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

Della,an officer for Energy Petrol Corporation (EPC),buys 100 shares of EPC stock.One week later,EPC announces that it will merge with a competitor,Fuel Oil Company,and the price of EPC stock increases.One month later,Della sells her shares for a profit.Under Section 16(b) of the Securities Exchange Act of 1934,Della would not be liable if,after buying the stock,she had waited

In May 2013,National Biotech Corporation generally advertises that it will make a $4 million offering of stock in June.National makes the offer-ing as advertised and,ten days after the first sale,notifies the Securities and Exchange Commission (SEC).All buyers of the stock are given mate-rial information about the company,its business,and the stock.Before the end of the year,the offering is completely sold out.The buyers include forty unaccredited investors and fifty accredited investors.National does not register the offering.The SEC files a suit against National,seeking civil sanctions on the ground that this offering was not exempt from reg-istration.National argues that the applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that because of this exemp-tion,any resale of the stock is also exempt.Who is correct?

Fresh Cream,Inc.,wants to make an initial public offering of securi-ties.Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933. -Refer to Fact Pattern 26-1.Fresh decides to sell its new securities via the Internet.This offering

The Securities Exchange Act of 1934 provides for continuous,periodic disclosures by publicly held corporations.

Before filing a registration statement,an issuer must offer to sell securities.

When Looking Glass Corporation wishes to issue certain securities,it must provide sufficient in-for-mation for Alice,and other unsophisticated investors,to evaluate the fi-nancial risk involved.Specifically,the law imposes liability for making a false statement or omission that is "material." What sort of information would Alice consider material?

Section 10(b) of the Securities Exchange Act of 1934 covers only corpo-rate officers and di-rectors.

To raise capital to form Plasticity Corporation with Quinn,Rona sells bonds and stock in other companies,and plans to register an initial public of-fer-ing under the Securities Act of 1933.SEC Rule l0b-5 covers

Violations of the Securities Exchange Act of 1934 may be subject to criminal prosecution,but not civil liability.

Madison is the chief executive officer of Nitro Medico,Inc.,which is required to file certain financial reports with the Securities and Exchange Commission (SEC).Under the Sarbanes-Oxley Act of 2002,Madison must

"Blue sky laws" regulate securities data stored in cloud computing servers.

One of the most common forms of securities are bonds issued by corporations.