Question 1

Nouveau Riche Corporation,and its officers,directors,and sharehold?ers,buy and sell securities.SEC Rule 10b-5 applies to

Accepted Answer

A) only the purchase or sale of a security by a financial corporation. 
B) only the purchase or sale of a security involving an officer or director. 
C) only the purchase or sale of a security involving a shareholder. 
D) the purchase or sale of any security. 
A) only the purchase or sale of a security by a financial corporation. 
B) only the purchase or sale of a security involving an officer or director. 
C) only the purchase or sale of a security involving a shareholder. 
D) the purchase or sale of any security. D

Question 2

The Securities and Exchange Commission can seek sanctions against those who violate foreign securities laws.

Accepted Answer

A) True 
 B)False  True

Question 3

Drew is an officer of Energy Fuel,Inc.Drew knows that an Energy engi?neer recently developed a new,inexpensive method for converting hy?dro?gen into fuel.Drew takes advantage of this information to buy Energy stock from Gert and,after the discovery is announced,to sell the stock to Holly at a profit.Gert claims that this is a violation of federal law.Is Gert correct? If so,what federal law has Drew violated,and what are its possible penalties?

Accepted Answer

Yes,assuming that Gert did not know about the engineer's invention before it became public knowledge,Gert is correct.Drew has violated the Securities Exchange Act of 1934.This federal law ex?tends li?ability to officers and di?rectors in their per?sonal transactions for tak?ing advantage of inside informa?tion when they know it is unavail?able to the persons with whom they are dealing.In this problem,Drew used the un?disclosed information about the new hydrogen conversion method to buy Energy stock from Gert,who apparently was not aware of the devel?op?ment at the time of the deal with Drew,and then sell it at a profit to Holly when the method was revealed to the public.There are both criminal and civil penalties for violations of this act.Criminal punishment includes fines up to $5 million,imprisonment up to twenty-five years,or both.Civil sanctions include triple the profits gained or the loss avoided,and rescission of the contract to buy securities.

Question 4

Noninvestment companies are firms that are not engaged primarily in the business of investing or trading in securities.

Accepted Answer

A) True 
 B)False

Question 5

Fact Pattern 42-1B 
Sid,a director of Tech Software Company,learns that a Tech engineer has developed "Ur Call," a new,exciting video game.Sid buys Tech stock and tells his friend Velma,who also buys Tech stock.When the new game is released three weeks later,Sid and Velma sell their stock for a big profit.
-Refer to Fact Pattern 42-1B.Under SEC Rule l0b-5,Sid would not be li?able if he had waited to buy Tech stock until

Accepted Answer

A) after Sid told Velma of the new game. 
B) after Velma bought Tech stock. 
C) after the public release of the game. 
D) just before the game was released. 
A) after Sid told Velma of the new game. 
B) after Velma bought Tech stock. 
C) after the public release of the game. 
D) just before the game was released.

Question 6

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

Accepted Answer

A) internal "disclosure controls and procedures." 
B) external "release and reveal timetables." 
C) personal "peruse and review liability policies." 
D) public "information and discussion forums." 
A) internal "disclosure controls and procedures." 
B) external "release and reveal timetables." 
C) personal "peruse and review liability policies." 
D) public "information and discussion forums."

Question 7

Most securities can not be resold without registration.

Accepted Answer

A) True 
 B)False

Question 8

When Looking Glass Corporation wishes to issue certain securities,it must provide sufficient in?for?mation for Alice,and other unsophisticated investors,to evaluate the fi?nancial risk involved.Specifically,the law imposes liability for making a false statement or omission that is "material." What sort of information would Alice consider material?

Accepted Answer

Most likely,Alice,and any other average

Question 9

Violations of Section 16(b)of the Securities Exchange Act of 1934 include the sale by insiders of stock acquired less than six months before the time of sale.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) avoid the costs and complications of registration. 
B) buy and sell the securities without liability for "recaptures." 
C) make forward-looking financial forecasts without liability. 
D) withhold inside information from accredited investors. 
A) avoid the costs and complications of registration. 
B) buy and sell the securities without liability for "recaptures." 
C) make forward-looking financial forecasts without liability. 
D) withhold inside information from accredited investors.

Question 11

Once the registration statement has been filed,there is no waiting period-the issuer can offer and sell the securities without restrictions.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Private parties can sue violators of Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 14

Dave,an accountant,does not work for Emergent Company,but wrong?fully obtains inside information concerning Emergent.Based on the in?forma?tion,Dave buys and sells Emergent stock for personal gain.The Securities and Exchange Commission prose?cutes Dave,arguing that he is liable because he stole in?formation right?fully belonging to another.This argument is

Accepted Answer

A) the blue-sky theory. 
B) the misappropriation theory. 
C) the red-herring theory. 
D) the tipper/tippee theory. 
A) the blue-sky theory. 
B) the misappropriation theory. 
C) the red-herring theory. 
D) the tipper/tippee theory.

Question 15

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

Accepted Answer

A) file a registration statement with the SEC. 
B) issue the securities through an online registration site. 
C) refrain from issuing the securities to unregistered investors. 
D) register the securities with a national stock exchange. 
A) file a registration statement with the SEC. 
B) issue the securities through an online registration site. 
C) refrain from issuing the securities to unregistered investors. 
D) register the securities with a national stock exchange.

