Question 1

Which of the following statements is true about blue-sky laws?

Accepted Answer

A)  They are state laws that provide penalties for fraudulent sales and permit the issuance of injunctions to protect investors from anticipated fraudulent acts. 
B)  They are state laws that give investors the information they need to make intelligent decisions about whether to purchase securities. 
C)  They provide civil penalties for selling fraudulent securities and conducting fraudulent transactions. 
D)  They give the bidder and the target company equal opportunities to present their cases to the shareholders. 
A)  They are state laws that provide penalties for fraudulent sales and permit the issuance of injunctions to protect investors from anticipated fraudulent acts. 
B)  They are state laws that give investors the information they need to make intelligent decisions about whether to purchase securities. 
C)  They provide civil penalties for selling fraudulent securities and conducting fraudulent transactions. 
D)  They give the bidder and the target company equal opportunities to present their cases to the shareholders. A

Question 2

Securities sold in exempt transactions are:

Accepted Answer

A)  exempt from registrations in all transactions. 
B)  exempt from registration on subsequent sales of the securities. 
C)  exempt from the registration requirements for those particular transactions only. 
D)  exempt from antifraud provisions of the 1933 Act. 
A)  exempt from registrations in all transactions. 
B)  exempt from registration on subsequent sales of the securities. 
C)  exempt from the registration requirements for those particular transactions only. 
D)  exempt from antifraud provisions of the 1933 Act. C

Question 3

Which of the following is true of Rule 10b-5 of the 1934 Act?

Accepted Answer

A)  Securities need not be registered under the 1933 Act or the 1934 Act for Rule 10b-5 to apply. 
B)  The rule applies only to transactions executed on a securities exchange. 
C)  The rule applies only to face-to-face transactions. 
D)  Misstatements or omissions of material fact, scienter, and reliance are not elements of Rule 10b-5. 
A)  Securities need not be registered under the 1933 Act or the 1934 Act for Rule 10b-5 to apply. 
B)  The rule applies only to transactions executed on a securities exchange. 
C)  The rule applies only to face-to-face transactions. 
D)  Misstatements or omissions of material fact, scienter, and reliance are not elements of Rule 10b-5. A

Question 4

Under the Securities Exchange Act of 1934,a 10-K annual report:

Accepted Answer

A)  must include audited financial statements for the fiscal year and current information about the conduct of business. 
B)  must include only a summarized and unaudited operating statement. 
C)  requires only summarized and unaudited figures on capitalization and shareholders' equity. 
D)  is required within 15 days of the end of any month in which any specified event occurs. 
A)  must include audited financial statements for the fiscal year and current information about the conduct of business. 
B)  must include only a summarized and unaudited operating statement. 
C)  requires only summarized and unaudited figures on capitalization and shareholders' equity. 
D)  is required within 15 days of the end of any month in which any specified event occurs.

Question 5

Which of the following is designed to stop speculative insider trading on the basis of insider information?

Accepted Answer

A)  Regulation of short-swing profits 
B)  Wash sale 
C)  Blue sky laws 
D)  Certificate of interest of participation 
A)  Regulation of short-swing profits 
B)  Wash sale 
C)  Blue sky laws 
D)  Certificate of interest of participation

Question 6

While auditing the financial statements of Forble Corp.(which are to be included in a Securities Act registration statement),Ernie,a certified public accountant,fails to review any of Forble's journal entries,does not read the details of meetings of the board of directors,and does not even speak with the comptroller of Forble.Consequently,Ernie does not discover that substantial loans,which went unmentioned in the financial statements,had been made to Forble officers.As a result,the registration statement omits any mention of the loans.Assuming the omitted fact is a material one and that Ernie is not an officer or director of Forble,does Ernie face potential liability under Section 11 of the Securities Act of 1933? Discuss the reasons for your answer.

Accepted Answer

Yes.Section 11 of the 1933 Act provides

Question 7

Which of the following is a feature of the Securities Exchange Act of 1934 but not the Act of 1933?

Accepted Answer

A)  It has several sections prohibiting fraud in securities transactions. 
B)  The 1934 Act requires additional information in the registration statement. 
C)  It has registration provisions for issuance of securities. 
D)  The 1934 Act requires periodic disclosure by issuers with publicly held equity securities. 
A)  It has several sections prohibiting fraud in securities transactions. 
B)  The 1934 Act requires additional information in the registration statement. 
C)  It has registration provisions for issuance of securities. 
D)  The 1934 Act requires periodic disclosure by issuers with publicly held equity securities.

