Question 1

Which of the following items is not required to be included in a registration statement?

Accepted Answer

A)  description of the securities 
B)  the price at which the securities will sell 
C)  description of the issuer's business 
D)  description of how the proceeds are to be used 
E)  audited (certified) financial statements 
A)  description of the securities 
B)  the price at which the securities will sell 
C)  description of the issuer's business 
D)  description of how the proceeds are to be used 
E)  audited (certified) financial statements

Question 2

When an insider discloses material insider information to a non-insider tippee,the tipper is liable for:

Accepted Answer

A)  the tipper's own trading only 
B)  the tippee's profits,but not the profits made by any remote tippees 
C)  the profits of both the immediate tippee and the profits of any remote tippees 
D)  the profits of all traders during the period before the information became public 
A)  the tipper's own trading only 
B)  the tippee's profits,but not the profits made by any remote tippees 
C)  the profits of both the immediate tippee and the profits of any remote tippees 
D)  the profits of all traders during the period before the information became public

Question 3

Fred is an officer at Hill Corporation.Fred,with no inside information,sells 100 shares of Hill stock in May at $50,and in July he buys 250 shares at $40.Is Fred liable for short-swing profits?

Accepted Answer

Fred is liable.Any purchase and sale can

Question 4

The private placement exception to registration of securities allows raising an unlimited amount of capital from an unlimited number of accredited investors.

Accepted Answer

A) True 
 B)False

Question 5

An insider is liable for so-called short-swing profits only if she has used inside information.

Accepted Answer

A) True 
 B)False

Question 6

Robert 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.Robert individually bought 1,000 shares of Target Co.Ten months later,when the merger was publicly announced,Robert sold Target's stock and made a large profit.Assuming that Robert is guilty of a violation under the 1934 Securities and Exchange Act,what are the possible consequences?

Accepted Answer

A)  The persons who sold Robert the stock could rescind the sale and recover their stock. 
B)  The persons who sold Robert the stock could sue Robert for damages. 
C)  The government could charge Robert with criminal violations,leading to fines and/or imprisonment. 
D)  A,B,and C 
E)  B and C only 
A)  The persons who sold Robert the stock could rescind the sale and recover their stock. 
B)  The persons who sold Robert the stock could sue Robert for damages. 
C)  The government could charge Robert with criminal violations,leading to fines and/or imprisonment. 
D)  A,B,and C 
E)  B and C only

Question 7

Under the small offering exemption of the Securities Act of 1933,the securities can be sold to only a limited number of unaccredited investors.

Accepted Answer

A) True 
 B)False

Question 8

Who is classified as a statutory insider under Section 16(a)of the Securities Exchange Act of 1934?

Accepted Answer

A)  officers and directors,but only if they own at least 10 percent of the outstanding shares 
B)  all officers and directors 
C)  anyone,such as accountants or lawyers,who has provided services to the corporation 
D)  anyone,whether or not an officer or director,who owns at least 10 percent of the outstanding shares of a corporation 
E)  B and D 
A)  officers and directors,but only if they own at least 10 percent of the outstanding shares 
B)  all officers and directors 
C)  anyone,such as accountants or lawyers,who has provided services to the corporation 
D)  anyone,whether or not an officer or director,who owns at least 10 percent of the outstanding shares of a corporation 
E)  B and D

Question 9

In order for an investment contract to be classified as a security,which of the following is required?

Accepted Answer

A)  an investment of money 
B)  a common enterprise 
C)  the expectation that profit form the enterprise will result from the efforts of others 
D)  A,B,and C 
E)  A and C only 
A)  an investment of money 
B)  a common enterprise 
C)  the expectation that profit form the enterprise will result from the efforts of others 
D)  A,B,and C 
E)  A and C only

Question 10

Negligence causing a material misstatement will subject a party to liability under Rule 10b-5 of the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

Question 11

No more than 35 non-accredited investors may purchase securities pursuant to a private placement exemption.

Accepted Answer

A) True 
 B)False

Question 12

The Securities Exchange Act of 1934 covers the following except:

Accepted Answer

A)  trading of certain securities following their initial issuance 
B)  regulation of securities exchanges 
C)  initial issuances of securities that are exempt under the 1933 Act 
D)  ongoing periodic financial reporting by companies listed on national exchanges 
A)  trading of certain securities following their initial issuance 
B)  regulation of securities exchanges 
C)  initial issuances of securities that are exempt under the 1933 Act 
D)  ongoing periodic financial reporting by companies listed on national exchanges

Question 13

Jill is president of Starship Enterprises,Inc.She bought stock in Starship on January 1,2002,and sold it for a profit on March 1,2002.Jill used no nonpublic information when she bought or sold the stock.Which of the following best describes Jill's situation?

Accepted Answer

A)  Jill has not violated any law. 
B)  Jill has violated the insider trading rules,and the profit belongs to the corporation. 
C)  Jill has violated the short-swing profits rule,and the profit belongs to the corporation. 
D)  Jill has violated the securities registration law. 
E)  both B and C 
A)  Jill has not violated any law. 
B)  Jill has violated the insider trading rules,and the profit belongs to the corporation. 
C)  Jill has violated the short-swing profits rule,and the profit belongs to the corporation. 
D)  Jill has violated the securities registration law. 
E)  both B and C

Question 14

The Howey test is used to determine whether investment contracts are classified as securities for purposes of the federal securities laws.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  the reasonable person defense 
B)  the due diligence defense 
C)  the no injury to plaintiff defense 
D)  the private placement defense 
E)  the de facto compliance defense 
A)  the reasonable person defense 
B)  the due diligence defense 
C)  the no injury to plaintiff defense 
D)  the private placement defense 
E)  the de facto compliance defense

Question 16

Regulation A allows issuers to sell up to $100,000 of securities to the public during a 12-month period.

