Exam 30: Investor Protection, Insider Trading, and Corporate Governance

Most private, midsize-business, noninvestment company offers of securities are not exempt from the registration requirements.

Most securities can be resold without registration.

"Forward-looking" financial forecasts that turn out to be wrong are not protected against liability for securities fraud.

To raise $120 million to expand operations, Premiere Movies Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. Premiere Movies plans to notify the SEC of sales. Under the Securities Act of 1933, this issue may qualify as an "exempt" transaction​

Fact Pattern 30-3 Dhani, an accountant for Eureka! Inc. learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka! stock. He reveals the company plans to Fay, who tells Geoff. Both Fay and Geoff buy 100 shares. Geoff knows that Fay got her information from Dhani. When Eureka! publicly announces its new laptop, Dhani, Fay, and Geoff sell their stock for a profit. -Refer to Fact Pattern 30-3. Under the Securities Exchange Act of 1934, Geoff is most likely

Global Trade Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that Global Trade must​

Securities offerings in unlimited amounts can be exempt from the registration requirements in certain circumstances.

The definition of security in the Securities Act of 1933 does not include instruments commonly known as securities.

Corporate "outsiders" may not be held liable for insider trading under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

The key to liability under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether information omitted or misrepresented in connection with the purchase or sale of a security is material.

Nester, a salesperson for Olive Grove Corporation, learns that Olive Grove will increase the dividend it pays to shareholders. Nester buys 10,000 shares of Olive Grove stock. When the dividend is announced to the public and the price of the stock increases, Nester sells his shares for a profit. Nester would not be liable for insider trading if the information about the dividend was

A well-known seasoned issuer cannot file a registration statement until after it announces a new offering.

Bonds & Stocks Corporation, and its officers, directors, and shareholders, buy and sell securities. SEC Rule 10b-5 applies to the purchase or sale of

Fact Pattern 30-2 ​Eddie, an accountant for Fresh Dairy, Inc., learns of undisclosed company plans to market a new smooth-tasting, fat-free butter. Eddie buys 10,000 shares of Fresh Dairy stock. He reveals the company plans to Giselle, who buys 5,000 shares. Giselle tells Hong, who tells Irwin, each of whom buy 1,000 shares. They know that Giselle got her information from Eddie. When Fresh Dairy publicly announces its new product, Eddie, Giselle, Hong, and Irwin sell their stock for a profit. -Refer to Fact Pattern 30-2. If Eddie is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of Fresh Dairy stock was​

Most private, small-business, noninvestment company offers of securities are exempt from the registration requirements.

Medico Corporation is a public company whose shares are traded in public securities markets. Medico's officers want to set up and maintain a system of "good corporate governance." What is "corporate governance"? What is its practical significance? What, at a minimum, should a "good" system of corporate governance include?

Solder Welding Corporation is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, Solder Welding is subject to the direct corporate governance requirements of​

The sale and transfer of securities are heavily regulated by federal and state statutes and by government agencies.

Hawaiian Shirts, Inc., wants to issue stock of $4 million in a single offering. The corporation must provide disclosure documents that generally are the same as those used in registered offerings to​

Every state has its own corporate securities laws that regulate the offer and sale of securities within tis borders.