Exam 45: Securities Regulation

One of the key elements in the Supreme Court's definition of an 'investment contract' is the right to a refund of the investment.

Any shareholder owning more than five (5) percent of any class of the corporation's equity securities is statutorily defined as an insider and must file with the SEC a disclosure statement regarding such ownership and all related transactions.

Forward looking statements, which involved SEC filings, press releases, and reports to shareholders, preserve the protections of the Private Securities Litigation Reform Act of 1995

The Securities Act of 1933 act applies all of the following instruments and transactions except: ______.

The JOBS Act of 2012 expanded Regulation A to allow emerging enterprises to raise public capital efficiently and to allow more choices to investors through a simpler SEC registration process.

Which of the following federal laws grants the SEC the power to suspend all trading when markets are excessively volatile?

A corporation or group of investors may seek to acquire control of another corporation by offering cash for all of its shares made available for sale by a certain date. This action is called a(n): ______.

An unlawful sale under the Insider Trading Sanctions Act of 1984 can result in a civil penalty of up to how many times the profit gained or loss avoided?

A "short-swing" profit is realized by a corporate insider from selling corporate securities less than one (1) year after purchase.

The Securities Act of 1933 allows a emerging growth company (EGC) with less than $1 million in revenues to waive the prospectus requirement.

All of the following are true regarding SEC Rule 10b-5 except: ______.

In a 10b-5 situation, the plaintiff must show "reliance" on the misrepresentation and a resulting injury.

Under Regulation D, Rule 506, sales may be made to:

All of the following are elements of an "investment contract" except: ______.

The Sarbanes-Oxley Act of 2002 requires written certification of the 10-K and 10-Q reports by each company's CEO and CFO.

The fraud-on-the-market theory creates a presumption of securities fraud based on plaintiff's reliance on defendant's misrepresentations which affected the market price of the company's shares.

Unless exempted, exchanges, brokers, and dealers who deal in the securities traded in interstate commerce must register with the SEC.

Mark Hubbard has been very successful in the cattle business over a number of years. Hubbard has decided to establish a cattle program as an investment tool. He will purchase cattle with investors' money and then provide medical care, feed, and transportation on a service contract basis. The profits then will be divided proportionately among the investors. An investment company, Money Ventures, Inc., is interested in the entire offering of Hubbard's cattle program. Hubbard is unsure as to whether the securities acts apply to him. In addition, he wonders whether his venture, as structured, is exempt if the activity is within the securities acts. Should Hubbard be concerned?

Rule 10b-5 only applies to registered securities not sold in interstate commerce.

Regulation D is commonly referred to as the "private placement exemption" and allows no more than 35 nonaccredited investors per offering.