§ 5.08 Document Delivery
§ 5.09 Electronic Communications
[1] Electronic Mail
[2] Instant Messaging
[3] CAN-SPAM Act
§ 5.10 Record Retention
[1] Introduction
[2] Adoption of the Record Keeping Rules
[3] Evolution of the Rules During the Early Years
[4] The 1960s Back Office Crisis
[5] Embracing Early Technology and Increased Sophistication in the Industry
[6] Record Access
[7] Insider Trading Cases
[8] Embracing Improvements in Technology
[9] Heightened Scrutiny of Broker-Dealers
[10] Implementing Electronic Record Retention Policies and Procedures
§ 5.11 Bulletin Boards, Chat Rooms, Blogs, and Social Networking Sites
[1] Bulletin Boards
[2] Chat Rooms
[3] Blogs
[4] Social Networking Sites
§ 5.12 Intranets
§ 5.13 Blockchain: Distributed Ledger Technology
[1] The Technology
[2] The Applications and Potential Impact
[3] Factors to Consider When Implementing DLT
§ 5.14 Discount Issues
[1] Registration
[2] Series 55 Trader Registration
[3] Suitability
[4] Best Execution
[5] Advertising and Promotion
[6] Day Trading
[7] Margin
§ 5.15 Compliance
[1] Uniform Firm-Wide Electronic Communications Policy
[2] Compliance Department Procedures—Electronic Media
[3] System Integration and Surveillance
§ 5.16 Business Continuity Plans
§ 5.17 Business Continuity Objectives and Sound Practices
§ 5.18 Guide for Critical Infrastructure for Pandemics
§ 5.19 SRO Pandemic Directives
§ 5.20 Requirements of NASD Rules 1020 to 1060
§ 5.21 Electronic Delivery of Information Under NASD Rules
§ 5.22 Electronic Delivery of Information Under NYSE Rules 3
Appendix A: Regulation S-AM Model Forms
Appendix B: FTC Red Flag Template
Appendix C: Cybersecurity Framework
Appendix D: State Computer Crimes Laws
Appendix E: OCIE Cybersecurity Initiative
Appendix F: Cybersecurity Examination Sweep Summary

CHAPTER 6
Regulation of the U.S. Capital Markets

§ 6.01 Introduction
§ 6.02 Market Participants and the Technological Issues They Face
[1] The Self-Regulatory Organizations
[2] The Broker-Dealers
[3] Alternative Trading Systems
[4] Increased Competition
[5] Decimalization
[6] Trading Pause—Circuit Breakers
§ 6.03 The Drive For Connectivity
[1] The FIX Protocol
[2] Information Dissemination
§ 6.04 The Concept Release
[1] The Solutions Suggested by the SEC
[2] Industry Comments on the Concept Release
§ 6.05 Regulation of Exchanges and Alternative Trading Systems
[1] Registration of ATSs
[2] The Regulation of Systems Operated by Traditional Exchanges
§ 6.06 Modern Trading Technology and Mechanisms
[1] High-Frequency Trading
[2] Dark Pools
[3] Compliance Issues Associated with Modern Trading Technology
[4] SEC and FINRA Regulatory Initiatives—Algorithmic Trading and High-Frequency Trading
[5] Algorithmic Trader Registration Requirement
[6] Amendment to Exchange Act Rule 15b9-1—FINRA Registration Exemption for Certain Exchange Members

CHAPTER 7
The Creation, Development, and Maintenance of a Broker-Dealer Web Site

§ 7.01 Introduction
[1] Web Site and Web Page Basics
[2] How a Broker-Dealer Web Site Differs from Other Corporate Sites
§ 7.02 Broker-Dealer Site Content
[1] The Nature of Data
[2] Market Information
[3] Company Information
[4] Shareholder Information
[5] Marketing Information
[6] Web Site Information
§ 7.03 Creating an Interactive Site
[1] Updating Displays
[2] Forms-Based Information
[3] The Customized Page
[4] Site Search
§ 7.04 Public and Private Sections of the Site
[1] Visitor’s Center versus Client Site
[2] Password Access
[3] Private Section Content
§ 7.05 Online Trading
§ 7.06 Security
[1] Server Security
[2] Server/Browser Security
[3] Security at the Client’s Desktop
[4] E-Mail Security
[5] Instant Messaging Security

