Exam 7: Securities Law and Corporate Governance

Securities must be registered under the Securities Act of 1933 for the Securities Exchange Act of 1934 to apply.

Scienter is not required to impose criminal sanctions under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

Fact Pattern 7-2 Ben, an accountant for AirLift, Inc., a ride service, learns of undisclosed company plans to distribute a new app. Ben buys 10,000 shares of AirLift stock. He reveals the company plans to Carly, who buys 5,000 shares. Carly tells Don, who tells Erwin, and each buys 1,000 shares. They know that Carly got her information from Ben. When AirLift publicly announces its new app, Ben, Carly, Don, and Erwin sell their stock for a profit. -Refer to Fact Pattern 7-2. If Ben is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of AirLift stock was​

Corporate "outsiders" may be held liable for insider trading under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

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

The Securities Exchange Act of 1934 applies to all cases involving the trading of securities, except in private transactions.

Trail Bike Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Trail Bike is required to​

Paddle & Portage Tours Corporation is poised to issue securities that, under the Securities Act of 1933, are "exempt." This means that the securities can be sold​

Shoes & Sox Corporation is a public company whose shares are traded in the public securities markets. With respect to financial and other significant information concerning its securities, the Securities Act of 1933​

HVAC Heating & Air Conditioning, Inc., is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that HVAC's financial results are accurate and timely, the firm's senior officers must set up and maintain​

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

Issuers of securities offerings must comply with either federal or state securities laws, but not both.

Food Service Corporation, and its officers, directors, and shareholders, buy and sell securities. Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of a security​

Securities can be sold before the effective date of the registration statement without restrictions.

Media Marketing Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain​

State securities laws apply mainly to intrastate transactions.

For a defendant to be convicted in a criminal prosecution under the securities laws, there can be no reasonable doubt that the defendant knew he or she was acting wrongfully.

Space Trips Inc. files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. The firm is charged with violating the Securities Act of 1933. Its best defense is​

Misrepresenting or omitting facts from a registration statement or prospectus is known as puffery and does not violate the Securities Act of 1933.

Most securities cannot be resold without registration.