Exam 7: Securities Law and Corporate Governance

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. Under the Securities Exchange Act of 1934, Carly is most likely​

Boats & Ships Corporation is a public company, which Colorado regulates and in which Dennis invests. The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to​

As part of a stock offering for Design Studio Corporation, the firm's accountant Eve intentionally misrepresents material facts in the prospectus. Fred buys the stock unaware of the misrepresentation and suffers a loss. Eve may be subject to​

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates​

Rico does not work for Street Bikes Company, but wrongfully obtains inside information concerning the firm. Based on the information, Rico buys and sells Street Bikes stock for personal gain. The Securities and Exchange Commission prosecutes Rico, arguing that he is liable because he stole information rightfully belonging to another. This argument is​

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?​

Brian, the chief executive officer of Chairs & Tables, Inc., intentionally understates the amount of the firm's debts in information provided to investors as part of an issue of stock. Darla buys the stock and suffers a loss. Brian may be subject to​

Leo is the chief financial officer of Moneysworth Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Leo must personally​

OnSpec, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving​

Small-business issues can use an integrated registration and reporting system that requires simpler forms than the full registration system.

Fact Pattern 7-1 College Bound, Inc., markets test and study prep materials and courses. College Bound wants to make an initial public offering of securities. The firm believes that it qualifies for an exemption under Regulation A from the full registration requirement of the Securities Act of 1933. -Refer to Fact Pattern 7-1. College Bound decides to sell its new securities via the Internet. Most likely, this offering​

While the Securities and Exchange Commission reviews a registration statement for completeness, the securities can be offered for sale but not sold.

Guitar Factory Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by​

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

Orbital Flights, Inc., is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 16(b) of the act covers​

When a security is exempt from the registration requirements, its offering is also exempt from the provisions of the Securities Act of 1933.

While the Securities and Exchange Commission reviews a registration statement for completeness, most issuers can distribute a free-writing prospectus.

Online crowdfunding can be exempt from the registration requirements.

The Securities and Exchange Commission does not regulate the content of proxy statements.

Flo, a salesperson for Gear Oil Corporation, learns that the firm will increase the dividend it pays to shareholders. She buys 10,000 shares of company stock. When the dividend is announced to the public and the price of the stock increases, she sells his shares for a profit. She would not be liable for insider trading if the information about the dividend was​