business sectors

Poison pill

Definition

A corporation’s defensive strategy against a hostile takeover bid in which current shareholders other than the tender-offer bidder or prospective bidder, upon a triggering event, have the right to purchase additional corporate stocks at a deeply discounted price. The effect is to dilute the value of the stock and increase the bidder’s acquisition costs. Also called a shareholder rights plan.

Securities law history

Why Regulate Securities?

The development of federal securities law was spurred by the stock market crash of 1929, and the resulting Great Depression.  In the period leading up to the stock market crash, companies issued stock and enthusiastically promoted the value of their company to induce investors to purchase those securities.  Brokers in turn sold this stock to investors based on promises of large profits but with little disclosure of relevant information about the company.

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