Accepted Answer

A) True 
 B)False

Question 17

Jones is an appraiser who was hired by Monolith Corporation to appraise a number of its properties in connection with financial statements to be issued in connection with a registration statement.Because Monolith Corporation has a high turnover of investment real estate,Jones was hired again for help in preparing the annual financial statements for each of the next 2 years.It turns out that Jones was negligent in performance of all the appraisals that led to material misstatements on the financial statements of all years concerned.Jones did not know that the appraisals or financial statements were misstated.Discuss Jones' legal situation.

Accepted Answer

Jones would be liable under Section 11 o

Question 18

A company is planning a security offering.To drum up public demand,the corporate officers go on a publicity campaign to tout the prospectus of the company and to publicize the securities issue.Additionally,annual reports are sent to all shareholders.Are these actions permitted?

Accepted Answer

A)  Yes; both actions are permissible. 
B)  The public relations campaign is permissible,but the mailing of annual reports is prohibited. 
C)  The public relations campaign is illegal,but the mailing of the annual reports is permissible. 
D)  No; neither action is permissible. 
A)  Yes; both actions are permissible. 
B)  The public relations campaign is permissible,but the mailing of annual reports is prohibited. 
C)  The public relations campaign is illegal,but the mailing of the annual reports is permissible. 
D)  No; neither action is permissible.

Question 19

A prospectus has no real purpose other than to file a registration with the SEC.

Accepted Answer

A) True 
 B)False

Question 20

An issuer may be a new company selling securities through an initial public offering.

Accepted Answer

A) True 
 B)False

Exam 41: Investor Protection and Online Securities Transactions

Which of the following items is not required to be included in a registration statement?

When an insider discloses material insider information to a non-insider tippee,the tipper is liable for:

Fred is an officer at Hill Corporation.Fred,with no inside information,sells 100 shares of Hill stock in May at $50,and in July he buys 250 shares at $40.Is Fred liable for short-swing profits?

The private placement exception to registration of securities allows raising an unlimited amount of capital from an unlimited number of accredited investors.

An insider is liable for so-called short-swing profits only if she has used inside information.

Under the small offering exemption of the Securities Act of 1933,the securities can be sold to only a limited number of unaccredited investors.

Who is classified as a statutory insider under Section 16(a)of the Securities Exchange Act of 1934?

In order for an investment contract to be classified as a security,which of the following is required?

Negligence causing a material misstatement will subject a party to liability under Rule 10b-5 of the Securities Exchange Act of 1934.

No more than 35 non-accredited investors may purchase securities pursuant to a private placement exemption.

The Securities Exchange Act of 1934 covers the following except:

Jill is president of Starship Enterprises,Inc.She bought stock in Starship on January 1,2002,and sold it for a profit on March 1,2002.Jill used no nonpublic information when she bought or sold the stock.Which of the following best describes Jill's situation?

The Howey test is used to determine whether investment contracts are classified as securities for purposes of the federal securities laws.

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

Regulation A allows issuers to sell up to $100,000 of securities to the public during a 12-month period.

A company is planning a security offering.To drum up public demand,the corporate officers go on a publicity campaign to tout the prospectus of the company and to publicize the securities issue.Additionally,annual reports are sent to all shareholders.Are these actions permitted?

A prospectus has no real purpose other than to file a registration with the SEC.

An issuer may be a new company selling securities through an initial public offering.

Legal Heritage and the Information Age

Court Systems and Jurisdiction

Judicial, Alternative, and Online Dispute Resolution

Constitutional Law for Business and E-Commerce

Intentional Torts and Negligence

Strict Liability and Product Liability

Intellectual Property and Cyber Piracy

Criminal Law and Cyber Crimes

Nature of Traditional and E-Contracts

Agreement

Consideration and Promissory Estoppel

Capacity and Legality

Genuineness of Assent and Undue Influence

Statute of Frauds and Equitable Exceptions

Third-Party Rights and Discharge

Remedies for Breach of Traditional and E-Contracts

Internet Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Sales and Lease Warranties

Creation of Negotiable Instruments

Transferability and Holder In Due Course

Liability,Defenses and Discharge

Checks, the Banking System, and E-Money

Creditor's and Debtor's Rights

Secured Transactions and Electronic Filing

Bankruptcy and Reorganization

Agency Formation and Termination

Liability of Principals, Agents, and Independent Contractors

Employment,Worker Protection,and Immigration Laws

Labor Law and Collective Bargaining

Equal Opportunity in Employment

Small Businesses, Entrepreneurs, and General Partnerships

Limited Partnerships and Limited Liability Limited Partnerships

Corporate Formation and Financing

Corporate Governance and the Sarbanes Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchises and Special Forms of Business

Ethics and Social Responsibility of Business

Administrative Law and Regulatory Agencies

Consumer Protection and Product Safety

Environmental Protection and Global Warming

Antitrust Law and Unfair Trade Practices

Personal Property and Bailment

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Landlord Tenant Law and Land Use Regulation

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