Exam 41: Investor Protection and Online Securities Transactions

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

A covered issuer need not file a written registration statement,as the SEC does not require any written formalities.

Is liability under Section 11 of the Securities Act of 1933 too broad? Should parties be liable even without scienter? Does the due diligence defense put too much of the burden of proof on defendants?

When selling securities under Regulation A,which of the following is true?

Pyramid sales schemes are not securities for purposes of federal securities law.

The CPA firm of Peterson and Peterson was hired by Hickory Street Corporation to audit its financial statements in connection with its initial public offering in 1998.Since then Peterson and Peterson has been retained to audit the financial statements in connection with the filings required under the Securities Exchange Act of 1934.In 2006,Peterson and Peterson discovered that all the financial statements audited in 2003,2004,and 2005 contained material misstatements.Peterson and Peterson negligently performed all of these audits,but did not know of the misstatements.Which is true about Peterson and Peterson's liability under Section 11 of the Securities Act of 1933 and under Rule 10b-5 of the Securities Exchange of 1934?

What does Regulation A under the Securities Act of 1933 provide?

What actions can the SEC take against a violator of the Securities Exchange Act of 1934?

Anyone who willfully violates the Securities Act of 1933 may be fined as well as imprisoned.

Smith and Company,CPAs,performed the audit work for a large corporation in connection with its registration statement.Smith and Company performed the work according to all appropriate professional standards,but the corporation had cleverly made the inventory look much greater than it actually was.Because the company did not have as much inventory as was indicated on the financial statements,the company was worth much less than it appeared to be.Smith and Company has been named in a lawsuit under Section 11 of the Securities Act of 1933.Even though Smith and Company properly performed the audit,and the fraud on the part of the corporation was such that it would not be uncovered by an audit,Smith and Company cannot prove any of this in court because all of its audit working papers and computer documentation was accidentally shredded.Discuss Smith and Company's legal situation.

The SEC issues ratings on the estimated risk of investing in a particular security.

Generally,unless the SEC objects,a registration statement does not become effective until 20 days after it is filed.

An issuer can qualify for an intrastate offerings exemption in only one state.

Is there a private right of action under Section 10b-5 of the Securities Exchange Act of 1934?

Walter was the president of JKL,Inc.JKL intended to purchase Target Co.JKL's intent was not public information,and when it became public,Target's stock would increase significantly in value.Walter bought no stock himself,but told his best friend of JKL's plan,and his friend bought 1,000 shares of Target Co.Ten months later,when the merger was publicly announced,the friend sold Target's stock and made a large profit.Several stockholders of Target sue Walter and his friend under the provisions of the Securities Acts.What results?

Which of the following is not an accredited investor for purposes of the private placement exemption under the Securities Act of 1933?

Which of the following is true about the 1933 and 1934 securities acts?

Which of the following statements is true about activities allowed in connection with a public offering?

Which of the following is not correct about the intrastate offering exception under the Securities Act of 1933?

What is the significance of the Howey test under federal securities law?