CHAPTER 8
Investment Companies

§ 8.01 Overview
§ 8.02 The Legal Framework for Investment Companies
§ 8.03 Electronic Delivery of Information
[1] Overview
[2] SEC Pronouncements Concerning Electronic Delivery of Information to Investors—Brown & Wood No-Action Letter; October 1995 Release
[3] May 1996 Releases
[4] The Summary Prospectus: Rule 498
[5] SEC Rule 30e-3
[6] Electronic Delivery and SEC Releases
[7] The SEC Report on Netflix and Its CEO
[8] Interactive Data Voluntary Reporting Program for Mutual Funds on the EDGAR System
[9] Mutual Funds and Extensible Business Reporting Language
[10] Use of Social Media
[11] Processing Customer Instructions Via a Click on a Mobile Application
§ 8.04 Advertising and Sales Literature
[1] In General
[2] Types of Publicity
[3] Use of a Combination of Advertising on the Internet
[4] Marketing over the Internet by Investment Advisers
§ 8.05 Supervision of Broker-Dealer Electronic Communications
[1] Securities and Exchange Commission
[2] New York Stock Exchange, Inc.
[3] FINRA
[4] “Real Time” Interactive Content
§ 8.06 The Use of Websites by Mutual Funds and Third Parties
[1] Mutual Fund Websites
[2] Use of the Internet by Third Parties
[3] Electronic Signatures in Global and National Commerce Act
§ 8.06A Exchange Traded Funds
[1] What Is an ETF and How Does It Work?
[2] Secondary-Market Trading of ETFs
[3] The Rise of ETFs
[4] Investors and ETFs
[5] Regulatory Framework
[6] Regulatory Exemptions
[7] Legal and Compliance Issues
[8] Taxation
[9] ETFs and Statutory Underwriter Status
[10] Commodity-Based ETFs: Special Concerns
[11] Understanding the Policy Behind SEC ETF Actions
[12] Exchange-Traded Notes (ETNs)
§ 8.07 State Blue Sky Issues
[1] Preemption of State Blue Sky Laws
[2] Securities Offerings
[3] NASAA’s Interpretive Order on Internet Advertising
§ 8.08 Private Funds
[1] JOBS Act Changes to General Solicitation
[2] Foreign Private Adviser Exemption
§ 8.09 International Issues
§ 8.10 Compliance Program
[1] Compliance Procedures
[2] Board Duties
[3] Chief Compliance Officer
[4] Business Continuity Plans (“BCPs”)
[5] Record Keeping
[6] Rule 22c-2: Redemption Fees for Redeemable Securities

CHAPTER 9
Investment Advisers

§ 9.01 Overview
§ 9.02 The Framework for the Regulation of Investment Advisers
[1] The Definition of an Investment Adviser
[2] Exclusions and Exemptions from the Definition of Investment Adviser
[3] Investment Adviser Registration Requirements
[4] Regulation of Investment Adviser Communications
[5] Regulation of Investment Adviser Transactions and Operations
[6] Investment Adviser Record Keeping Requirements
§ 9.03 Use of Electronic Media to Satisfy Investment Adviser Delivery Requirements
[1] The Framework for Use of Electronic Media by Investment Advisers
[2] Required Communications
[3] Electronic Delivery of Advertisements
§ 9.04 The Use of Electronic Media to Provide Advisory Services
[1] Online Advisory Services
[2] Portfolio Management; Robo-Advisers
[3] Administrative Services
§ 9.05 Jurisdictional Issues Relating to the Registration and Regulation of Investment Advisers in Connection with Use of the Internet
[1] Providing Advisory Services and Advertising on the Internet
[2] Foreign Advisers/The March Release
§ 9.06 Compliance Programs
[1] Rule 206(4)(7)
[2] Policies and Procedures
[3] Annual Review
[4] Chief Compliance Officer
[5] Record-Keeping
[6] Regulation FD
[7] Penalty
[8] Application of Compliance Programs and Procedures to Electronic Technologies
[9] SEC OCIE “National Examination Risk Alert”
[10] IM Cybersecurity Guidance

