Exam 18: Securities Regulation

Debt and equity both provide sources of funds for a company.

The most common investment management company is the:

Sarbanes-Oxley requires firms to ensure that there is no insider trading occurring within an organization.

A prospective issuer of securities must hire which of the following:

In Latta v. Rainey the victims of an investment scam were promised high rates of return for an investment that looked to be solid.

Fact Pattern 21-1 In 2005, Bettina opened Bettina Brownies in a shopping mall. The brownies were a hit and soon Bettina was operating shops in several malls in Illinois. By 2012 she had expanded operations to Indiana and she decided that it was time to finance expansion through the equity markets. With an investment banker, she prepared for the initial offering of Bettina Brownies. She sold 50,000 shares of stock at $10 a share. Expansion continued. Keebler determined that Bettina was a well-run company with an attractive financial position. It began secret negotiations with Bettina to buy her interest in the business. News of the negotiations leaked. Mr. Little, CEO of Keebler, denied that they were pursuing a deal with Bettina. A month later Bettina sold her share of the business to Keebler. Shortly before Bettina sold her interest to Keebler, Joe Kelso, a carpet cleaner was working at Bettina office when he overheard discussion of the sale to Keebler. Joe bought a large number of shares in Bettina. After the Keebler sale was completed, Joe sold his stock for a substantial profit. -Refer to Fact Pattern 21-1. If Joe is prosecuted for insider trading, the SEC will need to prove that he had a fiduciary duty to not use the information he heard at Bettina offices. Which case will Joe be most likely to rely upon to prove that he was simply a lucky outsider who did not have a fiduciary duty to not use the information he acquired?

____ are sold through a securities dealer and have a sales commission of some percentage of the price.

____ is the raising of funds through the sale of company stock.

A debt is a financial obligation a firm. It is:

The stock exchanges, such as the New York Stock Exchange, are self-regulating but are subject to SEC monitoring.

Suppose there has been securities fraud in the preparation of materials sent to investors, who then lose money. Potentially, which of the following may be liable?

The arbitration process used by investment firms and their clients is governed by SEC rules.

Which of the following is not considered a security under the 1933 Securities Act:

A security involves the pooling of money by a group of people; it cannot be an investment only by one person.

The SEC sets the rules of operation for the stock exchanges and its members.

The Public Company Accounting Oversight Board, which has authority to set accounting standards and discipline CPAs for misconduct, was established by the:

In Latta v. Rainey the courts held that while the investment sold by Rainey was a money loser, he did not engage in misrepresentation so could not be liable for losses.

A security is sold to the public under a private placement exemption. Later a suit is filed under the federal securities law claiming securities fraud. This suit will:

The definition of securities subject to federal regulation is:

Investment advisers: