Question 1

State securities laws apply mainly to intrastate transactions.

Accepted Answer

A) True 
 B)False

Question 2

Anyone who has access to or receives inside information of a nonpublic nature and trades on it for personal gain can be liable under SEC Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 3

Fabrication Corporation is a public company whose shares are traded in the public securities markets.Under the Securities Act of 1933,Fabrication is required to

Accepted Answer

A)  contribute to the operations of national security exchanges. 
B)  disclose all essential information about the issuance of its securities. 
C)  engage in market surveillance to deter undesirable practices. 
D)  meet investors' reasonable expectations to make a profit. 
A)  contribute to the operations of national security exchanges. 
B)  disclose all essential information about the issuance of its securities. 
C)  engage in market surveillance to deter undesirable practices. 
D)  meet investors' reasonable expectations to make a profit.

Question 4

The Securities Exchange Act of 1934 applies to all cases involving the trading of securities,except in private transactions.

Accepted Answer

A) True 
 B)False

Question 5

United Delivery Corporation is a public company whose shares are traded in the public securities markets.Under the Securities Act of 1933,United Delivery is required to

Accepted Answer

A)  buy or sell its securities only on a national security exchange. 
B)  register its securities transactions unless they qualify for an exemption. 
C)  invest its own managerial or entrepreneurial efforts. 
D)  issue instruments representing corporate ownership or debt. 
A)  buy or sell its securities only on a national security exchange. 
B)  register its securities transactions unless they qualify for an exemption. 
C)  invest its own managerial or entrepreneurial efforts. 
D)  issue instruments representing corporate ownership or debt.

Question 6

Furnaces & Filters Inc.is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,to ensure that the firm's financial results are accurate and timely,its senior officers must set up and maintain

Accepted Answer

A)  internal "disclosure controls and procedures." 
B)  external "release and reveal timetables." 
C)  personal "peruse and review liability policies." 
D)  public "information and discussion forums." 
A)  internal "disclosure controls and procedures." 
B)  external "release and reveal timetables." 
C)  personal "peruse and review liability policies." 
D)  public "information and discussion forums."

Question 7

Jazz Inc.makes and markets music.The company wants to make an initial public offering of securities via the Internet.Most likely,this offering

Accepted Answer

A)  can avoid high costs and complicated procedures. 
B)  is an attempt to deceive and manipulate investors. 
C)  is a way for investors to fairly break the rules. 
D)  will result in higher expenses and extended oversight. 
A)  can avoid high costs and complicated procedures. 
B)  is an attempt to deceive and manipulate investors. 
C)  is a way for investors to fairly break the rules. 
D)  will result in higher expenses and extended oversight.

Question 8

A Ponzi scheme is a fraudulent investment that pays returns from new capital invested with the fraudsters instead of from a legitimate investment.

Accepted Answer

A) True 
 B)False

Question 9

The key to liability under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether information omitted or misrepresented in connection with the purchase or sale of a security is material.

Accepted Answer

A) True 
 B)False

Question 10

Federal securities laws take priority over state securities laws.

Accepted Answer

A) True 
 B)False

Question 11

Under the Sarbanes-Oxley Act of 2002,chief financial officers must certify the accuracy of information in corporate financial statements.

Accepted Answer

A) True 
 B)False

Question 12

Cam,an accountant for Discount Inc. ,learns that the company's soon-to-be-announced quarterly sales figures exceed analysts' expectations.Cam tells Ed,who tells Frye,who buys 100 shares of the company's stock.Frye knows that Ed got the information from Cam.When Discount publicly announces the figures,Frye sells the stock for a profit.Under the Securities Exchange Act of 1934,Ed is most likely

Accepted Answer

A)  liable for insider trading. 
B)  not liable because Ed did not prevent others from profiting. 
C)  not liable because Ed did not misappropriate any information. 
D)  not liable because Ed does not work for Discount. 
A)  liable for insider trading. 
B)  not liable because Ed did not prevent others from profiting. 
C)  not liable because Ed did not misappropriate any information. 
D)  not liable because Ed does not work for Discount.

Question 13

Ewan,the chief executive officer of Furniture Inc. ,intentionally understates the amount of the firm's debts in information provided to investors as part of an issue of stock.Gary buys the stock and suffers a loss.Ewan may be subject to

Accepted Answer

A)  government prosecution and a private investor's suit. 
B)  negative publicity but no criminal prosecution or civil suit. 
C)  only government prosecution. 
D)  only a private investor's suit. 
A)  government prosecution and a private investor's suit. 
B)  negative publicity but no criminal prosecution or civil suit. 
C)  only government prosecution. 
D)  only a private investor's suit.

