Question 1

Criminal penalties may be imposed for a violation of the Securities Act of 1933.

Accepted Answer

A) True 
 B)False

Question 2

Section 11 of the 1933 Act provides for criminal liability for damages when a registration statement on its effective date misstates or omits a material fact.

Accepted Answer

A) True 
 B)False

Question 3

In connection with an issuance of securities,which of the following would amount to "conditioning" the market?

Accepted Answer

A)  issuing press releases about normally newsworthy events 
B)  analyzing the overall stock market in order to determine the price at which to issue securities 
C)  distributing a preliminary prospectus 
D)  issuing press releases that praise the backgrounds, accomplishments and future promise of key individuals in the company 
E)  placing "tombstone ads" in financial publications 
A)  issuing press releases about normally newsworthy events 
B)  analyzing the overall stock market in order to determine the price at which to issue securities 
C)  distributing a preliminary prospectus 
D)  issuing press releases that praise the backgrounds, accomplishments and future promise of key individuals in the company 
E)  placing "tombstone ads" in financial publications

Question 4

An insider is liable for "short-swing" profits,even if he/she has not used inside information.

Accepted Answer

A) True 
 B)False

Question 5

Bluegrass,Incorporated does ninety-five percent of its business in the state of Kentucky,and substantially all of its assets are located in Kentucky.Bluegrass plans to issue $5,000,000 in new stock,and use the proceeds exclusively in Kentucky.Bluegrass has ten accredited potential investors,nine of whom live in Kentucky,and one who lives in Ohio.Can Bluegrass qualify for a "private placement" exemption or an "intrastate offering" exemption under the Securities Act of 1933?

Accepted Answer

Bluegrass can qualify for a private plac

Question 6

Which of the following is true about Rule 16(a)of the Securities Exchange Act of 1934 regarding short-swing profits?

Accepted Answer

A)  It applies only to officers and directors of the corporation. 
B)  It provides for recovery from a statutory insider by the other party to the transaction. 
C)  It covers any trades occurring within one year of each other. 
D)  It provides that any profits made by a statutory insider on trades occurring within six months of each other belong to the corporation. 
E)  It provides that any profits made by a statutory insider on trades occurring within six months of each other belong to the corporation, but only if insider information was used to generate the profits. 
A)  It applies only to officers and directors of the corporation. 
B)  It provides for recovery from a statutory insider by the other party to the transaction. 
C)  It covers any trades occurring within one year of each other. 
D)  It provides that any profits made by a statutory insider on trades occurring within six months of each other belong to the corporation. 
E)  It provides that any profits made by a statutory insider on trades occurring within six months of each other belong to the corporation, but only if insider information was used to generate the profits.

Question 7

Under the ________,an arrangement is considered an investment contract if there is an investment of money by an investor in a common enterprise and the investor expects to make profits based on the sole or substantial efforts of the promoter or others.

Accepted Answer

A)  Howe 
B)  Lowe 
C)  Dewey 
D)  Howey 
E)  Cheatham 
A)  Howe 
B)  Lowe 
C)  Dewey 
D)  Howey 
E)  Cheatham

Question 8

All of the information in the prospectus must be printed in all-capital letters,and in boldface type.

Accepted Answer

A) True 
 B)False

Question 9

Pre-organization subscription agreements,interests in oil,gas,and mineral rights,and deposit receipts for foreign securities are examples of ________.

Accepted Answer

A)  common securities 
B)  preferred securities 
C)  statutorily-defined securities 
D)  investment contracts 
E)  warrants 
A)  common securities 
B)  preferred securities 
C)  statutorily-defined securities 
D)  investment contracts 
E)  warrants

Question 10

The Federal Trade Commission (FTC)regulates the activities of securities brokers and advisors,and this regulation includes registering brokers and advisors and taking enforcement action against those who violate securities laws.

Accepted Answer

A) True 
 B)False

Question 11

The prospectus provides expert analysis,from a duly-appointed representative of the Securities and Exchange Commission,of a particular security's potential for future value and growth.

Accepted Answer

A) True 
 B)False

Question 12

One of the major responsibilities of the Securities and Exchange Commission is to investigate securities so that it can issue ratings on the quality and level of risk of investing in particular securities.

Accepted Answer

A) True 
 B)False

Question 13

When does the "post-effective" period begin and end?

