Exam 18: Securities Regulation

An investor who is presumed sophisticated and wealthy enough to evaluate investment opportunities without an SEC-approved prospectus is known as a:

Under securities law, knowingly making a misstatement in company reports is punishable by which of the following:

____ are sold directly to the public through the mail or Internet with no sales commission.

The 1934 Act imposes disclosure requirements on corporations issuing new securities.

In City of Livonia Employees Retirement System v. Boeing Co., City sued Boeing on behalf of all persons who bought Boeing stock in a certain time period on the basis that the company was overly optimistic about the time schedule for the new 787 aircraft. When problems with the plane developed, the stock fell ten percent. Suit claimed that company executives made false statements about the plane, so committed securities fraud. The appeals court held that Boeing was "overly optimistic" in its forecasts about its financial future so was liable to investors who lost money when things turned out worse than expected.

When bonds are sold, there is often a(n) ____ of a certain amount.

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 Bettina received financing for her expansion by selling bonds rather than stock, which of the following items would Bettina bonds need to include?

Securities differ from other assets in that they:

If you own a security in a company, such as common stock in IBM, you have:

Which of the following is a securities professional:

The SEC may sue those alleged to be violating securities laws. Most SEC actions in these cases are:

Under SEC rules, a "private company" is a company:

The buying or selling of stock by persons who have access to information affecting the value of the stock that has not yet been revealed to the public is called:

The ____ is an extensive audited financial statement similar in content to the information provided in the registration process under the 1933 Act.

Securities are important because:

The SEC prohibits investment companies from charging "loads" or commissions on the sale of mutual funds since the companies also charge a management fee.

Which of the following is NOT a type of investment company as defined by the Investment Company Act:

Investment advisers may not, by law, be the managers of an investment company.

Debt financing bonds may be issued by governments not by private companies.

A prospectus must provide background information about the managerial experience and compensation packages of the promoters of a security.