Exam 41: Corporationssecurities Law Corporate Governance

Any corporation with more than $10 million in assets must register with the Securi?ties and Exchange Commission.

Instant Retail Company has assets of less than $10 million and fewer than five hun?dred shareholders. Jiffy Outlets, Inc., has assets of more than $10 mil?lion and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to

Only outsiders who would ordinarily be deemed fiduciaries of the corporations in whose stock they trade can be liable for insider trading.

Scienter is a requirement for liability under Section 16(b) of the Securities Ex?change Act of 1934.

Bild-It-Rite Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that Bild-It-Rite must

A registration statement must state how a corporation plans to use the proceeds from the sale of the securities.

To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock in other companies, and plans to register an initial public of?fer?ing under the Securities Act of 1933. SEC Rule l0b-5 covers

New Discoveries Corporation, and its officers, directors, and share?holders, buy and sell securities. Section 10(b) of the Securities Ex?change Act of 1934 applies to

Fact Pattern 41-1A 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 41-1A. If Dhani is liable under the Securities Ex?change Act of 1934, it will be because the infor?mation on which he based his purchase of Eureka stock was

Lex, a salesperson for Macro Corporation, learns that Macro will in?crease the dividend it pays to shareholders. Lex buys 1,000 shares of Macro stock. When the price increases, Lex sells his shares for a profit. Lex would not be liable for insider trading if the information about the dividend was

Readmore Bookstore Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by

Sales of securities may not occur until twenty days after registration.

In May 2001, 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?

Flite Airline Corporation is poised to issue securities in a transaction that, under the Securities Act of 1933, is "exempt." This enables Flite to

RingTone Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933, a security is

Anyone who receives inside information as a result of an insider's breach of his or her fiduciary duty can be liable under SEC Rule 10b-5.

Securities of charitable organizations are exempt from the registration requirement of the 1933 Securities Act.

Heavy Hauling, Inc., is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that Heavy Hauling's financial results are accurate and timely, the firm's senior officers must set up and maintain

The Securities Exchange Act of 1934 provides for continuous, periodic disclosures by publicly held corporations.

Delta Corporation is a noninvestment company that wants to is?sue stock of $3 million in a twelve-month period. Delta, with less than $20 mil?lion in annual sales, qualifies as a small business issuer. Before Delta sells the stock, it must provide investors with