Question 1

Under Rule 10b-5 of the Securities Act of 1934,a plaintiff has the burden of proof to establish that the defendant acted:

Accepted Answer

A) with negligence. 
B) with scienter. 
C) with malice. 
D) in concert with others. 
A) with negligence. 
B) with scienter. 
C) with malice. 
D) in concert with others. B

Question 2

Section 5 of the 1933 Act provides an exemption from registration for transactions of securities by any person other than an issuer,underwriter,or dealer.

Accepted Answer

A) True 
 B)False  False

Question 3

Section 16(a)of the 1934 Act prohibits statutory insiders from disclosing their ownership of their company's securities for the first 10 days of ownership.

Accepted Answer

A) True 
 B)False  False

Question 4

Section 11 of the 1933 Act provides civil liabilities for damages when a 1933 Act registration statement on its effective date misstates or omits a material fact.

Accepted Answer

A) True 
 B)False

Question 5

A company is not required to disclose merger negotiations if three requirements are met.Which of the following is not one of those requirements?

Accepted Answer

A) The company did not make any prior disclosures about the merger negotiations. 
B) Disclosure is not compelled by other SEC rules. 
C) Management determines that disclosure would jeopardize completion of the merger transaction. 
D) The company has not been part of a merger in the past six months. 
A) The company did not make any prior disclosures about the merger negotiations. 
B) Disclosure is not compelled by other SEC rules. 
C) Management determines that disclosure would jeopardize completion of the merger transaction. 
D) The company has not been part of a merger in the past six months.

Question 6

An offering circular is a disclosure document required under Regulation A of the SEC for a(n)________ offering exemption from the registration provisions of the 1933 Act.

Accepted Answer

A) intrastate 
B) interstate 
C) private 
D) small 
A) intrastate 
B) interstate 
C) private 
D) small

Question 7

Kirrah Company makes a registered offering of its common shares under the Securities Act of 1933.A year after the offering,the federal government cancels a contract with Kirrah.The contract had provided and was expected to continue to provide 30 percent of Kirrah's business.The material risks section of the registration statement failed to state that the federal government provided 30 percent of Kirrah's business and that the federal government had the right to terminate the contract at any time.Among others,Amy Arston,the president and chief executive officer of Kirrah,is sued by purchasers of the shares under Section 11 of the Securities Act.What is Amy's due diligence defense under Section 11? Is Amy likely to be able to prove she met that defense?

Accepted Answer

Amy,as the president and CEO,who is a no

Question 8

Which of the following demonstrates the timeline of decision makers from the initial SEC hearing to the final appeal?

Accepted Answer

A) Administrative law judge,U.S.District Court,U.S.Court of Appeals 
B) Commissioners of the SEC,U.S.Court of Appeals,U.S.Supreme Court 
C) Commissioners of the SEC,U.S.District Court,U.S.Court of Appeals 
D) Administrative law judge,commissioners of the SEC,U.S.Court of Appeals 
A) Administrative law judge,U.S.District Court,U.S.Court of Appeals 
B) Commissioners of the SEC,U.S.Court of Appeals,U.S.Supreme Court 
C) Commissioners of the SEC,U.S.District Court,U.S.Court of Appeals 
D) Administrative law judge,commissioners of the SEC,U.S.Court of Appeals

Question 9

Which of the following could be considered as an "insider" under the 1934 Securities and Exchange Act?

Accepted Answer

A) Directors of the corporation 
B) Any employee entrusted with information that is being held secret to the public 
C) The Secretary of State 
D) Both directors of the corporation and any employee entrusted with information that is being held secret to the public. 
A) Directors of the corporation 
B) Any employee entrusted with information that is being held secret to the public 
C) The Secretary of State 
D) Both directors of the corporation and any employee entrusted with information that is being held secret to the public.

Question 10

The "fraud-on-the-market-theory" used in some cases to establish liability under Rule 10b-5 of the Securities Act of 1934 is an indirect way of establishing which of the following elements of proof?

Accepted Answer

A) The defendant acted with negligence. 
B) The defendant acted with scienter. 
C) The plaintiff's reliance. 
D) The plaintiff's due diligence. 
A) The defendant acted with negligence. 
B) The defendant acted with scienter. 
C) The plaintiff's reliance. 
D) The plaintiff's due diligence.

Question 11

While auditing the financial statements of Merlyn Company,Arturo Artinez discovers nonpublic,confidential information that Merlyn's earnings will be larger than earlier projected.Arturo informs his sister Selena about this,telling her,"You can make a lot of money using this information because it isn't public yet.Be discreet,however,because I'm not supposed to give you this information." Selena uses the information to purchase 20,000 shares of Merlyn.Three weeks later when,Merlyn releases the financial statements showing its actual earnings,the price of its shares rises and Selena earns a $120,000 profit.Has Selena violated Rule 10b-5 of the Securities Exchange Act?

Accepted Answer

Yes,Selena has violated Rule 10b-5 of th

Question 12

Section 4(a)(2)of the 1933 Act covers the ________ offering exemption from the registration provisions.

Accepted Answer

A) intrastate 
B) interstate 
C) private 
D) small 
A) intrastate 
B) interstate 
C) private 
D) small

Question 13

State securities laws are known as "blue-sky laws".

