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

Insider trading occurs when a company employee or company advisor uses material,nonpublic information to make a profit by trading in the securities of the company.

"Regulation A" permits issuers to sell up to $5 million of securities during a twelve-month period,pursuant to a simplified registration process.

The ________ primarily regulates the issue of securities by companies and other businesses.

Contracts to purchase and sell securities are completed during the "post-effective" period.

Karl is the vice president of a medium-size corporation that operates retail sporting goods stores in seven states.Karl has considerable stock that he purchased and received over the years while working there.Karl has purchased no stock for the last three years,because all his excess funds have gone for college expenses for his oldest son.Karl's daughter will begin college in the fall,and Karl needs to sell some stock.Karl knows that one of the retail locations where the corporation owns the real estate was once used as a toxic dump.The corporation is legally obligated to clean up this site,and the costs will have a material effect on the corporation's net income for several years.This information is not yet public.Karl can:

A "whistleblower bounty program" allows persons who provide information that leads to a successful SEC action to recover ten (10)percent to thirty (30)percent of the monetary sanctions over $1 million recovered by the SEC.

Private parties who have been injured by certain securities violations may bring a civil action against the violator under Section 12 of the Securities Act of 1933.

The common defense available in a "Section 11" action under the Securities Act of 1933 is:

Courts have implied a private right of action for violation of Section 10(b)and Rule 10b-5.

Securities issued by non-profit issuers are exempt from registration with the SEC.

Securities issued by any government in the United States are exempt from registration with the SEC.

Derek,Alex and Jorge each own stock in Roundball,Inc.Derek is the chief executive officer,Alex is a fifteen-percent shareholder,and Jorge owns one hundred shares,which is less than one percent of the company's outstanding stock.During the first quarter of 2008,each of the three have bought and sold various numbers of shares in Roundball,and each has realized a significant profit.None of the three have used insider information when making any of their transactions.Has a violation of the 1934 Securities Exchange Act occurred,and if so,by whom?

Section 16(a)of the Securities Exchange Act of 1934 defines any person who is an executive officer,a director,or a 10-percent shareholder of an equity security of a reporting company as a "statutory insider" for Section 16 purposes.

A registration statement must be accompanied by financial statements certified by public accountants.

The courts apply the Dewey test in determining whether an arrangement is an investment contract and therefore a security.

The Securities Exchange Act of 1934 covers the following except:

The ________ Act of 2002 was enacted by the United States Congress to bring more transparency to securities markets and to eliminate conflicts of interests that previously existed in the securities industry.

The federal and state governments have enacted statutes that regulate the issuance and trading of securities.

The Sarbanes-Oxley Act of 2002 was enacted by the United States Congress to bring more transparency to securities markets and to eliminate conflicts of interests that previously existed in the securities industry.