Question 8

According to the registration requirements of the 1933 Act,a prospectus:

Accepted Answer

A)  should make forecasts of the annual return on a company's common stocks. 
B)  should include most of the information present in the registration statement. 
C)  should include statements that tout securities. 
D)  is a public offer by a bidder to purchase a target company's equity securities.
The 1933 Act requires the issuer of securities to register the securities with the SEC prior to their offer or sale to the public. The issuer must file the registration statement with the SEC. Most of the information in the registration statement must be included in the prospectus, which is the basic selling document of a 1933 Act registered offering. It must be furnished to every purchaser of the registered security prior to or concurrently with the delivery of the security to the purchaser. 
A)  should make forecasts of the annual return on a company's common stocks. 
B)  should include most of the information present in the registration statement. 
C)  should include statements that tout securities. 
D)  is a public offer by a bidder to purchase a target company's equity securities.
The 1933 Act requires the issuer of securities to register the securities with the SEC prior to their offer or sale to the public. The issuer must file the registration statement with the SEC. Most of the information in the registration statement must be included in the prospectus, which is the basic selling document of a 1933 Act registered offering. It must be furnished to every purchaser of the registered security prior to or concurrently with the delivery of the security to the purchaser.

Question 9

In a Rule 10b-5 case,_____.

Accepted Answer

A)  selective disclosure by a defendant doesn't make him liable for omission of material facts 
B)  the plaintiff must prove that the defendant acted with the intent to deceive, manipulate, or defraud 
C)  negligence on the part of the defendant is enough to make the defendant liable 
D)  the plaintiff is generally not required to prove that she relied on the defendant's false statement 
A)  selective disclosure by a defendant doesn't make him liable for omission of material facts 
B)  the plaintiff must prove that the defendant acted with the intent to deceive, manipulate, or defraud 
C)  negligence on the part of the defendant is enough to make the defendant liable 
D)  the plaintiff is generally not required to prove that she relied on the defendant's false statement

Question 10

Section 18 imposes liability on any person responsible for a false or misleading statement of material fact in any document filed with the SEC.

Accepted Answer

A) True 
 B)False

Question 11

What are the two types of securities that must be registered under the Securities Exchange Act of 1934?

Accepted Answer

Two types of securities must be register

Question 12

One of the principal regulatory components of the 1933 Act is _____.

Accepted Answer

A)  the prospectus 
B)  antifraud provisions 
C)  securities provisions 
D)  the registration statement 
A)  the prospectus 
B)  antifraud provisions 
C)  securities provisions 
D)  the registration statement

Question 13

Which of the following is true about Section 11 of the 1933 Act?

Accepted Answer

A)  To prove liability, a purchaser only has to prove that the defendant is in one of the three classes of persons liable under Section 11. 
B)  Directors who are not signers are not liable for false information after purchase of the security. 
C)  Under Section 11, the purchaser has the burden of proving that he or she exercised due diligence. 
D)  The defendant can escape liability if the purchaser did not read the registration statement. 
A)  To prove liability, a purchaser only has to prove that the defendant is in one of the three classes of persons liable under Section 11. 
B)  Directors who are not signers are not liable for false information after purchase of the security. 
C)  Under Section 11, the purchaser has the burden of proving that he or she exercised due diligence. 
D)  The defendant can escape liability if the purchaser did not read the registration statement.

Question 14

Which of the following statements is true of securities regulation?

Accepted Answer

A)  The Securities Exchange Act of 1934 requires periodic disclosures from issuers of securities. 
B)  The 1933 Act regulates the sale of securities while they are passing from the hands of the issuer into the hands of the private investors. 
C)  The Securities and Exchange Commission was created by the 1933 Act. 
D)  Unlike other federal administrative agencies, the Securities and Exchange Commission has only legislative functions. 
A)  The Securities Exchange Act of 1934 requires periodic disclosures from issuers of securities. 
B)  The 1933 Act regulates the sale of securities while they are passing from the hands of the issuer into the hands of the private investors. 
C)  The Securities and Exchange Commission was created by the 1933 Act. 
D)  Unlike other federal administrative agencies, the Securities and Exchange Commission has only legislative functions.

