Saturday, September 7, 2019
The Securities and Exchange Commission Essay Example | Topics and Well Written Essays - 1000 words
The Securities and Exchange Commission - Essay Example The International Monetary Fund approximated ââ¬Å"more than $1 trillion on toxic assets and from bad loansâ⬠were lost by big western banks ââ¬Å"from January 2007 to September 2009â⬠(Reuters 1). The individual losses and exposures were undisclosed by these institutions in order ââ¬Å"to prevent ââ¬Ërunsââ¬â¢ on their banks or trading against their positions by their competitors in the marketsâ⬠which can further escalate their losses (Dobbs & Minyard 1). Hence, what the banks and other companies/institutions did was to refrain from lending money ââ¬Å"among themselves or to other businessesâ⬠since they were uncertain as to their trading partnersââ¬â¢ financial health and considered that ââ¬Å"the risk of loss was too high,â⬠opting to preserve their cash to compensate for any probable future losses (Dobbs & Minyard 1). The ââ¬Å"sources of liquidityâ⬠was said to have desiccated for a number of companies with capital markets failing to perform properly (Dobbs & Minyard 1). This resulted to breakdown and bankruptcies of influential companies or ââ¬Å"land-rich/cash-poor situationâ⬠for energy companies (Dobbs & Minyard 1). The global economy then was said to be in recession as ââ¬Å"the financial markets seizedâ⬠(Dobbs & Minyard 1). ... SEC 1). The federal statutes and rules require companies to have ââ¬Å"full disclosure and transparencyâ⬠whenever it ââ¬Å"sells stocks or bonds to the publicâ⬠(Johnson 993), or to supply ââ¬Å"a detailed public disclosure documentâ⬠to both ââ¬Å"investors and regulatorsâ⬠(Securities Act of 1933 à §Ã § 5, 10, 15 U.S.C. à §Ã § 77e, 77j (2006); 17 C.F.R. pt. 230 (2011), whenever private businesses make public offerings (Johnson 993). The Securities and Exchange Commission (SEC) reviews ââ¬Å"these disclosure documents,â⬠which in the case of Groupon, the SEC they required the latter to revise its disclosures in order to improve their accuracy (U.S. SEC, Letter from Larry Spirgel 1-14). This requirement however is not applicable to private placements wherein ââ¬Å"a company sells an investment outside of the normal public securities marketsâ⬠(Securities Act of 1933 à § 4(2), 15 U.S.C. à § 77d(2); 17 C.F.R. à § 230.506 (2011)), which often times evade examination by federal and state regulatory bodies (Johnson 151). Because these placements are private, they are concealed (Johnson 993) and the issuers tend to divulge ââ¬Å"far less information to investorsâ⬠than that required for public offerings (SEC v. Ralston Purina Co., 346 U.S. 119, 125-26 (1953) and SEC rule 506 under 17 C.F.R. à § 230.506). Issuers also divulge this information ââ¬Å"only to qualified investorsâ⬠(17 C.F.R. à § 230.506 and 17 C.F.R. à § 230.501(a) (2011)). ââ¬Å"Regulators and even academics have little or no access to the private placement disclosuresâ⬠(Johnson 993). Private placements are also said not to be liquid, ââ¬Å"difficult to price,â⬠and bear significant risks (Johnson
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