THE INTERNET AND THE CYBERSECURITIES MARKETPLACE


THE INTERNET AND THE CYBERSECURITIES MARKETPLACE

Denis T. Rice, July 1998

Table of Contents

I. Introduction.

A. Background: Information and Communication Capabilities of the Internet.

B. The Mushrooming Use of the Internet for Securities Transactions.

II. The Internet As A Means To Market New Securities.

A. Introductory.

B. The Regulatory Framework For Cybersecurities.
1. Federal Regulation.
a. Importance of Consent of the Recipient to Electronic Transmission of Information.
b. Importance of Timely Notice, Effective Access, and Reasonable Assurance of Delivery of Information.
2. State Regulation.

C. Public Offerings of Securities on the Web.
1. General Regulatory Considerations.
2. Underwritten Offerings Over the Internet.
3. Conducting "Roadshows" Over the Internet.
4. Mutual Fund Offerings and the Internet.
5. Direct Public Offerings ("DPOs").
a. Regulatory Considerations.
b. Examples of DPOs.
c. Sites Providing Interaccess Between Groups of Potential Investors and a Number of DPOs.

D. Nonpublic Internet Offerings.

III. Secondary Trading of Securities in Cyberspace.

A. Discount Broker-Dealers.

B. Full Service Broker-Dealers.

C. Banks and Internet Discount Trading.

D. "Membership"-Type Trading by Institutions.

E. The Effect of Online Discount Trading on Suitability and Other Obligations of Broker-Dealers.

F. Clearing, Back Office Operations and Market Data.

G. Bulletin Boards and Message Groups as Secondary Trading Tools on the Web.

H. "Membership"-Type Trading for the Public.

I. Effects of Electronic Trading on Stock Exchanges.

IV. The Internet As an Information and Services Tool.

A. Use by Mutual Funds to Offer Services and Disseminate Information.

B. Sites Offering Individual Investors News, Research and Analysis.

V. Internet Securities and the Jurisdiction Reach of Securities Laws.

A. Background: Basic Jurisdictional Principles under the U.S. Constitution and under International Law.

B. Conflict Between the Internet and Jurisdictional Boundaries.

C. Applying U.S. Constitutional Principles to Internet Jurisdiction.


D. Jurisdiction of Blue-Sky Laws Over Internet Transactions.
1. Issuance of Securities.
2. Broker-Dealers and Investment Advisers.

E. Applying Federal Securities Laws To Foreign Web Sites.
1. Jurisdictional Basis.
2. Enforcement Activities, Federal and State.

VI. Conclusion.

The Extensive Footnotes to this Article have been omitted. If you wish a copy, please contact us at mary@freeadvice.com.