Question 1

The 1934 Act is primarily intended to

Accepted Answer

A) maintain the integrity of the secondary market for securities. 
B) make sure companies who wish to raise money by the sale of securities comply with disclosure requirements for the initial offering. 
C) coordinate federal and state laws with a primary emphasis on allowing the individual states to maintain primary control over securities law. 
D) broaden the SEC's enforcement power. 
A) maintain the integrity of the secondary market for securities. 
B) make sure companies who wish to raise money by the sale of securities comply with disclosure requirements for the initial offering. 
C) coordinate federal and state laws with a primary emphasis on allowing the individual states to maintain primary control over securities law. 
D) broaden the SEC's enforcement power.

Question 2

Which of the following statements is correct?

Accepted Answer

A) Investors generally receive a copy of the registration statement. 
B) Investors generally do not receive the company's prospectus. 
C) A registration statement and a prospectus are essentially the same thing. 
D) All investors must receive a copy of the prospectus before purchasing the stock. 
A) Investors generally receive a copy of the registration statement. 
B) Investors generally do not receive the company's prospectus. 
C) A registration statement and a prospectus are essentially the same thing. 
D) All investors must receive a copy of the prospectus before purchasing the stock.

Question 3

Premier Enterprises sold Watson unregistered stock which was not exempt.The 1933 Act imposes liability on Premier,and Watson can demand rescission if he still owns the stock.

Accepted Answer

A) True 
 B)False

Question 4

A criminal case under the Securities Act of 1933 is prosecuted by

Accepted Answer

A) the SEC. 
B) the Justice Department. 
C) the Department of the Treasury. 
D) the FTC. 
A) the SEC. 
B) the Justice Department. 
C) the Department of the Treasury. 
D) the FTC.

Question 5

Countywide Metals is a small company that incorporates in the state in which it is doing business and plans to offer and sell $100,000 worth of stock only to residents of the county in which it is doing business.Discuss the requirements Countywide must meet for registering its securities.

Accepted Answer

The Securities Act of 1933 requires that

Question 6

Which approach to state regulation of securities requires an issuer to undergo a full-blown registration complete with a merit review?

Accepted Answer

A) Registration by qualification 
B) Registration by notification 
C) Registration by coordination 
D) Registration by merit 
A) Registration by qualification 
B) Registration by notification 
C) Registration by coordination 
D) Registration by merit

Question 7

In determining liability for errors in a registration statement,the plaintiff must prove that there was a misstatement or omission that was important enough to affect the plaintiff's investing decision.In other words,the misstatement or omission needs to be?

Accepted Answer

A) material. 
B) unrefuteable. 
C) accredited. 
D) firm. 
A) material. 
B) unrefuteable. 
C) accredited. 
D) firm.

Question 8

Offerings under Regulation A of the Securities Act of 1933,although called private offerings,are really small public offerings.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following represents a valid Regulation A Tier 1 offering?

Accepted Answer

A) Selling $3 million of securities in any 12-month period with a $250,000 individual investor limit 
B) Selling $10 million in securities in any 12-month period; investors can't buy more than 10% of their annual income or net worth 
C) Selling $4 million of securities in any 12-month period with no individual investor limit 
D) Selling $20 million in securities in any 12-month period; investors can't buy more than 5% of their annual income or net worth 
A) Selling $3 million of securities in any 12-month period with a $250,000 individual investor limit 
B) Selling $10 million in securities in any 12-month period; investors can't buy more than 10% of their annual income or net worth 
C) Selling $4 million of securities in any 12-month period with no individual investor limit 
D) Selling $20 million in securities in any 12-month period; investors can't buy more than 5% of their annual income or net worth

Question 10

Section 16 of the 1934 Act addresses what type of insider trading?

Accepted Answer

A) Classic insider trading 
B) Tipping 
C) Short-swing trading 
D) Takeovers 
A) Classic insider trading 
B) Tipping 
C) Short-swing trading 
D) Takeovers

Question 11

What are the purposes of a registration statement and what information must it contain?

Accepted Answer

A registration statement has two purpose

Question 12

Techno is planning a security offering under Regulation D,Rule 506.Under this rule,Techno can

Accepted Answer

A) offer up to $5 million in securities over 12 months. 
B) offer up to $1 million in securities over 12 months. 
C) can offer an unlimited amount of securities. 
D) can only offer an amount equal to twice its initial capitalization. 
A) offer up to $5 million in securities over 12 months. 
B) offer up to $1 million in securities over 12 months. 
C) can offer an unlimited amount of securities. 
D) can only offer an amount equal to twice its initial capitalization.

