Question 1

What must an expert prove to successfully present the defense of due diligence?

Accepted Answer

To establish the due diligence defense, the expert must prove that a reasonable investigation of the financial statements of the issuer and controlling persons was conducted. As the result of this investigation, an expert exercising due diligence must prove that there was no reason to believe any of the information in the registration statement or prospectus was False or misleading.

Question 2

The registration statement to be filed with the SEC includes:

Accepted Answer

A)  statements which gives the holder the right to purchase securities at a stipulated price within a specified time limit. 
B)  a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise. 
C)  statements that show ownership of a bond, stock or other security. 
D)  financial statements and a report on operations, issued by a company to its shareholders at the company's fiscal year-end. 
E)  a detailed disclosure of financial information about the issuer and the controlling individuals involved in the offering of securities for sale to the public. 
A)  statements which gives the holder the right to purchase securities at a stipulated price within a specified time limit. 
B)  a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise. 
C)  statements that show ownership of a bond, stock or other security. 
D)  financial statements and a report on operations, issued by a company to its shareholders at the company's fiscal year-end. 
E)  a detailed disclosure of financial information about the issuer and the controlling individuals involved in the offering of securities for sale to the public. E

Question 3

A tipster is a person who learns of nonpublic information from an insider.

Accepted Answer

A) True 
 B)False  False

Question 4

The Public Company Accounting Oversight Board members are appointed by the:

Accepted Answer

A)  President. 
B)  Senate. 
C)  FTC. 
D)  Congress. 
E)  SEC. 
A)  President. 
B)  Senate. 
C)  FTC. 
D)  Congress. 
E)  SEC.

Question 5

What are the four common exemptions from blue sky laws that have been identified?

Accepted Answer

Individual states have varied in their a

Question 6

Under Sarbanes-Oxley, what types of services are auditing firms prohibited from providing to companies?

Accepted Answer

One of the purposes of Sarbanes-Oxley is

Question 7

A prospectus is filed during the:

Accepted Answer

A)  prefiling period. 
B)  waiting period. 
C)  preeffective period. 
D)  posteffective period. 
E)  elimination period. 
A)  prefiling period. 
B)  waiting period. 
C)  preeffective period. 
D)  posteffective period. 
E)  elimination period.

Question 8

The regulation of securities began as a program to:

Accepted Answer

A)  prohibit an individual's service as an officer or director. 
B)  recover triple damages in civil actions against a user of nonpublic information. 
C)  help the United States overcome the Great Depression of the 1930s. 
D)  eliminate liabilities for short-swing profits made by insiders. 
E)  help potential investors to make investment decisions based on less certain criteria. 
A)  prohibit an individual's service as an officer or director. 
B)  recover triple damages in civil actions against a user of nonpublic information. 
C)  help the United States overcome the Great Depression of the 1930s. 
D)  eliminate liabilities for short-swing profits made by insiders. 
E)  help potential investors to make investment decisions based on less certain criteria.

Question 9

Prohibitions against insiders from engaging in short-swing profits are enforced by the:

Accepted Answer

A)  SEC. 
B)  FTC. 
C)  SEC and FTC. 
D)  issuer of the security or by a person who owns a security of the issuer. 
E)  issuer of the security or the SEC. 
A)  SEC. 
B)  FTC. 
C)  SEC and FTC. 
D)  issuer of the security or by a person who owns a security of the issuer. 
E)  issuer of the security or the SEC.

Question 10

Materiality is one of the several defenses that is recognized by the Securities Act of 1933 and may be used to avoid civil liability. Explain "materiality".

Accepted Answer

The SEC and the courts have attempted to

Question 11

According to the Securities Act of 1933, which of the following is illegal during the waiting period?