Accepted Answer

A)  It begins when the registration statement becomes effective, and runs until the issuer either sells all of the offered securities or withdraws them from sale. 
B)  It begins when the registration statement becomes effective, and runs until the issuer sells all of the offered securities. 
C)  It begins when the registration statement becomes effective, and runs until the issuer withdraws the offered securities from sale. 
D)  It begins forty-five days after the registration statement is filed, and runs until the issuer either sells all of the offered securities or withdraws them from sale. 
E)  It begins sixty days after the registration statement is filed, and runs until the issuer sells all of the offered securities. 
A)  It begins when the registration statement becomes effective, and runs until the issuer either sells all of the offered securities or withdraws them from sale. 
B)  It begins when the registration statement becomes effective, and runs until the issuer sells all of the offered securities. 
C)  It begins when the registration statement becomes effective, and runs until the issuer withdraws the offered securities from sale. 
D)  It begins forty-five days after the registration statement is filed, and runs until the issuer either sells all of the offered securities or withdraws them from sale. 
E)  It begins sixty days after the registration statement is filed, and runs until the issuer sells all of the offered securities.

Question 14

Which of the following is false regarding the Small Corporate Offering Registration Form?

Accepted Answer

A)  The Securities and Exchange Commission amended Regulation A by adopting the Small Corporate Offering Registration Form. 
B)  The Small Corporate Offering Form is a "question-and-answer" disclosure form that small businesses can complete and file with the Securities and Exchange Commission if they plan on raising $1 million or less from the public issuance of securities. 
C)  The questions on the Small Corporate Offering Registration Form constitute the offering circular that must be given to prospective investors. 
D)  The Small Corporate Offering Form questions require the issuer to develop a business plan that states specific company goals, and how it plans to reach them. 
E)  The Small Corporate Offering Form is available to both domestic and international businesses. 
A)  The Securities and Exchange Commission amended Regulation A by adopting the Small Corporate Offering Registration Form. 
B)  The Small Corporate Offering Form is a "question-and-answer" disclosure form that small businesses can complete and file with the Securities and Exchange Commission if they plan on raising $1 million or less from the public issuance of securities. 
C)  The questions on the Small Corporate Offering Registration Form constitute the offering circular that must be given to prospective investors. 
D)  The Small Corporate Offering Form questions require the issuer to develop a business plan that states specific company goals, and how it plans to reach them. 
E)  The Small Corporate Offering Form is available to both domestic and international businesses.

Question 15

Under the "private placement" exception to the registration of securities,the limitation on the number of investors applies to non-accredited,but not accredited,investors.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is false regarding the intrastate offerings exemption?

Accepted Answer

A)  The issuer must be a resident of the state for which the exemption is claimed. 
B)  The purchasers of the securities may be residents of any state. 
C)  There is no limit on the dollar amount of capital that can be raised pursuant to an intrastate offering exemption. 
D)  The issuer must be doing business in the state for which the exemption is claimed. 
E)  Eighty percent of the issuer's assets must be located in the state for which the exemption is claimed. 
A)  The issuer must be a resident of the state for which the exemption is claimed. 
B)  The purchasers of the securities may be residents of any state. 
C)  There is no limit on the dollar amount of capital that can be raised pursuant to an intrastate offering exemption. 
D)  The issuer must be doing business in the state for which the exemption is claimed. 
E)  Eighty percent of the issuer's assets must be located in the state for which the exemption is claimed.

Question 17

The ________ was enacted to prevent fraud in the subsequent trading of securities.This act has been applied to prohibit insider trading and other frauds in the purchase and sale of securities in the after-markets,such as trading on securities exchanges.

Accepted Answer

A)  Securities Act of 1933 
B)  Securities Act of 1934 
C)  Securities Exchange Act of 1933 
D)  Securities Exchange Act of 1934 
E)  Securities Exchange Act of 1935 
A)  Securities Act of 1933 
B)  Securities Act of 1934 
C)  Securities Exchange Act of 1933 
D)  Securities Exchange Act of 1934 
E)  Securities Exchange Act of 1935

Question 18

Insurance and annuity contracts issued by insurance companies are exempt from registration with the SEC.

Accepted Answer

A) True 
 B)False

Question 19

Under the "due diligence" defense to a Section 11 action under the Securities Act of 1933:

Accepted Answer

A)  only the issuer can assert a due diligence defense. 
B)  any defendant can assert a due diligence defense. 
C)  any defendant except the issuer can assert a due diligence defense. 
D)  the due diligence defense must be either asserted together, by all defendants, or not asserted at all. 
E)  assertion of the defense will effectively eliminate the defendant's criminal liability. 
A)  only the issuer can assert a due diligence defense. 
B)  any defendant can assert a due diligence defense. 
C)  any defendant except the issuer can assert a due diligence defense. 
D)  the due diligence defense must be either asserted together, by all defendants, or not asserted at all. 
E)  assertion of the defense will effectively eliminate the defendant's criminal liability.