Question 13

Pursuant to a public offering,a CPA firm audited the financial statements.After the offering,omissions and misstatements were found.The CPA firm is now being sued by the purchasers of the stock.The purchasers are alleging that the erroneous financial statements in the registration statement caused them to suffer a monetary loss.The CPA firm can avoid liability if it can prove

Accepted Answer

A) that it used due diligence in auditing the financial statements. 
B) the corporation was the party who made misstatements and omissions. 
C) the firm believed that the statements were accurate. 
D) None of the above will avoid liability. 
A) that it used due diligence in auditing the financial statements. 
B) the corporation was the party who made misstatements and omissions. 
C) the firm believed that the statements were accurate. 
D) None of the above will avoid liability.

Question 14

The "tipper" of inside information can be convicted of a crime,the "tippee" cannot.

Accepted Answer

A) True 
 B)False

Question 15

If the final registration statement contains a material misstatement or omission,the purchaser of the security can recover damages from

Accepted Answer

A) everyone who signed the registration statement.. 
B) the company's directors, but not the chief officers. 
C) the experts who signed the registration statement, but not any other parties. 
D) the issuer of the security, but not the company's directors or chief officers. 
A) everyone who signed the registration statement.. 
B) the company's directors, but not the chief officers. 
C) the experts who signed the registration statement, but not any other parties. 
D) the issuer of the security, but not the company's directors or chief officers.

Question 16

Jackie learned of insider trading information while talking to Mark,a director of a large corporation.She took advantage of the information to buy stock and make a huge financial gain.If she is accused of violating securities law,what must the government prove in order to gain a conviction against Jackie?

Accepted Answer

The government must prove that (1)Jackie

Question 17

Under the 1934 Act,an issuer must register with the SEC if

Accepted Answer

A) it has not completed a public offering under the 1933 Act. 
B) its securities are not going to be traded on a national exchange. 
C) it will not be providing investors with a prospectus. 
D) it has at least 2,000 shareholders and total assets that exceed $10 million. 
A) it has not completed a public offering under the 1933 Act. 
B) its securities are not going to be traded on a national exchange. 
C) it will not be providing investors with a prospectus. 
D) it has at least 2,000 shareholders and total assets that exceed $10 million.

Question 18

The Securities Act of 1933 established the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False

Question 19

Typically,exemptions under the 1933 Act are based on either the type of security or the type of transaction.

Accepted Answer

A) True 
 B)False

Question 20

Securities offered and sold entirely within one state by a corporation of that state are exempt from registration.

Accepted Answer

A) True 
 B)False

Exam 37: Securities Regulation

The 1934 Act is primarily intended to

Which of the following statements is correct?

Premier Enterprises sold Watson unregistered stock which was not exempt.The 1933 Act imposes liability on Premier,and Watson can demand rescission if he still owns the stock.

A criminal case under the Securities Act of 1933 is prosecuted by

Countywide Metals is a small company that incorporates in the state in which it is doing business and plans to offer and sell $100,000 worth of stock only to residents of the county in which it is doing business.Discuss the requirements Countywide must meet for registering its securities.

Which approach to state regulation of securities requires an issuer to undergo a full-blown registration complete with a merit review?

In determining liability for errors in a registration statement,the plaintiff must prove that there was a misstatement or omission that was important enough to affect the plaintiff's investing decision.In other words,the misstatement or omission needs to be?

Offerings under Regulation A of the Securities Act of 1933,although called private offerings,are really small public offerings.

Which of the following represents a valid Regulation A Tier 1 offering?

Section 16 of the 1934 Act addresses what type of insider trading?

What are the purposes of a registration statement and what information must it contain?

Techno is planning a security offering under Regulation D,Rule 506.Under this rule,Techno can

The "tipper" of inside information can be convicted of a crime,the "tippee" cannot.

If the final registration statement contains a material misstatement or omission,the purchaser of the security can recover damages from

Under the 1934 Act,an issuer must register with the SEC if

The Securities Act of 1933 established the Securities and Exchange Commission.

Typically,exemptions under the 1933 Act are based on either the type of security or the type of transaction.

Securities offered and sold entirely within one state by a corporation of that state are exempt from registration.

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