Question 14

Securities must be registered under the Securities Act of 1933 for the Securities Exchange Act of 1934 to apply.

Accepted Answer

A) True 
 B)False

Question 15

Reno,an engineer for Shale Corporation,learns that the firm will increase the dividend it pays to shareholders.Reno buys 10,000 shares of company stock.When the dividend is announced to the public and the price of the stock increases,he sells the shares for a profit.He would not be liable for insider trading if the information about the dividend was

Accepted Answer

A)  material when he sold the stock. 
B)  available to the public after he bought the stock. 
C)  available to the public before he bought the stock. 
D)  forward-looking when he bought the stock. 
A)  material when he sold the stock. 
B)  available to the public after he bought the stock. 
C)  available to the public before he bought the stock. 
D)  forward-looking when he bought the stock.

Question 16

While the Securities and Exchange Commission reviews a registration statement for completeness,most issuers can distribute a free-writing prospectus.

Accepted Answer

A) True 
 B)False

Question 17

The definition of security in the Securities Act of 1933 includes interests that involve the right to buy a security on a national security exchange.

Accepted Answer

A) True 
 B)False

Question 18

Spectrum Paints Inc.is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,the firm is subject to the direct corporate governance requirements of

Accepted Answer

A)  any other public company with which the firm exchanges shares. 
B)  any state in which the firm does business. 
C)  the federal government. 
D)  the state in which the firm incorporated. 
A)  any other public company with which the firm exchanges shares. 
B)  any state in which the firm does business. 
C)  the federal government. 
D)  the state in which the firm incorporated.

Question 19

Equity Corporation,and its officers,directors,employees,and shareholders,buy and sell securities.Section 10(b)of the Securities Exchange Act of 1934 applies to the trading of securities

Accepted Answer

A)  only by investment companies on organized exchanges. 
B)  only involving short-swing profits obtained in over-the-counter markets. 
C)  only involving tippers and tippees in private transactions. 
D)  in almost any circumstances. 
A)  only by investment companies on organized exchanges. 
B)  only involving short-swing profits obtained in over-the-counter markets. 
C)  only involving tippers and tippees in private transactions. 
D)  in almost any circumstances.

Question 20

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934.Section 14(a)of the act regulates

Accepted Answer

A)  the declaration of dividends by the firm's board of directors. 
B)  the later re-registration of the firm's securities. 
C)  the short-swing activities of the firm's insiders. 
D)  the solicitation of proxies from the firm's shareholders. 
A)  the declaration of dividends by the firm's board of directors. 
B)  the later re-registration of the firm's securities. 
C)  the short-swing activities of the firm's insiders. 
D)  the solicitation of proxies from the firm's shareholders.

Exam 19: Investor Protection and Corporate Governance

State securities laws apply mainly to intrastate transactions.

Anyone who has access to or receives inside information of a nonpublic nature and trades on it for personal gain can be liable under SEC Rule 10b-5.

Fabrication Corporation is a public company whose shares are traded in the public securities markets.Under the Securities Act of 1933,Fabrication is required to

The Securities Exchange Act of 1934 applies to all cases involving the trading of securities,except in private transactions.

United Delivery Corporation is a public company whose shares are traded in the public securities markets.Under the Securities Act of 1933,United Delivery is required to

Furnaces & Filters Inc.is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,to ensure that the firm's financial results are accurate and timely,its senior officers must set up and maintain

Jazz Inc.makes and markets music.The company wants to make an initial public offering of securities via the Internet.Most likely,this offering

A Ponzi scheme is a fraudulent investment that pays returns from new capital invested with the fraudsters instead of from a legitimate investment.

The key to liability under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether information omitted or misrepresented in connection with the purchase or sale of a security is material.

Federal securities laws take priority over state securities laws.

Under the Sarbanes-Oxley Act of 2002,chief financial officers must certify the accuracy of information in corporate financial statements.

Ewan,the chief executive officer of Furniture Inc. ,intentionally understates the amount of the firm's debts in information provided to investors as part of an issue of stock.Gary buys the stock and suffers a loss.Ewan may be subject to

Securities must be registered under the Securities Act of 1933 for the Securities Exchange Act of 1934 to apply.

While the Securities and Exchange Commission reviews a registration statement for completeness,most issuers can distribute a free-writing prospectus.

The definition of security in the Securities Act of 1933 includes interests that involve the right to buy a security on a national security exchange.

Spectrum Paints Inc.is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,the firm is subject to the direct corporate governance requirements of

Equity Corporation,and its officers,directors,employees,and shareholders,buy and sell securities.Section 10(b)of the Securities Exchange Act of 1934 applies to the trading of securities

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934.Section 14(a)of the act regulates

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