Accepted Answer

A)  Soliciting buyers for a company's securities. 
B)  Receiving offers to buy a company's securities. 
C)  Selling security subject to the act. 
D)  Soliciting through the use of a summary prospectus. 
E)  Soliciting offers for later acceptance. 
A)  Soliciting buyers for a company's securities. 
B)  Receiving offers to buy a company's securities. 
C)  Selling security subject to the act. 
D)  Soliciting through the use of a summary prospectus. 
E)  Soliciting offers for later acceptance.

Question 12

Sarbanes-Oxley has increased the statute of limitations for various infringements of both the 1933 Act and the 1934 Act.

Accepted Answer

A) True 
 B)False

Question 13

The SEC's right to conduct investigations is based on:

Accepted Answer

A)  their quasi-executive power. 
B)  their quasi-legislative power. 
C)  their quasi-judicial power. 
D)  an executive order. 
E)  an injunction. 
A)  their quasi-executive power. 
B)  their quasi-legislative power. 
C)  their quasi-judicial power. 
D)  an executive order. 
E)  an injunction.

Question 14

What are the common issues regarding litigation under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934?

Accepted Answer

The common issues regarding litigation u

Question 15

The Financial Stability Oversight Council was established by the:

Accepted Answer

A)  Securities Exchange Act of 1934. 
B)  Sherman Antitrust Act of 1890. 
C)  Sarbanes-Oxley Act of 2002. 
D)  Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 
E)  Securities Act of 1933. 
A)  Securities Exchange Act of 1934. 
B)  Sherman Antitrust Act of 1890. 
C)  Sarbanes-Oxley Act of 2002. 
D)  Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 
E)  Securities Act of 1933.

Question 16

What are tombstone ads and when do they occur?

Accepted Answer

Tombstone ads are brief announcements id

Question 17

Under the Sarbanes-Oxley Act, whistleblowers that suffer retaliation are able to recover civil damages and can be reinstated if terminated improperly.

Accepted Answer

A) True 
 B)False

Question 18

The blue sky laws can apply to securities subject to federal laws as well as to those securities exempt from the federal statutes.

Accepted Answer

A) True 
 B)False

Question 19

Under the 1934 Act, a business organization found guilty of filing false or misleading documents with the SEC may be fined up to:

Accepted Answer

A)  $81,000,000. 
B)  $55,000,000. 
C)  $25,000,000. 
D)  $50,000,000. 
E)  $75,000,000. 
A)  $81,000,000. 
B)  $55,000,000. 
C)  $25,000,000. 
D)  $50,000,000. 
E)  $75,000,000.

Question 20

How does the Securities Exchange Act of 1934 seek to deal with insider transactions?

Accepted Answer

Section 16 of the Securities Exchange Ac

Exam 17: Financial and Securities Regulations

What must an expert prove to successfully present the defense of due diligence?

The registration statement to be filed with the SEC includes:

A tipster is a person who learns of nonpublic information from an insider.

The Public Company Accounting Oversight Board members are appointed by the:

What are the four common exemptions from blue sky laws that have been identified?

Under Sarbanes-Oxley, what types of services are auditing firms prohibited from providing to companies?

A prospectus is filed during the:

The regulation of securities began as a program to:

Prohibitions against insiders from engaging in short-swing profits are enforced by the:

Materiality is one of the several defenses that is recognized by the Securities Act of 1933 and may be used to avoid civil liability. Explain "materiality".

According to the Securities Act of 1933, which of the following is illegal during the waiting period?

Sarbanes-Oxley has increased the statute of limitations for various infringements of both the 1933 Act and the 1934 Act.

The SEC's right to conduct investigations is based on:

What are the common issues regarding litigation under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934?

The Financial Stability Oversight Council was established by the:

What are tombstone ads and when do they occur?

Under the Sarbanes-Oxley Act, whistleblowers that suffer retaliation are able to recover civil damages and can be reinstated if terminated improperly.

The blue sky laws can apply to securities subject to federal laws as well as to those securities exempt from the federal statutes.

Under the 1934 Act, a business organization found guilty of filing false or misleading documents with the SEC may be fined up to:

How does the Securities Exchange Act of 1934 seek to deal with insider transactions?

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