Question 1

Under the Securities Exchange Act of 1934 and the Williams Act, a tender offer:

Accepted Answer

A)  must be disclosed if the offeror's acquisition would give him 3 percent of the target's stock. 
B)  must be disclosed only to the shareholders of the target corporation. 
C)  disclosure is informational to ensure that investors may make an informed decision. 
D)  None of these are correct. 
A)  must be disclosed if the offeror's acquisition would give him 3 percent of the target's stock. 
B)  must be disclosed only to the shareholders of the target corporation. 
C)  disclosure is informational to ensure that investors may make an informed decision. 
D)  None of these are correct.

Question 2

Registration of securities with the SEC guarantees to a potential investor the financial soundness of the business represented by the stock.

Accepted Answer

A) True 
 B)False

Question 3

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 4

The issuer of a registration statement has strict liability for its accuracy.

Accepted Answer

A) True 
 B)False

Question 5

As mandated by the Dodd-Frank Act, the SEC issued a rule in 2015, effective for the first fiscal year beginning on or after January 1, 2017, requiring most public companies regularly to disclose the ratio of a CEO's compensation to the median compensation of the company's employees.

Accepted Answer

A) True 
 B)False

Question 6

The 1934 Act rules governing proxy solicitations would require a proxy statement describing the material facts relating to items to be voted upon.

Accepted Answer

A) True 
 B)False

Question 7

SEC regulations concerning fraud in securities transactions apply to:

Accepted Answer

A)  all securities transactions involving interstate commerce. 
B)  only securities registered under the 1934 Act. 
C)  only securities registered under the 1933 Act. 
D)  securities registered under both the 1933 and 1934 Acts. 
A)  all securities transactions involving interstate commerce. 
B)  only securities registered under the 1934 Act. 
C)  only securities registered under the 1933 Act. 
D)  securities registered under both the 1933 and 1934 Acts.

Question 8

For purposes of Section 16(b) of the 1934 Securities Exchange Act, which of the following are not "insiders"?

Accepted Answer

A)  Shareholders owning more than 10 percent of the stock of a corporation listed on a national stock exchange or registered with the SEC. 
B)  Directors. 
C)  Officers. 
D)  All of these may be considered insiders. 
A)  Shareholders owning more than 10 percent of the stock of a corporation listed on a national stock exchange or registered with the SEC. 
B)  Directors. 
C)  Officers. 
D)  All of these may be considered insiders.

Question 9

SEC Rule 10b5-2 adopts what theory of liability?

Accepted Answer

A)  Misappropriation. 
B)  Strict. 
C)  Negligence. 
D)  Criminal. 
A)  Misappropriation. 
B)  Strict. 
C)  Negligence. 
D)  Criminal.

Question 10

Section 14(e) of the Securities Act of 1934 makes it unlawful for any person to:

Accepted Answer

A)  make any untrue statement of material fact in connection with any tender offer, even if the target company is not subject to the 1934 Act's reporting requirements. 
B)  omit to state any material fact in connection with a tender offer. 
C)  engage in any fraudulent, deceptive, or manipulative practices in connection with any tender offer. 
D)  All of these. 
A)  make any untrue statement of material fact in connection with any tender offer, even if the target company is not subject to the 1934 Act's reporting requirements. 
B)  omit to state any material fact in connection with a tender offer. 
C)  engage in any fraudulent, deceptive, or manipulative practices in connection with any tender offer. 
D)  All of these.

Question 11

A defense to an action based on material omissions and untrue statements contained in a registration statement is:

Accepted Answer

A)  innocent mistake. 
B)  due diligence. 
C)  constructive disclosure. 
D)  reasonable diligence. 
A)  innocent mistake. 
B)  due diligence. 
C)  constructive disclosure. 
D)  reasonable diligence.

Question 12

"Insider trading" rules pertain to:

Accepted Answer

A)  tippees. 
B)  officers and directors. 
C)  underwriters . 
D)  All of these. 
A)  tippees. 
B)  officers and directors. 
C)  underwriters . 
D)  All of these.

Question 13

"Shelf registrations" allow delayed sales of stock.

Accepted Answer

A) True 
 B)False

Question 14

There are rigorously enforced restrictions regarding both number and qualification of investors who purchase securities under Regulation A.

