Exam 23: Securities Fraud and insider trading

Section 16(b)of the 1934 Act governs ________ by officers,directors,and greater-than-10% shareholders of equity securities of a public company.

A person may be liable under Section 16(b)of the 1934 Act if he or she was an officer or director at the time of

The requirement that the defendant in a 10b-5 action have used interstate commerce,the mails,or a national securities exchange gives Congress the power to regulate the defendant's conduct under ________.

The safe harbor provision applies to forward-looking statements in connection with an initial public offering.

Section 16(a)of the 1934 Act requires that officers,directors,and greater-than-10 percent shareholders of companies that have registered any class of equity securities under the 1934 Act file ________ reports with the SEC.

Under the bespeaks caution doctrine,a court may determine that the inclusion of sufficient ________ in a document renders immaterial any misrepresentation or omission contained therein.

Section 10(b)of the 1934 Act regulates only the purchase and sale of registered securities.

Fact pattern 23-1 Trudy was hired by Food Corporation to handle a products liability lawsuit brought against it alleging that it distributed dangerous dog biscuits.Trudy's investigation has brought to light facts establishing that the biscuits were not defective and that the problem actually law with improper retention policies of retailers.Trudy is aware that this information will result in the stock of Food Corporation increasing dramatically.Trudy immediately buys shares of Food Corporation and tells her fiancé,Frank,about the expected increase as well.Trudy tells Frank because she wants to borrow money from him for the trade and also because she believes that his investment will enable them to take a nicer honeymoon.Trudy's suspicions come true.The lawsuit is dismissed,the stock increases dramatically,and she and Frank go on a great honeymoon.The day after they return,an investigator from U.S.Attorney's Office interviews her regarding her trades and those of Frank. -Refer to fact pattern 23-1.Is there a basis upon which to hold Trudy liable for a securities violation for disclosure of the information regarding the likely dismissal of the lawsuit?

Insider trading rules apply to

Under Rule 10b-5,any use of the mails is sufficient to satisfy the interstate commerce condition even if the mail does not leave the state.

Under the Securities Fraud Enforcement Act,when may a brokerage house be fined?

Under the Sarbanes-Oxley Act of 2002,it is a misdemeanor to knowingly execute a scheme to defraud any person in connection with any security of a publicly traded company.

Fact pattern 23-1 Trudy was hired by Food Corporation to handle a products liability lawsuit brought against it alleging that it distributed dangerous dog biscuits.Trudy's investigation has brought to light facts establishing that the biscuits were not defective and that the problem actually law with improper retention policies of retailers.Trudy is aware that this information will result in the stock of Food Corporation increasing dramatically.Trudy immediately buys shares of Food Corporation and tells her fiancé,Frank,about the expected increase as well.Trudy tells Frank because she wants to borrow money from him for the trade and also because she believes that his investment will enable them to take a nicer honeymoon.Trudy's suspicions come true.The lawsuit is dismissed,the stock increases dramatically,and she and Frank go on a great honeymoon.The day after they return,an investigator from U.S.Attorney's Office interviews her regarding her trades and those of Frank. -Refer to fact pattern 23-1.Is there a basis upon which to hold Frank liable for a securities violation based upon his receipt of the information?

Temporary insiders are persons not directly employed by the corporation,but who acquire confidential information through the performance of professional services.

Sampson works as an accountant for ABC Accounting and was auditing XYZ Company.Delilah,the president of XYZ Company,told Sampson that she really needed to keep her job and that if the true condition of the company were exposed,she would certainly be fired.She tells Barry that she is sure she can turn things around if he will only look help her our in the audit report.Sampson,who was infatuated with Delilah,agreed to include inaccurate umbers in the company's audit report which would be included in the company's annual report on Form10-K filed with the SEC.Unfortunately,Delilah was not able to turn the company's performance around,and it went into bankruptcy later that year.Sampson becomes aware that an investigation is being conducted.Which of the following is true regarding his potential liability?

Which of the following is not a part of the safe harbor provision for forward-looking statements under the 1934 Act?

The materiality of a misstatement or omission under Rule 10b-5 is judged at the time

Which of the following is not a requirement for a Rule 10b-5 violation?