I'm still grading the midterm.  I will report the grades to you as soon as possible.  If you would like me to send you your grade to an email address other than your stern address, please note it on the attendance sheet before you leave this evening.

 

I. Should You Go Public?

II. The Economics and Law of Securities Markets- How Free Should The Markets Be?

 

            A. Introduction

 

            1. Why Do We Have Securities Markets?

2. Why Do We Have Securities Regulation?

3. How Do Securities Laws Try to Protect Small Investors?

 

            B.  Overview of the Laws Regulating Securities Markets

 

1. Securities Act of 1933

2. Securities Exchange Act of 1934

3. Other 'New Deal' Statutes

4. Recent Federal Statutes

5. Blue Sky Statutes

6. Self Regulatory Organization Rules

                         

III. Going Public

 

            A. Close and Public Corporations- Ross Perot's Story

            B. Should you go public?

 

IV. How Do The Regulated Public Markets this Effect Your Business Decisions?

                                   

            A. What is the Goal? Market valuation v. Fundamentals (P&G and RJR Nabisco)

            B. What is the Time Frame?  Long Term v. Short Term

C. Who Do You Serve? (Managerial Capitalism, Global Capital, and Control Shareholders)

D. Timing Decisions (e.g., to Merge, to Settle)

 

V. How does an IPO work?

 

A. Stages of going public- pre-filing, waiting and post-effective periods

B. Ongoing duties

 

VI. Trading on Inside Information- What Can and Can't You Do?

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Please read the attached rules for Sue or Settle for next time and be ready to play.  Please bring a deck of playing cards.

Sue or Settle

 

Sue  or  Settle  is   a  card  game   designed  to  help you understand   litigation   better. In  Sue  or  Settle, you are either a litigant or a lawyer.  (Your instructor will tell you which role you're playing). Each litigant starts  with $1,500,000 in his account. Each lawyer starts with $0. Two litigants- former software executives- will meet to sue each other in a case where $1,000,000 is at stake.

 

Here's what the case is about. Two years ago the litigants were senior executives of  a software firm. They signed a licensing agreement on behalf of the firm that created a serious, forseeable cash flow problem which forced the firm into bankruptcy proceedings.  The shareholders sued both of the two former executives for $1,000,000 in losses resulting from their mistake.  The two former executives were both found grossly negligent and liable. Now they are suing each other here to determine how much of the $1,000,000 each must pay in damages. They are the litigants in this game. Each litigant will be accompanied by a lawyer. A simple card game determines who wins the case.

 

1. How a Lawsuit is Won and Lost. Each  of the two sides is  dealt  seven cards. Only a litigant's lawyer gets to see the cards- the litigant cannot see them.  The litigant's lawyer adds up the total number of points in his client's hand:  a two is worth 2  points,  a  nine  is  worth 9 points.  Each face card (a Jack, a Queen, a King) is  worth 10 points.  An Ace is worth 1 point.      Each  lawyer then advises his client about how strong the hand is, but a lawyer cannot tell his client how many points are in his hand. Unless the litigants decide to settle immediately, each pays an initial fee to his lawyer. (Fees are discussed in more detail below.) The lawyer then orders his cards, places  all seven of his cards in a stack face down and then  reveals  his first card   If the litigants each decide to continue, they each pay their lawyer's another fee, and each lawyer then    reveals  his  second  card. The process  of revealing cards, deciding whether to sue or settle, and paying lawyers' fees continues  until  the litigants decide to settle the case or until all the cards  are revealed  and  a  winner  is  identified      For  your  reference,  an  average seven card hand will have about   45 points. The highest possible hand will have 70 points. The lowest possible hand will have 10 points.

 

2.  Legal  Fees.  Each litigant pays money directly to his   lawyer before each card is revealed.  No  player ever gets back any money paid to a lawyer.  Before each card is revealed, a litigant must pay his   lawyer $20,000 unless a litigant hires 'High Powered Legal Help,'. Each litigant must pay his attorney at least $20,000 even if they settle before the first card is revealed.

 

2.  Retaining  'High Powered Legal Help.' A litigant may try to improve his chances of winning the case by  deciding, before the first card is revealed, to hire high powered legal help. He then pays an additional $20,000 to his lawyer before each card and in return he  may draw  an extra card after the seventh card has been revealed. 

 

3. Lawyer's Duties. While each litigant decides  whether to sue or settle, only a litigant's lawyer sees and handles the litigant's cards; the litigant does not get to see them until each is revealed in turn.  Further, the lawyer  is not allowed tell  his client how many points are in his hand,  though his lawyer must  tell  him how  good  his chances appear whenever he asks.  (For example, "you have a strong case," or "it doesn't look very good.") Each lawyer can advise his client on  whether to hire high powered legal, whether to settle and on what terms, whether to appeal, and anything else, but the litigant makes the decisions.

 

4. Lawyer's Fees and Code of Conduct.  Lawyers keep all money their clients pay to them.  Each lawyer has an ethical duty under the state bar association's cannon of ethics to be honest with his client and to represent his client's interests zealously.  

 

5.  Appeal.   When the  last card is revealed and a winner is identified,   the loser must pay the winner $1,000,000 unless the loser decides to appeal. If he decides to appeal, each litigant pays an additional $50,000 to his lawyer (or $100,000 if he hired high powered legal help) and   then each litigant draws a single card. If the total points in the loser's entire hand (including his new card) is greater than the total points in the winner's entire hand (including his new card)  then the  loser wins the appeal and the other litigant now owes $1,000,000. (If the loser ties or falls short, he loses the appeal.)  The loser of the first appeal may then appeal this result. If he appeals, each player pays an additional $100,000 to his attorney (or $200,000 if he hired high powered legal help) and   each draws one more card. If the total points in the loser's entire hand (including this last new card and the one from the previous appeal)  is greater than the total points in the winner's entire hand (including this last new card and the one from the previous appeal),  the loser wins the appeal and the new loser owes $1,000,000.  There are no further appeals permitted.

6.  Settlement. At any time the litigants, through their lawyers, may  discuss  settling  on  any terms they desire. The case ends and payments to lawyers cease once the settlement is reached.

 

7. Statute of Limitations You must finish a given case of Sue or Settle in less than 15 minutes.  If you do not, the lawsuit is dismissed and each litigant must pay sanctions of $750,000 to the court.

 

8. Additional Lawsuits. Your instructor will announce how many lawsuits you will eventually litigate.  If you litigate more than one case, your instructor will tell you who you are suing and when.   You will not get more money before a new case.  Unless your instructor announces otherwise, you will keep your lawyer for each lawsuit.

 

9. Other Instructions.   Your instructor may deliver additional instructions to you before a case begins.

 

 

                              (c) 1994 Seth Freeman.  Revised 1996 and 2000.