Question 1

How does a company sell its shares to the public for the first time? Explain the contents of a registration statement.

Accepted Answer

The issuance of securities by an issuer is called an initial public offering (IPO).A business or party selling securities to the public is called an issuer.An issuer may be a new company that is selling securities to the public for the first time.This is referred to as "going public." Or the issuer may be an established company that sells a new security to the public.Many issuers of securities employ investment bankers, which are independent securities companies, to sell their securities to the public.A registration statement must contain descriptions of (a)the securities being offered for sale; (b)the registrant's business; (c)the management of the registrant, including compensation, stock options and benefits, and material transactions with the registrant; (d)pending litigation; (e)how the proceeds from the offering will be used; (f)government regulation; (g)the degree of competition in the industry; and (h)any special risk factors.

Question 2

The ________ is a federal statute that primarily regulates the issue of securities by companies and other businesses.

Accepted Answer

A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Sarbanes-Oxley Act of 2002 
D) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 
A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Sarbanes-Oxley Act of 2002 
D) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 A

Question 3

An accredited investor is defined as a person who does not understand the risks involved in securities investment and will suffer considerable financial damage if the investment fails.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following has the largest trading volume of any securities exchange in the world?

Accepted Answer

A) NYSE 
B) Euronext 
C) NASDAQ 
D) London Stock Exchange 
A) NYSE 
B) Euronext 
C) NASDAQ 
D) London Stock Exchange

Question 5

An investment contract is a flexible standard for defining a security.

Accepted Answer

A) True 
 B)False

Question 6

An offering circular must be provided to the investors immediately after the purchase of a Regulation A offering.

Accepted Answer

A) True 
 B)False

Question 7

Liability under Section 11 is imposed on issuers who are negligent in not discovering fraud in their security offerings.

Accepted Answer

A) True 
 B)False

Question 8

According to Regulation A, securities of up to $5 million can only be sold to accredited investors.

Accepted Answer

A) True 
 B)False

Question 9

A 10-percent shareholder of an equity security of a reporting company is considered a statutory insider.

Accepted Answer

A) True 
 B)False

Question 10

Regulation A offerings can be sold without registration with the SEC provided that an offering statement is provided prior to the purchase of the securities.

Accepted Answer

A) True 
 B)False

Question 11

The SEC is concerned with regulating issues and trading of securities alone and cannot regulate the activities of securities brokers and advisors.

Accepted Answer

A) True 
 B)False

Question 12

A(n)________ refers to a document that an issuer of securities files with the SEC that contains required information about the issuer, the securities to be issued, and other relevant information.

Accepted Answer

A) articles of organization 
B) operating statement 
C) registration statement 
D) certificate of interest 
A) articles of organization 
B) operating statement 
C) registration statement 
D) certificate of interest

Question 13

Continuous reporting to investors and the SEC is a requirement imposed by the Securities Act of 1933.

Accepted Answer

A) True 
 B)False

Question 14

________ requires securities offered to the public through the use of the mails or any facility of interstate commerce to be registered with the SEC by means of a registration statement and an accompanying prospectus.

Accepted Answer

A) Section 24 of the Securities Act of 1933 
B) Section 12 of the Securities Act of 1933 
C) Section 5 of the Securities Act of 1933 
D) SEC Rule 506 
A) Section 24 of the Securities Act of 1933 
B) Section 12 of the Securities Act of 1933 
C) Section 5 of the Securities Act of 1933 
D) SEC Rule 506

Question 15

SEC Rule 506 is known as the ________.

Accepted Answer

A) nonissuer exemption 
B) intrastate offering exemption 
C) private placement exemption 
D) interstate offering exemption 
A) nonissuer exemption 
B) intrastate offering exemption 
C) private placement exemption 
D) interstate offering exemption

Question 16

The courts apply the ________ in determining whether an arrangement is an investment contract.

Accepted Answer

A) Howey test 
B) misappropriation theory 
C) strict scrutiny test 
D) intermediate test 
A) Howey test 
B) misappropriation theory 
C) strict scrutiny test 
D) intermediate test

Question 17

The ________ imposes liability under Section 10(b)and Rule 10b-5 on an outsider who misappropriates information about a company, in violation of his or her fiduciary duty, and then trades in the securities of that company.

Accepted Answer

A) Insider Trading Sanctions Act 
B) Sarbanes-Oxley Act 
C) tort of appropriation 
D) misappropriation theory 
A) Insider Trading Sanctions Act 
B) Sarbanes-Oxley Act 
C) tort of appropriation 
D) misappropriation theory

Question 18

A(n)________ is an exemption from registration that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.

Accepted Answer

A) intrastate offering exemption 
B) regulation A offering 
C) private placement exemption 
D) nonissuer exemption 
A) intrastate offering exemption 
B) regulation A offering 
C) private placement exemption 
D) nonissuer exemption

Question 19

Which of the following best defines an initial public offering?

Accepted Answer

A) the issuance of an offering statement to the public prior to purchase 
B) the filing of a registration statement by an issuer 
C) the disclosure document released for public scrutiny 
D) the sale of securities by an issuer to the public 
A) the issuance of an offering statement to the public prior to purchase 
B) the filing of a registration statement by an issuer 
C) the disclosure document released for public scrutiny 
D) the sale of securities by an issuer to the public

Question 20

The nonissuer exemption permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.

Accepted Answer

A) True 
 B)False

Exam 41: Investor Protection, E-Securities, and Wall Street Reform

How does a company sell its shares to the public for the first time? Explain the contents of a registration statement.

The ________ is a federal statute that primarily regulates the issue of securities by companies and other businesses.

An accredited investor is defined as a person who does not understand the risks involved in securities investment and will suffer considerable financial damage if the investment fails.

Which of the following has the largest trading volume of any securities exchange in the world?

An investment contract is a flexible standard for defining a security.

An offering circular must be provided to the investors immediately after the purchase of a Regulation A offering.

Liability under Section 11 is imposed on issuers who are negligent in not discovering fraud in their security offerings.

According to Regulation A, securities of up to $5 million can only be sold to accredited investors.

A 10-percent shareholder of an equity security of a reporting company is considered a statutory insider.

Regulation A offerings can be sold without registration with the SEC provided that an offering statement is provided prior to the purchase of the securities.

The SEC is concerned with regulating issues and trading of securities alone and cannot regulate the activities of securities brokers and advisors.

A(n)________ refers to a document that an issuer of securities files with the SEC that contains required information about the issuer, the securities to be issued, and other relevant information.

Continuous reporting to investors and the SEC is a requirement imposed by the Securities Act of 1933.

________ requires securities offered to the public through the use of the mails or any facility of interstate commerce to be registered with the SEC by means of a registration statement and an accompanying prospectus.

SEC Rule 506 is known as the ________.

The courts apply the ________ in determining whether an arrangement is an investment contract.

The ________ imposes liability under Section 10(b)and Rule 10b-5 on an outsider who misappropriates information about a company, in violation of his or her fiduciary duty, and then trades in the securities of that company.

A(n)________ is an exemption from registration that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.

Which of the following best defines an initial public offering?

The nonissuer exemption permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.

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Nature of Traditional and E-Contracts

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Consideration and Promissory Estoppel

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Third-Party Rights and Discharge

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E-Commerce and Digital Law

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

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