Exam 22: Public and Private Offerings of Securities

Do you believe that the securities rules that are in place are sufficient to protect investors? Why or why not? Discuss fully.

A best-efforts underwriting of securities leaves the risks of the offering with the issuer.

Which of the following securities is not listed as exempt securities under Section 3 of the 1933 Act?

The Securities Act of 1933 is also referred to as the "blue sky" law.

Which of the following is true under the 1933 Act regarding the rights of a purchaser of unregistered securities sold illegally?

The Securities Act of 1934 requires continuous disclosure of certain information regarding publicly traded securities.

The SEC has the statutory authority to approve or disapprove an offering on its merits.

According to the ________ doctrine,a court may determine that the inclusion of sufficient cautionary statements in a prospectus renders immaterial any misrepresentations and omissions contained therein.

The ________ is the disclosure document that an issuer of securities provides to each prospective purchaser under the 1933 Act.

The ________ is the private offering counterpart to the prospectus.

Which of the following is not part of the Howey test?

Which of the following is not an accredited investor under Rule 501?

Fact pattern 22-2 Alice,along with her general partner Greg,owns several businesses.She is very interested in salt water aquariums and decides that a good venture for the partnership is the development of a business to raise tropical fish for that environment.She plans to issue stock to start a business raising fish for that environment with the idea that she and Greg will purchase a majority of the stock.She has a friend,Tony,who is a plastic surgeon with a good practice who has expressed interest in the venture because he believes that the presence of fish in waiting rooms reduces anxiety and encourages patients to spend more money.She does not want to go to the expense and trouble of a formal registration under the 1933 Act and seeks advice on how to avoid that process. -Refer to fact pattern 22-2.As far as Tony is concerned,which of the following is true?

A key step in preparing the registration statement is the process of ________,whereby the company,the underwriters,and their respective counsel assemble and review the information about the company in the registration statement.

Wynette plans to take steps to take her business public and raise funds through a public offering of stock.Her attorney tells her that there are some state laws that she should consider as well as the Securities Act of 1933.Which of the following is the proper term for state laws regulating the issuance of securities?

Under the ___________ provision of Regulation A,the exemption is unavailable if the directors of the issuer have been subject to SEC disciplinary orders for securities fraud within the applicable time limit.

Fact pattern 22-1 Rodney is unhappy because stock he recently purchased pursuant to an initial public offering has lost value.He would like to get his money back.While he has not real basis for believing that the issuance of stock was illegal,he believes that if he sues,his money will be returned because that would be less expensive than litigation.He decides that his best bet is to sue the issuer in federal court under Section 12 of the 1933 Act alleging that the securities he purchased were offered without an effective registration statement and by mean dos a noncomplying prospectus.He consults,Benny,a recent law school graduate who just passed the bar,regarding his plan.Benny really needs to make some money and is considering filing a lawsuit for Rodney.Benny figures that if the plan does not work,he can always just drop the lawsuit. -Refer to fact pattern 22-1.Should Benny have any concerns personally regarding institution of the litigation?

A "red herring" is the popular name given to the final prospectus under the 1933 Act.

The defenses of due diligence under Section 11 of the Securities Act of 1933 is not available to the issuing company.

If an issuer makes successive sales within a limited period of time,the SEC may ________ the successive sales,resulting in the loss of a private-offering exemption.