Question 1

A secondary offering is the subsequent offering of securities by the original issuer.

Accepted Answer

A) True 
 B)False

Question 2

Seasoned issuers may make automatic shelf registration offerings which are effective immediately on filing a registration statement with the SEC.

Accepted Answer

A) True 
 B)False

Question 3

CASE 21.2SEC v.Edwards (2004)involved sales of interests in pay telephones with a question before the U.S.Supreme Court of whether a moneymaking scheme falls outside the definition of an investment contract because the promised rate of return is fixed,rather than variable.How did the Court rule?

Accepted Answer

A)  The Court held that a promise of a fixed rate of return did not prevent the arrangement from being an investment contract. 
B)  The Court held that a promise ofa fixed rate of return prevented the arrangement from being an investment contract. 
C)  The Court held that a promise of a fixed rate of return did not prevent the arrangement from being an investment contract, but only because the underlying company went into bankruptcy. 
D)  The Court held that a promise of a fixed rate of return prevented the arrangement from being an investment contract, but only because the underlying company went into bankruptcy. 
A)  The Court held that a promise of a fixed rate of return did not prevent the arrangement from being an investment contract. 
B)  The Court held that a promise ofa fixed rate of return prevented the arrangement from being an investment contract. 
C)  The Court held that a promise of a fixed rate of return did not prevent the arrangement from being an investment contract, but only because the underlying company went into bankruptcy. 
D)  The Court held that a promise of a fixed rate of return prevented the arrangement from being an investment contract, but only because the underlying company went into bankruptcy.

Question 4

A(n)__________ company is a development-stage company that has no specific business plan or has a business plan to acquire a currently unknown business.

Accepted Answer

A)  illegal 
B)  bespeaks caution 
C)  blank check 
D)  best-efforts 
A)  illegal 
B)  bespeaks caution 
C)  blank check 
D)  best-efforts

Question 5

Fact Pattern 21-3
Yolanda has filed the registration statement, in connection with a public offering of stock in ABC Corgi, a company dedicated to the production of clothing and toys highlighting the highly prized Welsh Corgi breed of dog. The registration statement is not yet effective. Yolanda would like to move forward with promoting the company as much as possible. She asks for advice regarding activities in which she could legally participate. She is particularly interested in making presentations to large institutional investors.
-Refer to Fact Pattern 21-3.Which of the following are true regarding selling efforts to institutional investors during this period.

Accepted Answer

A)  Such efforts are called roadshows and are legal so long as SEC requirements are followed. 
B)  Such efforts are an illegal type of promotion referenced as selling promotions. 
C)  Such efforts are called concerted sales and are legal so long as the SEC gives prior approval. 
D)  Such efforts are simply called felonies and can result in fines as well as jail time. 
A)  Such efforts are called roadshows and are legal so long as SEC requirements are followed. 
B)  Such efforts are an illegal type of promotion referenced as selling promotions. 
C)  Such efforts are called concerted sales and are legal so long as the SEC gives prior approval. 
D)  Such efforts are simply called felonies and can result in fines as well as jail time.

Question 6

A key step in preparing the registration statement is the process of __________,whereby the company,the underwriters,and their respective counsel assemble and review the information about the company in the registration statement.

Accepted Answer

A)  due diligence 
B)  reasonable review 
C)  strict scrutiny 
D)  proofing 
A)  due diligence 
B)  reasonable review 
C)  strict scrutiny 
D)  proofing

Question 7

Fact Pattern 21-2
Alice and her general partner, Greg, own several businesses. Alice is very interested in salt water aquariums and decides that a good venture for the partnership would be the development of a business to raise tropical fish. She plans to issue stock to start the fish business with the idea that she and Greg will purchase a majority of the stock. She has a friend, Tony, a plastic surgeon with a good practice, who has expressed interest in the venture because he believes that the presence of fish in waiting rooms reduces anxiety and encourages patients to spend more money. Alice does not want to go to the expense and trouble of a formal registration under the 1933 Act and seeks advice on how to avoid that process should the partnership issue securities.
-Refer to Fact Pattern 21-2.As far as Tony is concerned,which of the following is true?

Accepted Answer

A)  Selling to Tony would not trigger registration requirements because of the professional exemption. 
B)  Selling to Tony would not trigger registration requirements if it can be established that his income or net worth meets amounts required to qualify him as an accredited investor. 
C)  Selling to Tony would not trigger registration requirements so long as he purchases under 5% of the stock. 
D)  Selling to Tony would trigger registration requirements. 
A)  Selling to Tony would not trigger registration requirements because of the professional exemption. 
B)  Selling to Tony would not trigger registration requirements if it can be established that his income or net worth meets amounts required to qualify him as an accredited investor. 
C)  Selling to Tony would not trigger registration requirements so long as he purchases under 5% of the stock. 
D)  Selling to Tony would trigger registration requirements.

