Exam 26: Investor Protection, insider Trading, and Corporate Governance

Global Investments Corporation buys and sells securities.Section 10(b) of the Securities Ex-change Act of 1934 applies to

Celfone 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

A free-writing prospectus may be used before the Securities and Exchange Commission completes its review of a related registration statement.

Against a charge of a violation of the Securities Act of 1933,only an issuer of stock can assert the due diligence defense.

Any corporation with less than $10 million in assets and fewer than five hundred shareholders must register their securities with the Securi-ties and Exchange Commission.

Hi-Five Aero Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934.Section 14(a) of the act regulates

A corporation whose security does not qualify for an exemption can avoid the cost and complexity associated with registration.

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

Corporations' chief executive officers are directly accountable for the accuracy of financial statements filed with the Securities and Exchange Commission.

GR8 Stuf Company 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.GR8 Stuf is charged with violating the Securities Act of 1933.GR8 Stuf's best defense is

Readmore Bookstore Corporation files a registration statement with the Securities and Exchange Commission and provides a prospectus describing the securities to investors.These items are intended to provide sufficient information so that the financial risks involved can be evaluated by

North American Properties,Inc.,and its officers,directors,and share-holders,buy and sell securities.Section 16(b) of the Securities Exchange Act of 1934 covers

Generally,stock offerings that involve a small dollar amount are ex-empt from the registration requirement.

A registration statement must state how a corporation plans to use the proceeds from the sale of the securities.

Dhani,an accountant for Eureka,Inc.,learns of undisclosed com-pany plan-s to market a new laptop.Dhani buys 1,000 shares of Eureka stock.He re-veals the company plans to Fay,who buys 500 shares.Fay tells Geoff,who tells Hu.Both Geoff and Hu buy 100 shares.They know that Fay got her informa-tion from Dhani.When Eureka publicly an-nounces its new laptop,Dhani,Fay,Geoff,and Hu sell their stock for a profit. -Refer to Fact Pattern 26-3.Under the Securities Ex-change Act of 1934,Fay is most likely

A corporation can recapture any profits realized by an insider on any purchase or sale of the firm's stock within any six-month period.

Dee,an accountant,does not work for Emergent Company,but wrong-fully obtains inside information concerning Emergent.Based on the in-forma-tion,Dee buys and sells Emergent stock for personal gain.The Securities and Exchange Commission prose-cutes Dee,arguing that she is liable because she stole in-formation right-fully belonging to another.This argument is

Sid,a director of Tech Software Company,learns that a Tech engineer has developed a new,exciting video game.Sid buys Tech stock and tells his friend Uri,who also buys Tech stock.When the new game is released three weeks later,Sid and Uri sell their stock for a big profit. -Refer to Fact Pattern 26-2.Under SEC Rule l0b-5,Sid would not be li-able if he had waited to buy Tech stock until

The key to liability under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether undisclosed inside information is material.