Reference no: EM132239683

Assignment Questions -

Omega Company manufacture fiber-optic switches and is located Cupertino, California, just south of San Francisco. Omega was formed about seven years ago and now desperately needs to expand its manufacturing capacity as well as pursue certain new product development possibilities. For this, it needs to raise about $50-$70 million through a public offering of common shares. Omega contemplates that a registration statement covering the offering will be filed May 1^st. For each of the problems that follow, consider whether Section 5 of the Securities Act has been violated. Omega is not a reporting company, has not previously engaged in a public offering of its security, and is an emerging growth company.

1. On February 10th, Bob, Omega's vice president of marketing, places an advertisement to appear in nine upcoming issues of Business Week. The advertisement previously had run for several months in Tech World, a computer trade magazine, and in addition to listing the full range of products manufactured by Omega, it carried a quote from a trade magazine that "Omega is the emerging industry leader in the development and design of fiber-optic switches."

Recall the earlier background information regarding Omega's pending IPO that was discussed at the end of the materials focused on the pre-filing period. On May 1st, after several weeks of intense work by Omega, its lawyers and the staff from Hedley, Hadley, Omega files a registration statement with the SEC covering 4 million of its common shares. Each of the following activities occurs during the waiting period. For each of the following problems, resolve whether Section 5 of the Securities Act has been violated (assuming Omega is an emerging growth company).

2. Various underwriters associated with the offering prepare and distribute their own sales brochures to brokers and potential customers. These are not shared with other underwriters in the offering and are not filed with the SEC. Also, consider how your approach to this question is changed if Omega is not an emerging growth company.

Omega's registration statement covering 2 million common shares with an offering price of $15 became effective on July 1st of this year, shortly after the meeting with all the underwriters' representatives. After its IPO, Omega's shares will trade on Nasdaq. Consider whether any of the following activities violate the federal securities laws. Assume that omega is an emerging growth company.

3. C.T. Gaines, one of the underwriters in the Omega offering, sold its entire allotment by July 5th. On July 10th, Nida, one of the brokers with C.T. Gaines, recommended that Oscar purchase a block of Omega common stock on Nasdaq. Oscar agrees. Must C.T. Gaines forward a final prospectus to Oscar when it confirms the sale and delivers the shares to Oscar? What result if C.T. Gaines had not sold its entire allotment?

For the problems that follow, assume that Omega is a reporting company eligible to use Form S-3 for its offering and, unless otherwise stated, is neither an emerging growth company nor a well-known seasoned issuer. The registration statement was filed on May 1st and became effective July 1st.

4. On April 15, just a couple of weeks before Omega was planning to file a registration statement for an offering of common shares, the public relations staff prepared a brochure highlighting the company's rapid development and innovative products for distribution to the financial media. Copies would also be distributed to lawyers, accountants, and investment advisers, and to other localities where Omega's name is likely to be recognized. The brochure indicates that Omega intends to make a public offering in the near future and includes estimates of its future production capacity as a result of the forthcoming offer. The brochure does not include any statement disavowing an offer of a security. Is Omega in violation of Section 5 of the Security Act?

5. Hedley, Hadley Ltd. is the lead underwriter of Tecto Company common stock. Tecto common shares are currently quoted on Nasdaq, and Hedley, Hadley has maintained a bid to purchase Tecto common at $9 for several days prior to Tecto's registration statement becoming effective. The last quoted price before Hedley, Hadley entered its $9 bid was $9.25. Just before it filed the pricing amendment, the last sale price of Tecto common stock was $9.50. Tecto filed its pricing amendment, setting an offering price of $9.50, and the Commission's staff permitted acceleration of that amendment, so that the registration statement became effective at 10 A.M. that day. Hedley, Handley then increased its bid to $9.50. Do Hedley, Handley's action constitute lawful stabilization?

6. Assume your firm has been retained by Tecto Enterprises, Inc to assist it in raising $5 to $8 million for oil exploration efforts at a yet-to-be-determined location in the United States through a public offering of Tecto common stock that will be made in California and Texas. The senior partner has just learned that four months ago senior officers purchased Tecto common shares at $10 per share and that the broker-dealer that will assist Tecto in the offering has an option to acquire 10,000 common shares at $10 per share. Tecto proposes to offer the Tecto common shares to the public at around $14 per share. You have been asked to prepare a memorandum outlining the problems likely to be encountered in blue skying the Tecto offering.

Rule 501(h) defined purchaser representative, Evaluate the following problems in light of that definition.

7. Marvella is interested in purchasing securities in a Rule 506(b) offering by Syntertech. Although Marvella lacks the requisite sophistication required by the exemption, she relies on her brother-in-law, George, for advice. Assuming George has the requisite experience to meet the sophistication standard, which of the following circumstances would disqualify George from acting as a purchaser representative?

a. Marvella divorces her husband.

b. George is an officer of Syntertech.

c. George is an officer of Syntertech and does not tell Marvella of his position.

d. George is planning to buy a substantial block of stock offered by Syntertech.

8. As an attorney, what risk of liability will Priscilla incur if she acts as a purchaser representative for Marvella? Is it likely that this liability is covered by her malpractice insurance policy?

9. Suppose Marvella, who is thrifty and unwilling to pay high fees to anyone, refuses to hire a representative. May the issuer pay the fee of Mavella's representative?

Note - Total 9 questions and 1 page each.