Question 16

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

Accepted Answer

A) Hometown Shops and Interstate Outlets. 
B) Hometown Shops only. 
C) Interstate Outlets only. 
D) neither Hometown Shops nor Interstate Outlets. 
A) Hometown Shops and Interstate Outlets. 
B) Hometown Shops only. 
C) Interstate Outlets only. 
D) neither Hometown Shops nor Interstate Outlets.

Question 17

Maple Products Corporation is a public company,which New Hampshire regulates and in which Orin invests.The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to

Accepted Answer

A) public companies. 
B) private investors. 
C) state regulators. 
D) none of these choices. 
A) public companies. 
B) private investors. 
C) state regulators. 
D) none of these choices.

Question 18

Lara is the chief executive officer of Micro,Inc. ,which is required to file certain financial reports with the Securities and Exchange Commission (SEC).Under the Sarbanes-Oxley Act of 2002,Lara must

Accepted Answer

A) certify that the reports are complete and accurate. 
B) designate a corporate official to assume liability for inaccuracies. 
C) do nothing. 
D) read the reports and be prepared to answer questions about them. 
A) certify that the reports are complete and accurate. 
B) designate a corporate official to assume liability for inaccuracies. 
C) do nothing. 
D) read the reports and be prepared to answer questions about them.

Question 19

For a defendant to be convicted in a criminal prosecution under the securities laws,a jury is allowed to speculate that the defendant may have acted wrongfully.

Accepted Answer

A) True 
 B)False

Question 20

Liability under Section 10(b)of the Securities Exchange Act of 1934 has been extended to include certain "outsiders."

Accepted Answer

A) True 
 B)False

Exam 42: A: Securities Law Corporate Governance

Nouveau Riche Corporation,and its officers,directors,and sharehold?ers,buy and sell securities.SEC Rule 10b-5 applies to

The Securities and Exchange Commission can seek sanctions against those who violate foreign securities laws.

Noninvestment companies are firms that are not engaged primarily in the business of investing or trading in securities.

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

Most securities can not be resold without registration.

Violations of Section 16(b)of the Securities Exchange Act of 1934 include the sale by insiders of stock acquired less than six months before the time of sale.

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

Once the registration statement has been filed,there is no waiting period-the issuer can offer and sell the securities without restrictions.

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

Private parties can sue violators of Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

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

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

Maple Products Corporation is a public company,which New Hampshire regulates and in which Orin invests.The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to

Lara is the chief executive officer of Micro,Inc. ,which is required to file certain financial reports with the Securities and Exchange Commission (SEC).Under the Sarbanes-Oxley Act of 2002,Lara must

For a defendant to be convicted in a criminal prosecution under the securities laws,a jury is allowed to speculate that the defendant may have acted wrongfully.

Liability under Section 10(b)of the Securities Exchange Act of 1934 has been extended to include certain "outsiders."

A: Introduction to Law and Legal Reasoning

B: Introduction to Law and Legal Reasoning

C: Introduction to Law and Legal Reasoning

D: Introduction to Law and Legal Reasoning

A: Courts and Alternative Dispute Resolution

B: Courts and Alternative Dispute Resolution

A: Court Procedures

B: Court Procedures

A: Constitutional Authority to Regulate Business

B: Constitutional Authority to Regulate Business

A: Ethics and Business Decision Making

B: Ethics and Business Decision Making

A: Intentional Torts and Privacy

B: Intentional Torts and Privacy

A: Negligence and Strict Liability

B: Negligence and Strict Liability

C: Negligence and Strict Liability

D: Negligence and Strict Liability

A: Intellectual Property and Internet Law

B: Intellectual Property and Internet Law

A: Criminal Law and Cyber Crimes

B: Criminal Law and Cyber Crime

A: Nature and Terminology

B: Nature and Terminology

C: Nature and Terminology

D: Nature and Terminology

A: Agreement in Traditional and E-Contracts

B: Agreement in Traditional and E-Contracts

A: Consideration

B: Consideration

A: Capacity and Legality

B: Capacity and Legality

A: Mistakes,fraud,and Voluntary Consent

B: Mistakes,fraud,and Voluntary Consent

A: The Statute of Frauds

B: The Statute of Frauds

A: Third Party Rights

B: Third Party Rights

A: Performance and Discharge

B: Performance and Discharge

A: Breach of Contract and Remedies

B: Breach of Contract and Remedies

A: The Formation of Sales and Lease Contracts

B: The Formation of Sales and Lease Contracts

C: The Formation of Sales and Lease Contracts

D: The Formation of Sales and Lease Contracts

A: Title,risk,and Insurable Interest

B: Title,risk,and Insurable Interest

A: Performance Breach of Sales Lease Contracts

B: Performance Breach of Sales Lease Contracts

A: Warranties and Product Liability

B: Warranties and Product Liability

A: International Law in a Global Economy

B: International Law in a Global Economy

A: The Function Creation of Negotiable Instruments

B: The Function Creation of Negotiable Instruments

C: The Function Creation of Negotiable Instruments

D: The Function Creation of Negotiable Instruments

A: Transferability and Holder in Due Course

B: Transferability and Holder in Due Course

A: Liability,defenses,and Discharge

B: Liability,defenses,and Discharge

A: Checks,the Banking System,and E-Money