Question 20

________ has the largest trading volume of any securities exchange in the world.

Accepted Answer

A)  The New York Stock Exchange 
B)  The Chicago Board of Exchange 
C)  The Philadelphia Board of Exchange 
D)  NASDAQ 
E)  ANSQAD 
A)  The New York Stock Exchange 
B)  The Chicago Board of Exchange 
C)  The Philadelphia Board of Exchange 
D)  NASDAQ 
E)  ANSQAD

Exam 32: Investor Protection,E-Securities Transactions,and Wall Street Reform

Criminal penalties may be imposed for a violation of the Securities Act of 1933.

Section 11 of the 1933 Act provides for criminal liability for damages when a registration statement on its effective date misstates or omits a material fact.

In connection with an issuance of securities,which of the following would amount to "conditioning" the market?

An insider is liable for "short-swing" profits,even if he/she has not used inside information.

Which of the following is true about Rule 16(a)of the Securities Exchange Act of 1934 regarding short-swing profits?

Under the ________,an arrangement is considered an investment contract if there is an investment of money by an investor in a common enterprise and the investor expects to make profits based on the sole or substantial efforts of the promoter or others.

All of the information in the prospectus must be printed in all-capital letters,and in boldface type.

Pre-organization subscription agreements,interests in oil,gas,and mineral rights,and deposit receipts for foreign securities are examples of ________.

The Federal Trade Commission (FTC)regulates the activities of securities brokers and advisors,and this regulation includes registering brokers and advisors and taking enforcement action against those who violate securities laws.

The prospectus provides expert analysis,from a duly-appointed representative of the Securities and Exchange Commission,of a particular security's potential for future value and growth.

One of the major responsibilities of the Securities and Exchange Commission is to investigate securities so that it can issue ratings on the quality and level of risk of investing in particular securities.

When does the "post-effective" period begin and end?

Which of the following is false regarding the Small Corporate Offering Registration Form?

Under the "private placement" exception to the registration of securities,the limitation on the number of investors applies to non-accredited,but not accredited,investors.

Which of the following is false regarding the intrastate offerings exemption?

The ________ was enacted to prevent fraud in the subsequent trading of securities.This act has been applied to prohibit insider trading and other frauds in the purchase and sale of securities in the after-markets,such as trading on securities exchanges.

Insurance and annuity contracts issued by insurance companies are exempt from registration with the SEC.

Under the "due diligence" defense to a Section 11 action under the Securities Act of 1933:

________ has the largest trading volume of any securities exchange in the world.

Legal Heritage and the Information Age

Constitutional Law for Business and E-Commerce

Courts and Jurisdiction

Judicial, Alternative, Administrative, and E-Dispute Resolution

Torts and Strict Liability

Criminal Law and Cyber Crimes

Intellectual Property and Cyber Piracy

Ethics and Social Responsibility of Business

Nature of Traditional and E-Contracts

Agreement and Consideration

Capacity and Legality

Genuineness of Assent and Statute of Frauds

Third-Party Rights and Discharge

Breach of Contract and Remedies

Digital Law and E-Commerce

Formation of Sales, Lease, and E-Contracts

Performance of Sales, Leases and E-Contracts

Remedies for Breach of Sales and Lease Contracts

Warranties and Product Liability

Creation and Transfer of Negotiable Instruments

Holder in Due Course and Liability of Parties

Banking System, E-Money, and Financial Reform

Credit and Secured Transactions

Bankruptcy and Reorganization

Agency Law

Small Business, Entrepreneurship, and Partnerships

Corporate Formation and Financing

Corporate Governance and Sarbanes-Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Company and Limited Liability Partnership

Franchise and Special Forms of Business

Antitrust Law

Consumer Safety, Consumer Financial Protection, and Environmental Protection

Labor, Worker Protection, Employment, and Immigration Law

Equal Opportunity in Employment

Personal Property, Bailment, and Insurance

Real Property, Landlord-Tenant Law, and Land Use Regulation

Family Law, Wills, and Trusts

Accountants' Liability

International and World Trade Law

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