Exam 23: Securities Fraud and insider trading

Under Section 16(b)pertaining to short-swing profits,a person will be considered a(n)________ of any securities held by his or her immediate family or any other relative living in his or her household.

When can a securities fraud claim be used as a predicate act in a civil case under the Racketeer Influenced and Corrupt Organizations Act (RICO)?

Which of the following is true regarding the state of mind needed in order to find a violation of Section 16(b)involving short-swing trading?

More suits are brought under Section 16(b)of the 1934 Act than under any other provision of that statute.

Which of the following is true regarding bounties in insider trading prosecutions?

A prediction will not be treated as a misstatement under Rule 10b-5 when

Scienter requires more than mere negligence or lack of due care.

Before signing a written consent allowing their audited report to be included in a registration statement,accountants should do a(n)________.

List the seven elements of a Rule 10b-5 cause of action.

Who can bring a suit for aiding and abetting under Section 10(b)? What must be proven?

Susan,an accountant,prepared an audit report for a company that wishes to include the report in a registration statement.What must Susan do before the company can do so? What should Susan do to help protect herself against liability?

If an insider resigns before trading,he or she cannot be held liable for improper insider trading.

Which of the following statements,if reasonably calculated to influence the investing public,could result in liability under Rule 10b-5?

Secondary actors (such as an accountant,lawyer,or bank)can be held liable in private suits alleging violations of Section 10(b)if their conduct satisfies the requirements for primary liability.

Under the efficient market theory,in an open and developed securities market,the market price of a company's stock equals its true value.

In order to be actionable under Rule 10b-5,the misstatements or omissions must be made with

A controlling shareholder is traditionally considered an insider.

In the case of a(n)________,the U.S.Supreme Court has ruled that the reliance will be presumed under Rule 10b-5 if the fact was material.

Drug Company X reports the introduction of a new pill that is guaranteed to cause weight loss with no side effects.Later,it becomes apparent through additional testing that unfortunately the new pill also results in premature hair loss,a material issue.Monika is the president of Company X and is very pleased with sales of the drug.She recognizes that she can no longer advertise the drug as having no side effects but she does not believe she has made any misrepresentations because she was not aware of the hair loss side effect when previous statements were made.She decides to do nothing.Has she made the correct decision as far as Rule 10b-5 is concerned?

A misstatement under Rule 10b-5 is defined as a misrepresentation of