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Spring 2006 Course Syllabus "Securities Law and the Internet" |
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"Securities Law and the Internet"
Georgetown University Law Center Graduate Program
Wednesday Evenings 5:45-7:45 Room 200
Adjunct Professor |
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The Internet has begun to serve an even more important role than a telephone or fax machine does for today’s investors. At present in the area of securities, investments, finance and commerce, the Internet can often seem akin to the Wild West, with the pioneers and entrepreneurs struggling within an uncharted territory of the securities laws. This course focuses on four important areas of concern for the securities lawyer: offerings conducted over the Internet, trading facilities and market centers operating over the Internet, investment advising over the Internet, and SEC Enforcement issues and the Internet. This course covers the nuts and bolts of the securities laws in each of the areas, and then applies these existing statutes, rules and regulations to ongoing Internet activities. Finally, this course will also cover the Internet's role in the implementation and compliance requirements of the Sarbanes-Oxley Act of 2002. As the basis for analysis and discussion, every class will feature a multimedia demonstration together with a live Internet hookup beamed by monitor projector on to a movie screen and several television monitors.
Goal
This course, a multimedia presentation (complete with graphics, sound and video), will not only grab the attention of students but will also survey the fundamental principles that serve as the basis of some of the more common securities laws and principles. Though the emphasis is on the practical (i.e. the realities of a cyber-securities practice), the course will also venture into some of the more theoretical conflicts that arise when the securities laws and the Internet intersect. Most importantly, given the rapidly changing technological aspects of the securities marketplace, this course will provide students with the requisite tools to handle future, unforeseen legal issues that they will undoubtedly encounter after graduation. Given the timeliness of each topic, when appropriate, the professor will also begin most classes with a discussion of current events (see also Topics From 2005) pertinent to the course.
Attendance and Participation
Regular and punctual attendance at class sessions is required of each student. Although this course contains a carefully prepared daily schedule of topics, each session is designed to incorporate discussion, particularly to analyze current events and trends in the practice of securities law. More importantly, student participation results in a more interesting and challenging two hours of class. Thus, if significant and of a high quality, a student’s contribution to class discussion will result in an automatic raising of a half of a grade point (e.g. from a “B” to a “B+” or a “B+” to an “A-”). I reserve the right to judge the quality of your participation. IN THIS REGARD, EVERY STUDENT MUST PLACE A PLACARD STATING THEIR NAME IN FRONT OF THEIR SEATS DURING CLASS. This is not for the purpose of the Socratic method but rather so I can get to know each of you, insure that you get credit for your participation and potentially help you with a reference after the semester.
Materials
You will find all required and recommended materials on www.johnreedstark.com -- free of charge. Note: Not all of the Materials on the "Course Materials" Website are Required Reading. This course is truly paperless and requires no financial commitment to purchase materials. (I have created this website, at my own expense, not only to make it easier for students to review the required and recommended reading but also to to make it easier for me to provide the most up to date materials for students. I took this step of building the website after six years of hearing students ask for an Internet based textbook.) Given the rapidly changing dimensions of the securities laws and the Internet, there simply does not exist a textbook that is not out of date, so, in an effort to provide to you the most current and timely materials, all materials, both required and suggested, will remain available on www.johnreedstark.com. Occasionally, I will provide additional materials if timely which I shall also place on www.johnreedstark.com. Students are expected to have read and thoroughly analyzed all assigned reading prior to the class covering those materials. Much reading included on the list of materials though part of the materials for purposes of reference, remain merely "suggested reading" or "extra reading" for which you are not responsible. I encourage you to look ahead in the reading because some weeks require more reading than others – plan your schedules accordingly.
Exams, Presentations & Grading
There will be a final exam that will count for 100% of your grade. The final exam will be a THREE-HOUR OPEN BOOK examination.
Schedule
January 18th
Topic: Goals and overview of the course.
Synopsis:
Goal: To cover four major subject areas of the securities laws as they relate to the Internet: online offerings, online investment advising, online trading facilities and SEC Enforcement issues. In the end, each student should walk away from the course with (i) a good (though general) understanding of the securities laws as they relate to these areas; and (ii) the ability to apply the material learned in the course not only to Internet related issues of the present but also to any new or novel issue that arises in the future.
Overview: Introduction on the size and growth of the Internet and the evolution of its many different applications relevant to securities, finance, investments and commerce. Demonstration (via computer and monitor projector with live Internet hookup) of examples, including initial public offerings and private placements occurring over the Internet, Internet stock discussion forums, Internet investment newsletters, Internet trading facilities, and potential Internet securities frauds.
Materials: Syllabus reviewed and explained. Also presented are the top ten reasons to take this course and the top ten reasons to drop the course.
January 25th
Topic: Continuation of prior lecture. The ‘33 Act Exemptions: Practice, Procedure and Consequences.
Synopsis: Finish lecture of prior class. When a company wishes to “go public,” it faces a complex and challenging process. The aim in this session is to briefly cover the practice and procedures, as well as important consequences of going public, and then to cover the nuts and bolts of the exemptions under Regulation A, the intrastate offering, the private offering, and the exemptions provided by Section 4(6) and Regulation D, Rule 504, 505 and 506.