Accepted Answer

A) True 
 B)False

Question 14

Northern Company is a small issuer who wishes to solicit investors to buy its securities during the pre-filing period.As the advertising budget of the company is not large,Northern has decided to advertise during the pre-filing period by using a website.This solicitation of shares is:

Accepted Answer

A) in violation of the Prohibition of Solicitation Act. 
B) permitted as the Internet has strong potential for attracting investors. 
C) in violation of Rule 505 and Rule 506 of Regulation D. 
D) allowed provided SEC gives written permission. 
A) in violation of the Prohibition of Solicitation Act. 
B) permitted as the Internet has strong potential for attracting investors. 
C) in violation of Rule 505 and Rule 506 of Regulation D. 
D) allowed provided SEC gives written permission.

Question 15

The purpose of securities regulation is to make issuers and sellers of securities have a duty to disclose important information.

Accepted Answer

A) True 
 B)False

Question 16

The Uniform Securities Act permits an issuer to register by coordination,which means the issuer:

Accepted Answer

A) can file the 1933 Act registration statement with the state securities administrator. 
B) becomes exempt from registration under state securities registration law. 
C) needs to file under the state securities registration law only and not the 1933 Act. 
D) need not register the securities statement once he/she has registered under the 1933 Act. 
A) can file the 1933 Act registration statement with the state securities administrator. 
B) becomes exempt from registration under state securities registration law. 
C) needs to file under the state securities registration law only and not the 1933 Act. 
D) need not register the securities statement once he/she has registered under the 1933 Act.

Question 17

Under the Securities Act of 1933,the definition of a security excludes a promissory note that matures not more than nine months from the date of issuance.

Accepted Answer

A) True 
 B)False

Question 18

Under the Securities Act of 1933,the registration of securities which are offered to the public in interstate commerce is:

Accepted Answer

A) directed toward minimizing investor exposure to financially risky securities. 
B) not required unless the issuer is a corporation. 
C) mandatory unless the cost to the issuer is "prohibitive" as defined in the SEC regulations. 
D) required unless the offering of the securities are exempt from registration. 
A) directed toward minimizing investor exposure to financially risky securities. 
B) not required unless the issuer is a corporation. 
C) mandatory unless the cost to the issuer is "prohibitive" as defined in the SEC regulations. 
D) required unless the offering of the securities are exempt from registration.

Question 19

The maximum penalty for any person who willfully violates the Securities Act of 1933 or its rules and regulations is a $20,000 fine and 10 years' imprisonment.

Accepted Answer

A) True 
 B)False

Question 20

Baronet Company is a publicly owned company whose shares are traded on the NYSE.Baronet acquired a small manufacturing plant in Nevada as part of its strategic growth plan.Under the 1934 Act,which of the following reports must Baronet file with the SEC within four business days of this event?

Accepted Answer

A) The 10-K 
B) The 8-Q 
C) The 10-Q 
D) The 8-K 
A) The 10-K 
B) The 8-Q 
C) The 10-Q 
D) The 8-K

Exam 45: Securities Regulation

Under Rule 10b-5 of the Securities Act of 1934,a plaintiff has the burden of proof to establish that the defendant acted:

Section 5 of the 1933 Act provides an exemption from registration for transactions of securities by any person other than an issuer,underwriter,or dealer.

Section 16(a)of the 1934 Act prohibits statutory insiders from disclosing their ownership of their company's securities for the first 10 days of ownership.

Section 11 of the 1933 Act provides civil liabilities for damages when a 1933 Act registration statement on its effective date misstates or omits a material fact.

A company is not required to disclose merger negotiations if three requirements are met.Which of the following is not one of those requirements?

An offering circular is a disclosure document required under Regulation A of the SEC for a(n)________ offering exemption from the registration provisions of the 1933 Act.

Which of the following demonstrates the timeline of decision makers from the initial SEC hearing to the final appeal?

Which of the following could be considered as an "insider" under the 1934 Securities and Exchange Act?

The "fraud-on-the-market-theory" used in some cases to establish liability under Rule 10b-5 of the Securities Act of 1934 is an indirect way of establishing which of the following elements of proof?

Section 4(a)(2)of the 1933 Act covers the ________ offering exemption from the registration provisions.

State securities laws are known as "blue-sky laws".

Northern Company is a small issuer who wishes to solicit investors to buy its securities during the pre-filing period.As the advertising budget of the company is not large,Northern has decided to advertise during the pre-filing period by using a website.This solicitation of shares is:

The purpose of securities regulation is to make issuers and sellers of securities have a duty to disclose important information.

The Uniform Securities Act permits an issuer to register by coordination,which means the issuer:

Under the Securities Act of 1933,the definition of a security excludes a promissory note that matures not more than nine months from the date of issuance.

Under the Securities Act of 1933,the registration of securities which are offered to the public in interstate commerce is:

The maximum penalty for any person who willfully violates the Securities Act of 1933 or its rules and regulations is a $20,000 fine and 10 years' imprisonment.

Baronet Company is a publicly owned company whose shares are traded on the NYSE.Baronet acquired a small manufacturing plant in Nevada as part of its strategic growth plan.Under the 1934 Act,which of the following reports must Baronet file with the SEC within four business days of this event?

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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