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Jones Day is a global law firm with 43 offices in major centers of business and finance throughout the world. We are One Firm Worldwide. The removal of the 85 percent limit on minimum purchase price, however, may be significant in certain instances where companies desire to structure discount purchases of restricted stock which would not run afoul of A to attract key executives. This is typically the state in which the purchaser of the securities resides i. Chapter 1 - 4 Chapter 5 - 8 Chapter 9 - 12 Chapter 13 -

Blue Sky Laws are state regulations established as safeguards for investors against securities fraud. The laws, which may vary by state, typically require sellers of new issues to register their offerings and provide financial details.

What are the 'Blue Sky Laws'

Background Section of the California Corporate Securities Law of , as amended the "California Securities Law" , generally prohibits the offer or sale of any security in California pursuant to an equity compensatory plan unless either the offer or the sale has been qualified by the Commissioner or an exemption is available. Most privately held companies adopting equity compensation plans and intending to offer participation to California employees rely primarily upon the exemption from qualification available under Section o of the California Securities Law.

Companies seeking to qualify plans for the Section o exemption must comply not only with Rule promulgated under the Securities Act of , as amended the "Securities Act" , but with regulations promulgated by the Commissioner under Section o , which impose certain substantive requirements on the provisions of stock options and stock issuances such as restricted stock. Adopted Amendments The key changes resulting from the adopted amendments applying to equity compensation plans that qualify under the Section o exemption from qualification under California state securities law are as follows: The removal of restrictions on the exercise price of options under the California Securities Law is likely not significant due to existing requirements of the Internal Revenue Code the "Code" relating to deferred compensation and incentive stock options.

Adverse tax consequences result to the holder of the option if options granted at less than fair market value do not comply with requirements of Code Section A. In addition, the grant of incentive stock options must comply with a number of requirements under Code Section , including that the incentive stock option may not be granted at less than fair market value of the stock on the date of the grant.

The removal of the 85 percent limit on minimum purchase price, however, may be significant in certain instances where companies desire to structure discount purchases of restricted stock which would not run afoul of A to attract key executives.

Shareholder Approval Requirements The plan or agreement must now be approved by a majority of the outstanding securities entitled to vote by the later of a 12 months after the date the plan is adopted or the agreement is entered into or b within 12 months of the date options or shares are granted under the plan or agreement, or the issuance of any other securities under the plan or agreement in California. In addition, a foreign private issuer as defined in Rule 3b-4 of the Securities Exchange Act of , as amended may grant options, shares, or other securities to up to 35 persons within California without receiving shareholder approval.

Continuing Requirements Following adoption of the amendments, the following substantive requirements remain: Grants must still generally qualify under Rule to qualify under Section o. The plan must have a termination date of no more than 10 years from the date the plan is adopted or the plan is approved by shareholders, whichever is earlier, and an agreement termination date of no more than 10 years from the date the agreement is entered into or the date it is approved by shareholders, whichever is earlier.

In addition, the exercise period of an option must not exceed months from the date of grant. The plan must specify the total number of securities that may be issued and the class of individuals eligible to receive options and purchase securities under the plan.

The number of securities and the exercise price subject to equity awards must be proportionately adjusted in the event of stock splits and similar transactions effected without the receipt of consideration by the issuer. Options and the right to acquire securities under the plan must be nontransferable, except as permitted by Rule by will, the laws of descent or distribution, or limited transfers to family members by gift or domestic relations orders permitted by Rule The requirement of a minimum post-termination exercise period for options remains.

Optionees must be permitted to exercise their options, to the extent that the optionee is entitled to exercise on the date employment terminates, until the earlier of 1 the option expiration date or 2 at least six months from a termination due to death or disability, and at least 30 days from a termination due to any other reason except cause.

If a stock option or restricted stock is subject to repurchase rights in favor of the company following the termination of an optionee's or grantee's employment, the company must repurchase the option or shares within 90 days of termination or, in the case of securities issued upon post-termination exercise, within 90 days of the date of the exercise.

Companies may want to consult with their counsel to determine whether amendments to their existing o -compliant equity compensation plans are advisable in order to take advantage of the now liberalized regulations.

It just means the company has filed all the paperwork needed to go ahead with the issue. The prospectus is really no more than a summary of the information found in the registration statement, which does the following: Registration statements and prospectuses become public shortly after being filed with the SEC. Learn to decipher the secret language of the IPO prospectus report.

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Discover the different roles and functions that surrounds investment banks, and the role they have played throughout the evolution of the modern system. Administrative law is the body of law that governs the regulation Financial responsibility law is typically a state-based regulation Your career as a securities agent begins with this test.

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If a federal exemption applies that preempts state securities law (called “blue sky” laws), such as Rule of Regulation D, then the transaction is fine and there is no need to look further into state securities laws. But if the there is a federal exemption that does not preempt state securities laws, then a state exemption must also be found. Blue Sky Laws and the Securities Act of View the performance of your stock and option holdings. Academy. including the authorized and outstanding amount of stock;. such as restricted stock or stock options. Equity compensation can be securities laws (blue sky laws). Blue sky laws generally require a company Start-up Equity Awards: Securities Law Considerations Rule is a broad exemption specifically designed to help make it feasible for non-reporting companies to grant compensatory equity.


Blue Sky Laws Sept. 27, In addition to the federal securities laws, every state has its own set of securities laws—commonly referred to as "Blue Sky Laws"—that are designed to protect investors against fraudulent sales practices and activities. However, Federal Securities Laws Administered by the Securities and Exchange Commission (”SEC”) have preempted much of the scope of Blue Sky Laws. Examples of SEC preemption include control over any securities traded on a national stock exchange such as the New YorkStock Exchange (“NYSE”), the American Stock Exchange (“AMEX”) or NASDAQ. California Amends Blue Sky Laws Applicable to Stock Option and Share Purchase Plans Effective as of July 9, , the California Corporations Commissioner adopted amendments to the state’s Client Alert is published by Latham & Watkins as a news reporting service to clients.

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