Accepted Answer

A) True 
 B)False

Question 15

The Securities Act of 1933 regulates tender offers and proxy solicitations.

Accepted Answer

A) True 
 B)False

Question 16

The provisions of Section 17(a) of the 1933 Act:

Accepted Answer

A)  primarily allow for a private right of action for persons injured by the act. 
B)  make it unlawful to engage in any transaction, practice, or course of business that operates as deceit upon the issuer. 
C)  make it unlawful in the offer or sale of any securities to obtain property by any statement that omits a material fact without which the information is misleading. 
D)  None of these. 
A)  primarily allow for a private right of action for persons injured by the act. 
B)  make it unlawful to engage in any transaction, practice, or course of business that operates as deceit upon the issuer. 
C)  make it unlawful in the offer or sale of any securities to obtain property by any statement that omits a material fact without which the information is misleading. 
D)  None of these.

Question 17

All of the following are exempt from registration under the 1933 Act except:

Accepted Answer

A)  government bonds. 
B)  securities issued by for-profit medical facilities. 
C)  notes with a maturity of not more than nine months when issued for working capital. 
D)  state-regulated insurance company annuities. 
A)  government bonds. 
B)  securities issued by for-profit medical facilities. 
C)  notes with a maturity of not more than nine months when issued for working capital. 
D)  state-regulated insurance company annuities.

Question 18

Hugo wishes to raise money for his restaurant.He offers to sell stock to his brothers, sisters, aunts, uncles, and cousins.The offering is made by telephone to each of the investors and amounts to a stock offering in the total dollar amount of $1.5 million.The offering is made to a total of 38 family members and no notice is given to the SEC.Is this a permissible exempt offering under the federal securities laws? Explain.

Accepted Answer

Hugo would probably be able to qualify f

Question 19

The Sarbanes-Oxley Act requires either the chief executive officer or the chief financial officer of a company issuing securities to certify information in the issuer's annual and quarterly reports.

Accepted Answer

A) True 
 B)False

Question 20

Effective in 2000, a plain English term sheet is required in all tender offers and mergers.

Accepted Answer

A) True 
 B)False

Exam 39: Securities Regulation

Under the Securities Exchange Act of 1934 and the Williams Act, a tender offer:

Registration of securities with the SEC guarantees to a potential investor the financial soundness of the business represented by the stock.

The issuer of a registration statement has strict liability for its accuracy.

As mandated by the Dodd-Frank Act, the SEC issued a rule in 2015, effective for the first fiscal year beginning on or after January 1, 2017, requiring most public companies regularly to disclose the ratio of a CEO's compensation to the median compensation of the company's employees.

The 1934 Act rules governing proxy solicitations would require a proxy statement describing the material facts relating to items to be voted upon.

SEC regulations concerning fraud in securities transactions apply to:

For purposes of Section 16(b) of the 1934 Securities Exchange Act, which of the following are not "insiders"?

SEC Rule 10b5-2 adopts what theory of liability?

Section 14(e) of the Securities Act of 1934 makes it unlawful for any person to:

A defense to an action based on material omissions and untrue statements contained in a registration statement is:

"Insider trading" rules pertain to:

"Shelf registrations" allow delayed sales of stock.

There are rigorously enforced restrictions regarding both number and qualification of investors who purchase securities under Regulation A.

The Securities Act of 1933 regulates tender offers and proxy solicitations.

The provisions of Section 17(a) of the 1933 Act:

All of the following are exempt from registration under the 1933 Act except:

The Sarbanes-Oxley Act requires either the chief executive officer or the chief financial officer of a company issuing securities to certify information in the issuer's annual and quarterly reports.

Effective in 2000, a plain English term sheet is required in all tender offers and mergers.

Introduction to Law

Business Ethicspart Ii: the Legal Environment of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Negligence and Strict Liabilitypart Iii: Contracts

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 Remediespart Iv: Sales

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remediespart V: Negotiable Instruments

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transferspart Vi: Agency

Relationship of Principal and Agent

Relationship With Third Partiespart Vii: Business Associations

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 Corporationspart Viii: Debtor and Creditor Relations

Secured Transactions and Suretyship

Bankruptcypart Ix: Regulation of Business

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

International Business Lawpart X: Property

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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