Question 1

Securities sold under Regulation A must be registered if they are resold.

Accepted Answer

A) True 
 B)False

Question 2

The use of the Internet or other means to raise money-typically in small amounts-from a large number of contributors to support a specific venture is called:

Accepted Answer

A)  groupfunding. 
B)  initial public offering. 
C)  startup capital. 
D)  crowdfunding. 
A)  groupfunding. 
B)  initial public offering. 
C)  startup capital. 
D)  crowdfunding.

Question 3

The Sarbanes-Oxley Act:

Accepted Answer

A)  allows the SEC to add criminal penalties to a disgorgement fund for the benefit of victims of violations of the 1933 and 1934 securities acts. 
B)  requires an outside CPA and the corporate treasurer to certify the financial and other information contained in the issuer's annual and quarterly reports. 
C)  requires that issuers of securities disclose in plain English to the public on a rapid and current basis such additional information concerning material changes in the financial condition or operations of the issuer as the SEC determines is necessary or useful. 
D)  All of these are true. 
A)  allows the SEC to add criminal penalties to a disgorgement fund for the benefit of victims of violations of the 1933 and 1934 securities acts. 
B)  requires an outside CPA and the corporate treasurer to certify the financial and other information contained in the issuer's annual and quarterly reports. 
C)  requires that issuers of securities disclose in plain English to the public on a rapid and current basis such additional information concerning material changes in the financial condition or operations of the issuer as the SEC determines is necessary or useful. 
D)  All of these are true.

Question 4

Shelf registrations allow issuers to register securities that are to be offered and sold on a delayed or continuous basis in the future, but the provision allowing it does not apply to all companies.

Accepted Answer

A) True 
 B)False

Question 5

The rule that prohibits schemes and devices to defraud investors is Rule:

Accepted Answer

A)  504 
B)  144 
C)  10b-5 
D)  16(b) 
A)  504 
B)  144 
C)  10b-5 
D)  16(b)

Question 6

The 1933 Act imposes liability for material misstatements and omissions in a registration statement on:

Accepted Answer

A)  only the directors and certain officers. 
B)  only the issuers. 
C)  experts and underwriters as well as directors, officers, and issuers. 
D)  the CEO only. 
A)  only the directors and certain officers. 
B)  only the issuers. 
C)  experts and underwriters as well as directors, officers, and issuers. 
D)  the CEO only.

Question 7

Securities that are exempt from registration under the federal securities laws include:

Accepted Answer

A)  securities of domestic banks. 
B)  annuity contracts issued by state-regulated insurance companies. 
C)  bonds issued by a city. 
D)  All of these are exempt. 
A)  securities of domestic banks. 
B)  annuity contracts issued by state-regulated insurance companies. 
C)  bonds issued by a city. 
D)  All of these are exempt.

Question 8

A registration statement becomes public immediately on filing with the SEC, but a prospectus only becomes public upon signature of the chief financial officer.

Accepted Answer

A) True 
 B)False

Question 9

Insiders would violate the short-swing profits rule (16b) of the 1934 Act by buying stock on January 1 and selling on May 1.

Accepted Answer

A) True 
 B)False

Question 10

The Securities and Exchange Commission (SEC) is an independent, quasi-judicial agency consisting of five commissioners.

Accepted Answer

A) True 
 B)False

Question 11

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 granted the SEC the power to issue cease and desist orders and to impose civil penalties.

Accepted Answer

A) True 
 B)False

Question 12

The 1933 Securities Act differs from the 1934 Act in that the former deals with trading in stock that has already been issued and the latter has to do with the issuance of securities.

Accepted Answer

A) True 
 B)False

Question 13

The 1933 Securities Act defines the term "security." The Supreme Court of the United States has adopted a two-tier analysis of what constitutes a security. Within this analysis the Court has used a three-part test to determine whether a non-traditional financial transaction constitutes an investment contract and thus a security. Explain
(a) the 1933 Act's statutory definition of security,
(b) the courts' general interpretation of the 1933 Act's definition and
(c) the Supreme Court's two-tier test. Use case law to illustrate your explanation, if appropriate. Also, why do you think the Supreme Court had to devise such an analysis?

