Exam 36: Securities Regulation

Larry was working at his job at the landfill when he got off his tractor to take a break.He noticed some papers on the ground and went to throw them on a trashpile.As he held the papers he saw a confidential report from MegaCorp stating it would be announcing the development of a new super computer in two weeks.Larry has no relationship with MegaCorp.Larry mortgaged his house and borrowed all the money he could to purchase $200,000 worth of MegaCorp stock.Larry bought the stock for $32 a share.When the announcement was made public,MegaCorp's stock skyrocketed.Larry sold his stock a few weeks later and made a huge profit.Larry has:

The guiding principal of federal securities law is:

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

A defense to a civil action brought under Section 10(b)and Rule 10b-5 of the 1934 Act would be:

After the SEC completes its review of a preliminary registration statement,it sends the issuer a comment letter setting forth changes that must be made.

Any securities offerings covered by the NSMIA must comply with state securities laws.

A control security is stock which gives the owner a controlling interest in the company.

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?

Under what type of securities offering must the issuer determine if the investor is an accredited,sophisticated,or unaccredited investor?

Pursuant to a public offering,a CPA firm prepared an unqualified opinion as to 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:

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.

If a registration statement contains a material misstatement or omission:

The Fallwater Partnership wants to incorporate and is considering using a DPO.Explain what a DPO is and discuss the advantages and disadvantages of this course of action.

Securities issued by banks are exempt from SEC registration.

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.

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

With regard to a corporation's delivery of securities documents to investors and to the SEC:

When a stock underwriter acts as the company's agent in selling stock,it is called a:

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

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