Question 1

Securities that are exempt from the registration requirement can not generally be resold without being registered.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  as is. 
B)  if all of the investors are also given certain material information. 
C)  if the offering is also made available to the general public. 
D)  under no circumstances. 
A)  as is. 
B)  if all of the investors are also given certain material information. 
C)  if the offering is also made available to the general public. 
D)  under no circumstances.

Question 6

Hobie, the chief executive officer of Ideal Gamers, Inc. (IGI), intentionally understates the amount of IGI's debts in information provided to investors as part of an issue of IGI stock. Jack buys the stock and suffers a loss. Hobie may be subject to

Accepted Answer

A)  government prosecution and Jack's suit. 
B)  neither government prosecution nor Jack's suit. 
C)  only government prosecution. 
D)  only Jack's suit. 
A)  government prosecution and Jack's suit. 
B)  neither government prosecution nor Jack's suit. 
C)  only government prosecution. 
D)  only Jack's suit.

Question 7

Della, an officer for Energy Petrol Corporation (EPC), buys 100 shares of EPC stock. One week later, EPC announces that it will merge with a competitor, Fuel Oil Company, and the price of EPC stock increases. One month later, Della sells her shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Della would not be liable if, after buying the stock, she had waited

Accepted Answer

A)  less than fourteen days to sell it. 
B)  more than six months to sell it. 
C)  ninety days to sell it. 
D)  two months to sell it. 
A)  less than fourteen days to sell it. 
B)  more than six months to sell it. 
C)  ninety days to sell it. 
D)  two months to sell it.

Question 8

Lex, a salesperson for Macro Corporation, learns that Macro will increase 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

Accepted Answer

A)  material when he sold the stock. 
B)  public after he bought the stock. 
C)  public before he bought the stock. 
D)  too speculative when he bought the stock. 
A)  material when he sold the stock. 
B)  public after he bought the stock. 
C)  public before he bought the stock. 
D)  too speculative when he bought the stock.

Question 9

Fact Pattern 42-2A
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals 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 information from Dhani. When Eureka publicly announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
-Refer to Fact Pattern 42-2A. Under the Securities Exchange Act of 1934, Fay is most likely

Accepted Answer

A)  liable for insider trading. 
B)  not liable because Fay did not prevent others from profiting. 
C)  not liable because Fay did not solicit information from Dhani. 
D)  not liable because Fay does not work for Eureka. 
A)  liable for insider trading. 
B)  not liable because Fay did not prevent others from profiting. 
C)  not liable because Fay did not solicit information from Dhani. 
D)  not liable because Fay does not work for Eureka.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

State securities laws apply mainly to intrastate transactions.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  certify that the statements are accurate. 
B)  delegate the responsibility for preparing the statements. 
C)  deliver the statements to the appropriate SEC officer. 
D)  prepare the statements. 
A)  certify that the statements are accurate. 
B)  delegate the responsibility for preparing the statements. 
C)  deliver the statements to the appropriate SEC officer. 
D)  prepare the statements.

Question 14

Exemptions from federal securities laws are exemptions from state laws.

Accepted Answer

A) True 
 B)False

Question 15

Frothy Beverage Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Frothy is required to

Accepted Answer

A)  contribute to the operations of national stock exchanges. 
B)  disclose financial and other information about its securities. 
C)  engage in market surveillance to deter undesirable practices. 
D)  solicit proxies for voting. 
A)  contribute to the operations of national stock exchanges. 
B)  disclose financial and other information about its securities. 
C)  engage in market surveillance to deter undesirable practices. 
D)  solicit proxies for voting.

Question 16

The Securities and Exchange Commission can bring a civil action against anyone who aids in a violation of the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

Question 17

Rico, an engineer for Shur-2-Gro Seed Corporation, learns that Shur-2-Gro has developed a corn hybrid to triple the output of any farm. Rico buys 20,000 shares of Shur-2-Gro stock. He tells Taylor, who buys 15,000 shares. After the new hybrid is announced publicly, the price of Shur-2-Gro stock increases. Rico and Taylor sell their shares for a profit. Under the Securities Exchange Act of 1934, liability may be imposed on

Accepted Answer

A)  none of these parties. 
B)  Rico and Taylor only. 
C)  Rico only. 
D)  Rico, Shur-2-Gro, and Taylor. 
A)  none of these parties. 
B)  Rico and Taylor only. 
C)  Rico only. 
D)  Rico, Shur-2-Gro, and Taylor.

Question 18

Start-Up Enterprises, Inc., completes its registration process and begins advertising the availability of its new issue of securities. Start-Up places a tombstone ad in the financial papers. This ad tells prospective investors

Accepted Answer

A)  about investing. 
B)  about the company. 
C)  where to buy the securities. 
D)  where to obtain a prospectus. 
A)  about investing. 
B)  about the company. 
C)  where to buy the securities. 
D)  where to obtain a prospectus.

Question 19

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

Accepted Answer

A)  any other public company with which Flux exchanges shares. 
B)  any state in which Flux does business. 
C)  the federal government. 
D)  the state in which Flux incorporated. 
A)  any other public company with which Flux exchanges shares. 
B)  any state in which Flux does business. 
C)  the federal government. 
D)  the state in which Flux incorporated.

Question 20

Fact Pattern 42-2A
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals 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 information from Dhani. When Eureka publicly announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
-Refer to Fact Pattern 42-2A. If Dhani is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of Eureka stock was

Accepted Answer

A)  a forward-looking forecast. 
B)  not material. 
C)  not yet public. 
D)  not yet true. 
A)  a forward-looking forecast. 
B)  not material. 
C)  not yet public. 
D)  not yet true.

Exam 42: Securities Law Corporate Governance

Securities that are exempt from the registration requirement can not generally be resold without being registered.

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

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

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

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

Hobie, the chief executive officer of Ideal Gamers, Inc. (IGI), intentionally understates the amount of IGI's debts in information provided to investors as part of an issue of IGI stock. Jack buys the stock and suffers a loss. Hobie may be subject to

Lex, a salesperson for Macro Corporation, learns that Macro will increase 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

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

State securities laws apply mainly to intrastate transactions.

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

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

Exemptions from federal securities laws are exemptions from state laws.

Frothy Beverage Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Frothy is required to

The Securities and Exchange Commission can bring a civil action against anyone who aids in a violation of the Securities Exchange Act of 1934.

Start-Up Enterprises, Inc., completes its registration process and begins advertising the availability of its new issue of securities. Start-Up places a tombstone ad in the financial papers. This ad tells prospective investors

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

Introduction to Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Constitutional Authority to Regulate Business

Ethics and Business Decision Making

Intentional Torts and Privacy

Negligence and Strict Liability

Intellectual Property and Internet Law

Criminal Law and Cyber Crime

Nature and Terminology

Agreement in Traditional and E-Contracts

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

The Statute of Frauds

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

International Law in a Global Economy

The Function Creation of Negotiable Instruments

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Checks and Banking in the Digital Age

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Mortgages Foreclosures After the Recession

Agency Formation and Duties

Agency Liability and Termination

Employment, Immigration, and Labor Law

Employment Discrimination

Sole Proprietorships and Franchises

Partnerships and Limited Liability Partnerships

Limited Liability Companies Special Business Forms

Corporate Formation and Financing

Corporate Directors, Officers, Shareholders

Corporate Merger, Consolidation, Termination

Law for Small Business

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

Professional Liaility and Accountability

Personal Property and Bailments

Real Property Landlord-Tenant Relationships

Insurance

Wills and Trusts

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