CHAPTER 10
Protection of Intellectual Property in Electronic Media

§ 10.01 Introduction
§ 10.02 Copyright
[1] Protectable Subject Matter
[2] Originality
[3] Tangible Form of Expression
[4] Copyright Exclusive Rights
[5] Exceptions and Limitations to the Owner’s Rights
[6] Joint Ownership
[7] Work Made for Hire
[8] Transfer of Ownership
[9] Duration of Copyright
[10] Obtaining a Copyright Registration
[11] Copyright Infringement
[12] Linking and Mirroring and Copyright Infringement
[13] Digital Millennium Copyright Act
[14] DMCA and User Generated Content (USG)
§ 10.03 Trademarks
[1] Types of Marks
[2] Function of Trademarks
[3] Secondary Meaning
[4] Geographical Extent of Usage and Priority of Use
[5] Relative Strength of Marks
[6] Requirements for Federal Registration
[7] Maintenance of Registration
[8] Licensing and Assignment of Marks
[9] Enforcement of Trademark Rights
[10] Loss of Trademark Rights
[11] Online Sale of Counterfeit Products: Seller and Web Site Liability
[12] Internet Domain Names
[13] Metatags
§ 10.04 Intellectual Property Audits
[1] Asset Inventory Audits
[2] Due Diligence Audits
§ 10.05 Data Security: Computer Fraud and Abuse Act
[1] Calculating Loss and Damages
[2] Exceeding Authorized Use and Unauthorized Use

CHAPTER 11
International Regulation

§ 11.01 Introduction
§ 11.02 International Regulation
[1] Introduction
[2] IOSCO Task Force Report
§ 11.03 United Kingdom
[1] Introduction
[2] The Regulatory Overview
[3] Territorial Scope of FSA Regulation and Supervision
[4] The Application Process
[5] Regulated Activities
[6] Financial Promotion
[7] Money Laundering
[8] Specific Requirements of the Use of Electronic Media
§ 11.04 European Union
[1] Introduction
[2] The Markets in Financial Instruments Directive (MiFID)
[3] The UCITS Directive
[4] Stock Exchange Listing
[5] Distance Marketing Directive
[6] Conclusion
§ 11.05 Australia
[1] Introduction
[2] Offers and Invitations in Relation to Securities
[3] Information Relating to Securities
[4] The Australian Stock Exchange Limited
[5] Encryption
§ 11.06 Canada
[1] Introduction
[2] Distributions of Securities to the Public: Prospectus and Registration Requirements
[3] Internet Issues
[4] Encryption
§ 11.07 Germany
[1] Regulatory Environment
[2] Offering of Securities through Electronic Media
[3] Advertising and Selling Efforts
[4] Prospectus Liability
[5] Liability of Providers of Bulletin Boards or Online Services
[6] The Purchase of Securities Via Electronic Media
[7] Encryption
§ 11.08 Hong Kong
[1] Introduction
[2] In General
[3] The CO-Prospectus Provisions
[4] The Securities and Futures Ordinance
[5] The Provision of Financial Services
[6] Encryption
[7] Conclusion
§ 11.09 Japan
[1] Broker-Dealer Activities: Meaning of Solicitation
[2] Offering Securities
[3] Proprietary Trading Systems
[4] International Enforcement and Cooperation
[5] Encryption
§ 11.10 Conclusion

CHAPTER 12
Litigation

§ 12.01 Introduction
§ 12.02 Civil Securities Law Litigation
[1] Insider Trading
[2] Cybersmear
[3] Manipulation
[4] The Duty to Correct
[5] Liability for Analysts’ Reports
[6] Unregistered Sales
§ 12.03 Intellectual Property Law Litigation
[1] Tort Liability
[2] Trademark and the Internet
[3] Copyright and the Internet
§ 12.04 Jurisdiction and the Internet
[1] Statutory Jurisdictional Limitations
[2] Constitutional Due Process Limitations
§ 12.05 Discovery in the Electronic Age
[1] Discovery of Electronic Information
[2] Technology-Assisted Review
[3] E-Discovery Sanctions
[4] Clawback Agreements
[5] Cost-Shifting
[6] Privacy Concerns
[7] Materials Protected from Discovery
§ 12.06 Evidentiary Issues Under the Federal Rules
[1] Business Record Exception
[2] Best Evidence Rule
§ 12.07 Regulatory Litigation
[1] The Securities and Exchange Commission
[2] Self-Regulatory Organizations
[3] Blue Sky
§ 12.08 International Concerns
§ 12.09 Identity Theft
[1] Phishing
[2] Legal Recourse for Identity Theft Victims

INDEX