Question 15

The executive branch of the Securities and Exchange Commission:

Accepted Answer

A)  decides whether a person has violated the securities statutes or not. 
B)  controls securities transactions by creating and passing regulations. 
C)  promulgates rules and regulations. 
D)  brings enforcement actions against alleged violators of the statutes. 
A)  decides whether a person has violated the securities statutes or not. 
B)  controls securities transactions by creating and passing regulations. 
C)  promulgates rules and regulations. 
D)  brings enforcement actions against alleged violators of the statutes.

Question 16

Insurance policies are exempt from both the registration and antifraud provisions of the 1933 Act.

Accepted Answer

A) True 
 B)False

Question 17

The U.S.Supreme Court has ruled that fraud claims under Section 10(b)and Rule 10b-5 must be brought:

Accepted Answer

A)  within one year after discovery of the facts constituting the violation and no more than three years after the violation has occurred. 
B)  within three years after discovery of the facts constituting the violation and no more than five years after the violation has occurred. 
C)  within five years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred. 
D)  within two years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred. 
A)  within one year after discovery of the facts constituting the violation and no more than three years after the violation has occurred. 
B)  within three years after discovery of the facts constituting the violation and no more than five years after the violation has occurred. 
C)  within five years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred. 
D)  within two years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred.

Question 18

An investment contract:

Accepted Answer

A)  is used to bring enforcement actions against investors who violate provisions of the 1934 Act. 
B)  regulates the sale of securities while they are passing from the hands of the issuer into the hands of the public investors. 
C)  is defined as an investment of money in a common enterprise with an expectation of profits from the efforts of others. 
D)  is the basic investment document of a 1933 Act registered offering. 
A)  is used to bring enforcement actions against investors who violate provisions of the 1934 Act. 
B)  regulates the sale of securities while they are passing from the hands of the issuer into the hands of the public investors. 
C)  is defined as an investment of money in a common enterprise with an expectation of profits from the efforts of others. 
D)  is the basic investment document of a 1933 Act registered offering.

Question 19

The safe harbor legislation:

Accepted Answer

A)  is implemented with the goal of giving the bidder and the target company equal opportunities to present their cases to the shareholders. 
B)  applies only when the target company's equity securities are registered under the 1934 Act. 
C)  holds companies immune from liability as long as they warn the public about factors that might undermine their forecasts. 
D)  applies to transactions executed on a securities exchange as well as face-to-face transactions. 
A)  is implemented with the goal of giving the bidder and the target company equal opportunities to present their cases to the shareholders. 
B)  applies only when the target company's equity securities are registered under the 1934 Act. 
C)  holds companies immune from liability as long as they warn the public about factors that might undermine their forecasts. 
D)  applies to transactions executed on a securities exchange as well as face-to-face transactions.

Question 20

A bidder making a tender offer must file a tender offer statement with the SEC before the offer is made.

Accepted Answer

A) True 
 B)False

Exam 31: Securities Regulation

Which of the following statements is true about blue-sky laws?

Securities sold in exempt transactions are:

Which of the following is true of Rule 10b-5 of the 1934 Act?

Under the Securities Exchange Act of 1934,a 10-K annual report:

Which of the following is designed to stop speculative insider trading on the basis of insider information?

Which of the following is a feature of the Securities Exchange Act of 1934 but not the Act of 1933?

According to the registration requirements of the 1933 Act,a prospectus:

In a Rule 10b-5 case,_____.

Section 18 imposes liability on any person responsible for a false or misleading statement of material fact in any document filed with the SEC.

What are the two types of securities that must be registered under the Securities Exchange Act of 1934?

One of the principal regulatory components of the 1933 Act is _____.

Which of the following is true about Section 11 of the 1933 Act?

Which of the following statements is true of securities regulation?

The executive branch of the Securities and Exchange Commission:

Insurance policies are exempt from both the registration and antifraud provisions of the 1933 Act.

The U.S.Supreme Court has ruled that fraud claims under Section 10(b)and Rule 10b-5 must be brought:

An investment contract:

The safe harbor legislation:

A bidder making a tender offer must file a tender offer statement with the SEC before the offer is made.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Propertypart Two Contracts

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remediespart Three Sales

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contractspart Four Agency and Employment

The Agency Relationship-Creation, duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws-Part Five Business Organizations

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Legal Liability of Accountantspart Six Property

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance-Part Seven Commercial Paper

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers-Part Eight Credit Transactions

Introduction to Security

Security Interests in Personal Property

Bankruptcy-Part Nine Government Regulation

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

Filters