Exam 42: Securities Law Corporate Governance

Selling securities after the effective date of the registration statement results in liability.

Before filing the registration statement,an issuer cannot sell or offer to sell the securities.

"Forward-looking" financial forecasts are protected against liability for securities fraud.

Flux Corporation is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,Flux is subject to the direct corporate governance requirements of

Kirk is the chief financial officer of Lemon Corporation,which is re?quired to file certain financial statements with the Securities and Exchange Commission (SEC).Under the Sarbanes-Oxley Act of 2002,Kirk must personally

In May,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?

The Securities and Exchange Commission interprets federal securities laws,but does not investigate violations.

For criminal sanctions to be imposed under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5,scienter must not exist.

To raise $12 million to expand operations,Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated,but unaccredited investors.Star plans to notify the SEC of sales.Under the Securities Act of 1933,this issue may qualify as an "exempt" transaction

Fact Pattern 42-1A (Questions A6-A7 apply) Fresh Fruits & Veggies,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 42-1A.Fresh decides to sell its new securities via the Internet.This offering

The Securities Exchange Act of 1934 is a one-time disclosure law.

The Securities and Exchange Commission does not regulate the content of proxy statements.

Catalina promises high returns to Darby and other investors,who then agree to trust their funds to Catalina.She uses these funds to pay previous investors.This is

Fact Pattern 42-2A (Questions A13-A14 apply) Dhani,an accountant for Eureka,Inc.,learns of undisclosed com?pany plan?s to market a new laptop.Dhani buys 1,000 shares of Eureka stock.He re?veals the company plans to Fay,who buys 500 shares.Fay tells Geoff,who tells Hu,each of whom buy 100 shares.They knows that Fay got her informa?tion from Dhani.When Eureka publicly an?nounces its new laptop,Dhani,Fay,Geoff,and Hu sell their stock for a profit. -Refer to Fact Pattern 42-2A.Under the Securities Ex?change Act of 1934,Fay is most likely

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

Ridgeline Sports Gear,Inc.,is required to register its securities under Section 12 of the Securities Exchange Act of 1934.Section 16(b)of the act covers

Players Video Game Centers,Inc.,wants to issue stock of $1 million in a single offer?ing.Players must provide all investors with material in?forma?tion about itself,its business,and its securities if

Under the Sarbanes-Oxley Act of 2002,chief executive officers no longer need to certify the accuracy of information in corporate financial statements.

The Securities and Exchange Commission administrative law judges hear cases involving alleged securities law violations.

Most private,small-business,noninvestment company offers of securities are not exempt from the registration requirements.