Accepted Answer

(a) Any note; stock; bond; debenture; ev

Question 14

If Terry makes a tender offer to the owners of Pizza Village's registered stock, he must file a statement with the SEC if he:

Accepted Answer

A)  owns 1% of Pizza Village stock. 
B)  will, after the acquisition, own 5% of all Pizza Village stock. 
C)  will, after the acquisition, own 5% of one class of Pizza Village stock. 
D)  will own more than 3% of the stock in all classes. 
A)  owns 1% of Pizza Village stock. 
B)  will, after the acquisition, own 5% of all Pizza Village stock. 
C)  will, after the acquisition, own 5% of one class of Pizza Village stock. 
D)  will own more than 3% of the stock in all classes.

Question 15

As amended in 2008, SEC rules define a small business issuer as a noninvestment company with less than $10 million in public float.

Accepted Answer

A) True 
 B)False

Question 16

The Securities Act of 1933 identifies a number of securities exemptions that are, in effect, transaction exemptions.

Accepted Answer

A) True 
 B)False

Question 17

Emerging growth companies (EGCs) have strict disclosure requirements and limited permissible communications to avoid a repeat of the dot-com disaster of the late 1990's.

Accepted Answer

A) True 
 B)False

Question 18

Effective in 2010, the SEC adopted new requirements to improve the disclosure shareholders of public companies receive regarding compensation and corporate governance. These new rules require disclosure of any directorships held by each nominee at any time during the past seven years at any public company.

Accepted Answer

A) True 
 B)False

Question 19

The Klodhoffer Corporation has assets amounting to $2 million and needs additional capital to finance expansion of its operation. The board of directors decides to promote an issue of $1.5 million of common stock in order to raise capital. At the time the stock is issued, Klodhoffer has 250 shareholders owning common stock. If Klodhoffer is to trade the stock over the counter, does it need to register with the SEC?

Accepted Answer

The issue is exempt from registration un

Question 20

Recovery of damages under Rule 10b-5 requires proof of:

Accepted Answer

A)  reliance on a misstatement or omission. 
B)  materiality. 
C)  connection with the purchase or sale of a security . 
D)  All of these are required for recovery of damages. 
A)  reliance on a misstatement or omission. 
B)  materiality. 
C)  connection with the purchase or sale of a security . 
D)  All of these are required for recovery of damages.

Exam 39: Securities Regulation

Securities sold under Regulation A must be registered if they are resold.

The use of the Internet or other means to raise money-typically in small amounts-from a large number of contributors to support a specific venture is called:

The Sarbanes-Oxley Act:

Shelf registrations allow issuers to register securities that are to be offered and sold on a delayed or continuous basis in the future, but the provision allowing it does not apply to all companies.

The rule that prohibits schemes and devices to defraud investors is Rule:

The 1933 Act imposes liability for material misstatements and omissions in a registration statement on:

Securities that are exempt from registration under the federal securities laws include:

A registration statement becomes public immediately on filing with the SEC, but a prospectus only becomes public upon signature of the chief financial officer.

Insiders would violate the short-swing profits rule (16b) of the 1934 Act by buying stock on January 1 and selling on May 1.

The Securities and Exchange Commission (SEC) is an independent, quasi-judicial agency consisting of five commissioners.

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 granted the SEC the power to issue cease and desist orders and to impose civil penalties.

The 1933 Securities Act differs from the 1934 Act in that the former deals with trading in stock that has already been issued and the latter has to do with the issuance of securities.

If Terry makes a tender offer to the owners of Pizza Village's registered stock, he must file a statement with the SEC if he:

As amended in 2008, SEC rules define a small business issuer as a noninvestment company with less than $10 million in public float.

The Securities Act of 1933 identifies a number of securities exemptions that are, in effect, transaction exemptions.

Emerging growth companies (EGCs) have strict disclosure requirements and limited permissible communications to avoid a repeat of the dot-com disaster of the late 1990's.

Recovery of damages under Rule 10b-5 requires proof of:

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance Breach and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits Collections and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property Property Insurance Bailments and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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