Question 8

Under Section 13 of the 1934 Act,any person acquiring beneficial ownership of more than _____ of the equity shares of a reporting company must file a Schedule 13D providing information regarding the acquisition within ten days after crossing the designated ownership mark.

Accepted Answer

A)  3% 
B)  5% 
C)  25% 
D)  51% 
A)  3% 
B)  5% 
C)  25% 
D)  51%

Question 9

Assuming Rule 504 of Regulation D otherwise applies,it exempts offerings of up to __________ within a __________ period,and there may be __________ purchasers.

Accepted Answer

A)  $2 million; six-month; up to 100 
B)  $500,000; two-year; up to 500 
C)  $1 million; twelve-month; an unlimited number of 
D)  $100,000; three-month; up to 50 
A)  $2 million; six-month; up to 100 
B)  $500,000; two-year; up to 500 
C)  $1 million; twelve-month; an unlimited number of 
D)  $100,000; three-month; up to 50

Question 10

Any security offered by the United States Government or any national bank would be considered an exempt security under the 1933 Act's registration requirements.

Accepted Answer

A) True 
 B)False

Question 11

A "red herring" is the popular name given to the final prospectus under the 1933 Act.

Accepted Answer

A) True 
 B)False

Question 12

According to the SEC,a hyperlink embedded within a prospectus causes the hyperlinked information to be treated as part of the prospectus.

Accepted Answer

A) True 
 B)False

Question 13

The __________ is the disclosure document that an issuer of securities provides to each prospective purchaser under the 1933 Act.

Accepted Answer

A)  registration statement 
B)  prospectus 
C)  investment contract 
D)  placement memorandum 
A)  registration statement 
B)  prospectus 
C)  investment contract 
D)  placement memorandum

Question 14

Securities issued in a private placement are called __________ securities.

Accepted Answer

A)  qualified 
B)  private 
C)  restricted 
D)  shelf 
A)  qualified 
B)  private 
C)  restricted 
D)  shelf

Question 15

Tina,in-house counsel for a start-up company,is asked what the company must do if it plans to offer securities for sale only outside the U.S.What advice should she give in relation to the application of Section 5/Regulation S registration requirements?

Accepted Answer

A)  According to SEC Regulation S, so long as the company is incorporated in the U.S., all aspects of Section 5 apply, and that any offer or sale outside the U.S.is subject to the federal registration requirements. 
B)  According to SEC Regulation S,offers or sales outside the U.S.are not subject to federal registration requirements so long as only accredited investors are involved but that, otherwise, any offer or sale is subject to the federal registration requirements. 
C)  According to SEC Regulation S, offers or sales outside the U.S.are not subject to federal registration requirements so long as only accredited investors are involved and no more than $5 million in sales are made but that, otherwise, any offer or sale is subject to the federal registration requirements. 
D)  According to SEC Regulation S, offers and sales outside the U.S.are not subject to Section 5 registration requirements. 
A)  According to SEC Regulation S, so long as the company is incorporated in the U.S., all aspects of Section 5 apply, and that any offer or sale outside the U.S.is subject to the federal registration requirements. 
B)  According to SEC Regulation S,offers or sales outside the U.S.are not subject to federal registration requirements so long as only accredited investors are involved but that, otherwise, any offer or sale is subject to the federal registration requirements. 
C)  According to SEC Regulation S, offers or sales outside the U.S.are not subject to federal registration requirements so long as only accredited investors are involved and no more than $5 million in sales are made but that, otherwise, any offer or sale is subject to the federal registration requirements. 
D)  According to SEC Regulation S, offers and sales outside the U.S.are not subject to Section 5 registration requirements.

Question 16

Which of the following is true regarding uniform state regulation of securities?

Accepted Answer

A)  Federal law has entirely preempted the area, and there is no state regulation of securities. 
B)  Many states have adopted the Uniform Securities Act. 
C)  Many states have adopted the Proposed Uniform Trading Act. 
D)  There is no proposed uniform act in regard to securities, and state regulation is inconsistent. 
A)  Federal law has entirely preempted the area, and there is no state regulation of securities. 
B)  Many states have adopted the Uniform Securities Act. 
C)  Many states have adopted the Proposed Uniform Trading Act. 
D)  There is no proposed uniform act in regard to securities, and state regulation is inconsistent.

Question 17

Set forth the difference between firm commitment underwriting and best-efforts underwriting.

Accepted Answer

In a firm commitment underwriting,the un

Question 18

The __________ Act permits __________ companies to make a(n)__________ public offering without meeting all the onerous SEC registration requirements.

Accepted Answer

A)  JOBS, emerging growth, secondary 
B)  JOBS, farming, initial 
C)  Sarbanes-Oxley, multinational, secondary 
D)  JOBS, emerging growth, initial 
A)  JOBS, emerging growth, secondary 
B)  JOBS, farming, initial 
C)  Sarbanes-Oxley, multinational, secondary 
D)  JOBS, emerging growth, initial

Question 19

Investors are prohibited under the Securities Act of 1933 from making highly speculative investments.

Accepted Answer

A) True 
 B)False

Question 20

Assuming no exemption applies,what is the penalty for a violation of section 5 of the 1933 Act through offering a security for sale without an effective registration statement or by means of a noncomplying prospectus?

Accepted Answer

A)  The purchaser may keep the shares if the investment proves successful; or if within one year from the date of purchase the investment proves unprofitable, the investor can get his or her money back. 
B)  The purchaser must keep the shares if the investment proves successful; or if within one year from the date of purchase the investment proves unprofitable, the investor will be refunded his or her money. 
C)  The investor has no option to keep the shares but will be refunded his or her money. 
D)  The investor must hold the shares for at least two years but will be refunded his or her money if the investment has failed to show a profit within that amount of time. 
A)  The purchaser may keep the shares if the investment proves successful; or if within one year from the date of purchase the investment proves unprofitable, the investor can get his or her money back. 
B)  The purchaser must keep the shares if the investment proves successful; or if within one year from the date of purchase the investment proves unprofitable, the investor will be refunded his or her money. 
C)  The investor has no option to keep the shares but will be refunded his or her money. 
D)  The investor must hold the shares for at least two years but will be refunded his or her money if the investment has failed to show a profit within that amount of time.

Exam 21: Public and Private Offerings of Securities.

A secondary offering is the subsequent offering of securities by the original issuer.

Seasoned issuers may make automatic shelf registration offerings which are effective immediately on filing a registration statement with the SEC.

CASE 21.2SEC v.Edwards (2004)involved sales of interests in pay telephones with a question before the U.S.Supreme Court of whether a moneymaking scheme falls outside the definition of an investment contract because the promised rate of return is fixed,rather than variable.How did the Court rule?

A(n)__________ company is a development-stage company that has no specific business plan or has a business plan to acquire a currently unknown business.

A key step in preparing the registration statement is the process of __________,whereby the company,the underwriters,and their respective counsel assemble and review the information about the company in the registration statement.

Under Section 13 of the 1934 Act,any person acquiring beneficial ownership of more than _____ of the equity shares of a reporting company must file a Schedule 13D providing information regarding the acquisition within ten days after crossing the designated ownership mark.

Assuming Rule 504 of Regulation D otherwise applies,it exempts offerings of up to __________ within a __________ period,and there may be __________ purchasers.

Any security offered by the United States Government or any national bank would be considered an exempt security under the 1933 Act's registration requirements.

A "red herring" is the popular name given to the final prospectus under the 1933 Act.

According to the SEC,a hyperlink embedded within a prospectus causes the hyperlinked information to be treated as part of the prospectus.

The __________ is the disclosure document that an issuer of securities provides to each prospective purchaser under the 1933 Act.

Securities issued in a private placement are called __________ securities.

Tina,in-house counsel for a start-up company,is asked what the company must do if it plans to offer securities for sale only outside the U.S.What advice should she give in relation to the application of Section 5/Regulation S registration requirements?

Which of the following is true regarding uniform state regulation of securities?

Set forth the difference between firm commitment underwriting and best-efforts underwriting.

The __________ Act permits __________ companies to make a(n)__________ public offering without meeting all the onerous SEC registration requirements.

Investors are prohibited under the Securities Act of 1933 from making highly speculative investments.

Assuming no exemption applies,what is the penalty for a violation of section 5 of the 1933 Act through offering a security for sale without an effective registration statement or by means of a noncomplying prospectus?

Law, Value Creation, and Risk Management.

Ethics and the Law.

Sources of Law, Courts, and Dispute Resolution.

Constitutional Bases for Business Regulation.

Agency.

Administrative Law.

Contracts.

Sales, Licensing, and E-Commerce.

Torts and Privacy Protection.

Product Liability.

Intellectual Property.

The Employment Agreement.

Civil Rights and Employment Discrimination.

Criminal Law.

Environmental Law and Sustainability.

Antitrust.

Consumer Protection.

Real Property and Land Use.

Forms of Business Organizations.

Directors, Officers, and Controlling Shareholders.

Securities Fraud and Insider Trading.

Debtor-Creditor Relations and Bankruptcy.

International Law and Transactions.

Filters

Assuming Rule 504 of Regulation D otherwise applies,it exempts offerings of up to within a period,and there may be __ purchasers.

The Act permits companies to make a(n)__ public offering without meeting all the onerous SEC registration requirements.