Materials: Regulation A and Regulation D (and amendments) and certain pertinent rules. No-action letters pertaining to: IPONet; Venture Listing Services; Commscan; Oil-N-Gas.
February 1st
Topic: Securities Offerings over the Internet.
Synopsis: Using the Internet to find an “angel.” Multimedia demonstration and discussion of actual online offerings, including an analysis of whether they fall within the appropriate exemptions. Also possible short discussion of web advertisement of Corporate Dividend Reinvestment Plans and Direct Stock Purchase Plans over the Internet.
Materials: The SEC Internet-related Interpretive Releases (33-7288; 33-7233; 33-7516; 33-7856); ITT Corp and Baltimore Gas & Electric no-action letters.
February 8th
Topic: Continuation of prior lectures and “free stock” offerings and discussion of proxy solicitation and the Internet.
Synopsis: Is the position of the SEC regarding so-called “free stock” appropriate and in accordance with the securities laws?
Materials: “Free stock” sweep documents; Simplystocks.com no-action letter; American Brewing Company Incorporated; Auction Sites; Internet Countries
February 15th
Continuation of previous lecture.
February 22nd No class (Faculty Retreat)
March 1st
Topic: The Securities Laws In The Electronic Marketplace. Online Financial Portals.
Synopsis: Broker-dealer registration issues and ’33 Act issues concerning online trading facilities.
Materials: No action letters pertaining to Securities Transfer Association; Charles Schwab & Co. Inc. I; Stockback and Streetline.
March 8th No class (Spring Break)
March 15th
Topic: Existing & Operating Online Trading Facilities and SEC Internet Interpretive Releases.
Synopsis: Discussion of four Interpretive Releases. Multimedia presentation discussing existing online trading facilities (not ECNs) currently up and running and analysis of no-action letters concerning these sites.
Materials: No-action letters pertaining to: Spring Street Brewing Company (Wit-Trade); Real Goods Trading Corporation; PerfectData Corp.; Flamemaster Corporation; Arizona Stock Exchange; Angel Capital Exchange; Internet Capital Corp. and Evare.
March 22nd
Same as previous session. Also, Investor Relations and the Internet.
March 29th
Topic: Selective Disclosure and the Internet. Internet based Roadshows.
Synopsis: How does the SEC position on Internet based Roadshows reconcile with its position with principles of selective disclosure and the new Regulation FD?
Materials: No-action letters pertaining to: Private Financial Network; Bloomberg; Net Roadshow I & II; Charles Schwab (1999); Thomsen Financial Services; Activate.net.
April 5th
Topic: Discussion of SEC regulation of Investment Advisers and the Internet. Analysis of daytrading recommendation sites and momentum sites. Discussion of Broker-Dealer conduct and the Internet.
Materials: No-action letters pertaining to Lamp Technologies I and II; International Association For Financial Planning and Progressive Technologies Inc. Stock Recommendation Sites; Momentum Trading Sites; (Suggested reading, not required but probably helpful: Online Newsletter Sites)
April 12th
Topic: SEC Enforcement and the Internet.
Synopsis: Discussion and multimedia demonstration of six areas of potential fraud over the Internet which primarily concern SEC Enforcement at this time, including the offer and sale of bogus securities, market and stock manipulations, online investment newsletters, online trading facilities, international investment advisers & broker-dealers, and the use of spamming in securities scams.
Materials: Various SEC Internet Related Litigation Releases and AP Orders; Certain Internet Related pump and dump schemes (selected by professor at time of assignment) (Suggested reading, not required but probably helpful: Internet Sweep documents)
April 19th
Topic: SEC Program of EnForcenet.
Synopsis: Discussion of SEC’s five-prong Internet Program, EnForcenet, which includes surveillance, self-policing, education, liaison work and prosecution. Also, discussion of the Cybersmear.
Materials: (Suggested reading, not required but probably helpful:. Stark/Cella Article “SEC Enforcement and the Internet: Meeting the Challenge of the Next Millennium” (May 1997 of The Business Lawyer”); Stark Article “Tombstones: The Internet’s Impact Upon SEC Rules of Engagement” (February 1998 of Insights); Stark/Cutler Article “The SEC’s Statutory Weaponry to Battle Internet Fraud” (February 1999 of Securities Reporter); Enforcenet Redux: A Retrospective of the SEC’s Internet Program Four Years After its Genesis (The Business Lawyer, November 2001))
April 26th
Topic: Case Studies: Spotlight on the SEC and Spam
Synopsis: Various case studies. Discussion of SEC surveillance, the Privacy Act, and the Electronic Communications Privacy Act. Also covers law enforcement related investigative techniques, guidelines and practices.
Materials: Impersonation: Jakob, Hoke, Moldofsky, Zbierajewski, Snyder; Certain Spam-Related Enforcement Actions (selected by professor at time of assignment)
May ? -- Open Book Exam Laptops Allowed