Exam 18: Securities Regulation

A proxy is best described as:

Companies that issue publicly traded securities must turn in quarterly and annual financial reports to the SEC.

Accredited investors often buy private placement securities through Regulation D offerings. They receive a private-placement memorandum, which is similar to a prospectus, even though the security is not registered.

When the SEC reviews a prospectus for a new stock offering it may not:

Securities financing is:

At least 40 percent of the directors of investment companies must be outside directors with no business relationship with the company.

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. Suppose Bettina took Rob's advice and called her offerings "brownie squares" rather than a stock. The SEC decided to sue Bettina for failure to follow federal securities laws. To prove that the "brownie squares" were securities for purposes of federal regulation, the SEC must show that:

The prospectus condenses the longer registration statement provided by security issuers to the SEC.

Securities do not include direct ownership in physical goods; they are an undivided interest in an asset.

A "publicly held company" is one that has issued securities that are publicly traded.

A proxy is best described as:

Someone who does not have a fiduciary duty to the shareholders of a company and uses inside information to make a profit with company stocks:

The registration requirement of the Securities Act of 1933 applies to:

An open-end investment company is usually called a mutual fund.

The Investment Advisers Act requires investment advisers and stock brokers to be registered with the SEC, but not stock dealers, who are regulated by the stock exchanges.

An individual who is classified as an accredited investor has a net worth of at least $1 million.

Companies are required to release material information to the public, rather than to reveal such information selectively under:

The Securities Litigation Uniform Standards Act of 1998 requires all states to amend their securities laws to conform to federal standards.

In the event that the SEC staff believes that a prospectus that has been submitted for review does not adequately explain the high-risk factors of an offering, it can:

A tender offer takes place when: