Question 1

Registration by notification:

Accepted Answer

A)  is required by those issuers who do not have a proven record and who are not subject to the Securities Act of 1933. 
B)  refers to documents filed with the Securities & Exchange Commission (SE
C)  by a privately held company, declaring its intent to offer shares of its stock to the general public. 
C)  is required for those issuers of securities who must register with the SEC and the duplicate documents are filed with the state's administrative agency. 
D)  refers to the quality certification process in which an independent and accredited quality auditor conducts an on-site audit of a firm. 
E)  allows issuers to offer securities for sale automatically after a stated time period expire unless the administrative agency takes action to prevent the offering. 
A)  is required by those issuers who do not have a proven record and who are not subject to the Securities Act of 1933. 
B)  refers to documents filed with the Securities & Exchange Commission (SE
C)  by a privately held company, declaring its intent to offer shares of its stock to the general public. 
C)  is required for those issuers of securities who must register with the SEC and the duplicate documents are filed with the state's administrative agency. 
D)  refers to the quality certification process in which an independent and accredited quality auditor conducts an on-site audit of a firm. 
E)  allows issuers to offer securities for sale automatically after a stated time period expire unless the administrative agency takes action to prevent the offering.

Question 2

The Security Act of 1933 requires the preparation and distribution to potential investors of the:

Accepted Answer

A)  registration statement only. 
B)  registration statement and prospectus. 
C)  prospectus and licensing agreement. 
D)  registration statement, prospectus, and licensing agreement. 
E)  licensing agreement. 
A)  registration statement only. 
B)  registration statement and prospectus. 
C)  prospectus and licensing agreement. 
D)  registration statement, prospectus, and licensing agreement. 
E)  licensing agreement.

Question 3

The _____ regulates transfers of securities after the initial sale.

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 4

Sarbanes-Oxley limits personal loans from a company to its executives to one loan of no more than $10,000, amortized over five years, at a time.

Accepted Answer

A) True 
 B)False

Question 5

A defrauding seller usually benefits from an increase in the value of the securities.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is NOT true of the statute of limitations?

Accepted Answer

A)  The statute of limitations is a defense for both civil and criminal liability. 
B)  The basic limitations period is one year. 
C)  In no event may a suit be brought more than one year after the sale. 
D)  The one year limitations period does not start to run until the discovery of the untrue statement or omission. 
E)  The one year limitations period does not start to run until the time such discovery would have been made with reasonable diligence. 
A)  The statute of limitations is a defense for both civil and criminal liability. 
B)  The basic limitations period is one year. 
C)  In no event may a suit be brought more than one year after the sale. 
D)  The one year limitations period does not start to run until the discovery of the untrue statement or omission. 
E)  The one year limitations period does not start to run until the time such discovery would have been made with reasonable diligence.

Question 7

Restatements of financial reports have risen in number as a result of Sarbanes-Oxley because companies have made efforts to maintain appropriate compliance with the law.

Accepted Answer

A) True 
 B)False

Question 8

An insider is any person who owns more than _____ percent of any security.

Accepted Answer

A)  5 
B)  10 
C)  15 
D)  20 
E)  50 
A)  5 
B)  10 
C)  15 
D)  20 
E)  50

Question 9

What are the primary provisions of the Sarbanes-Oxley Act?

Accepted Answer

The Sarbanes-Oxley Act served to accompl

Question 10

The SEC applies the misappropriation theory of insider trading to force executives who file or certify incorrect financial statements to return bonuses and additional compensation received.

Accepted Answer

A) True 
 B)False

Question 11

Parties who are involved with or who promote the initial sale of securities fall into one or more of four roles. Mention these roles.

Accepted Answer

The Securities Act of 1933 regulates any

Question 12

What does Section 12 of the Securities Act of 1933 deal with?

Accepted Answer

Section 12 of the 1933 Act is divided in

Question 13

Plaintiffs can recover for harm done by false or misleading information in a prospectus even if the prospectus was not read or reviewed.

Accepted Answer

A) True 
 B)False

Question 14

Under Rule 10b-5, plaintiffs are entitled to:

Accepted Answer

A)  contemptuous damages. 
B)  consequential damages. 
C)  aggravated damages. 
D)  restitutionary damages. 
E)  punitive damages. 
A)  contemptuous damages. 
B)  consequential damages. 
C)  aggravated damages. 
D)  restitutionary damages. 
E)  punitive damages.

Question 15

The Securities Act of 1933 is a disclosure law with respect to the initial sale of securities to the public.

Accepted Answer

A) True 
 B)False

Question 16

The damages of a defrauded purchaser of securities:

Accepted Answer

A)  are measured at the time of purchase. 
B)  include a punitive amount to discourage further fraud. 
C)  are measured at the time the fraud is discovered. 
D)  are considered a "sunk cost" and are not recoverable. 
E)  include speculative damages. 
A)  are measured at the time of purchase. 
B)  include a punitive amount to discourage further fraud. 
C)  are measured at the time the fraud is discovered. 
D)  are considered a "sunk cost" and are not recoverable. 
E)  include speculative damages.

Question 17

Tombstone ads refer to:

Accepted Answer

A)  solicitations made during the waiting period. 
B)  notices filed during the posteffective period announcing that the sale of securities has ended. 
C)  announcements issued by the SEC warning potential investors that a company is being investigated for fraud. 
D)  feedback from the SEC requiring additional information or a clarification of supplied information needed to complete a filed registration statement. 
E)  the statement that is required to be filled with the SEC. 
A)  solicitations made during the waiting period. 
B)  notices filed during the posteffective period announcing that the sale of securities has ended. 
C)  announcements issued by the SEC warning potential investors that a company is being investigated for fraud. 
D)  feedback from the SEC requiring additional information or a clarification of supplied information needed to complete a filed registration statement. 
E)  the statement that is required to be filled with the SEC.

Question 18

"Benefit of the bargain" refers to the damages awarded to the buyer which is:

Accepted Answer

A)  designed to restore the injured party to the economic position he/she occupied at the time the contract was entered. 
B)  equal to the out-of-pocket expenses such as the legal fees incurred by the plaintiff. 
C)  equal to what the security was represented to be worth in the market. 
D)  equal to the combination of the out-of-pocket expenses and what the security was represented to be worth in the market. 
E)  equal to the difference between what he/she paid and what the security was represented to be worth. 
A)  designed to restore the injured party to the economic position he/she occupied at the time the contract was entered. 
B)  equal to the out-of-pocket expenses such as the legal fees incurred by the plaintiff. 
C)  equal to what the security was represented to be worth in the market. 
D)  equal to the combination of the out-of-pocket expenses and what the security was represented to be worth in the market. 
E)  equal to the difference between what he/she paid and what the security was represented to be worth.

Question 19

The _____ is a disclosure law which makes it illegal to use mails or any other means of interstate communication or transportation to sell securities without disclosing certain financial information to potential investors.

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 20

Which of the following statements is true of a seller?

Accepted Answer

A)  It refers to anyone who contracts with a purchaser or who is a motivating influence that causes the purchase transaction to occur. 
B)  It refers to the individual or business organization offering a security for sale to the public. 
C)  It refers to anyone who participates in the original distribution of securities by selling such securities for the issuer or by guaranteeing their sale. 
D)  It refers to a person with whom some article is left, usually pursuant to a contract who is responsible for the safe return of the article to the owner when the contract is fulfilled. 
E)  It refers to anyone who controls or is controlled by the issuer, such as a major stockholder of a corporation. 
A)  It refers to anyone who contracts with a purchaser or who is a motivating influence that causes the purchase transaction to occur. 
B)  It refers to the individual or business organization offering a security for sale to the public. 
C)  It refers to anyone who participates in the original distribution of securities by selling such securities for the issuer or by guaranteeing their sale. 
D)  It refers to a person with whom some article is left, usually pursuant to a contract who is responsible for the safe return of the article to the owner when the contract is fulfilled. 
E)  It refers to anyone who controls or is controlled by the issuer, such as a major stockholder of a corporation.

Exam 17: Financial and Securities Regulations

Registration by notification:

The Security Act of 1933 requires the preparation and distribution to potential investors of the:

The _____ regulates transfers of securities after the initial sale.

Sarbanes-Oxley limits personal loans from a company to its executives to one loan of no more than $10,000, amortized over five years, at a time.

A defrauding seller usually benefits from an increase in the value of the securities.

Which of the following is NOT true of the statute of limitations?

Restatements of financial reports have risen in number as a result of Sarbanes-Oxley because companies have made efforts to maintain appropriate compliance with the law.

An insider is any person who owns more than _____ percent of any security.

What are the primary provisions of the Sarbanes-Oxley Act?

The SEC applies the misappropriation theory of insider trading to force executives who file or certify incorrect financial statements to return bonuses and additional compensation received.

Parties who are involved with or who promote the initial sale of securities fall into one or more of four roles. Mention these roles.

What does Section 12 of the Securities Act of 1933 deal with?

Plaintiffs can recover for harm done by false or misleading information in a prospectus even if the prospectus was not read or reviewed.

Under Rule 10b-5, plaintiffs are entitled to:

The Securities Act of 1933 is a disclosure law with respect to the initial sale of securities to the public.

The damages of a defrauded purchaser of securities:

Tombstone ads refer to:

"Benefit of the bargain" refers to the damages awarded to the buyer which is:

The _____ is a disclosure law which makes it illegal to use mails or any other means of interstate communication or transportation to sell securities without disclosing certain financial information to potential investors.

Which of the following statements is true of a seller?

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