Question 1

In a Rule 10b-5 case, _____.

Accepted Answer

A)  selective disclosure by a defendant doesn't make him liable for omission of material facts 
B)  the plaintiff must prove that the defendant acted with the intent to deceive, manipulate, or defraud 
C)  negligence on the part of the defendant is enough to make the defendant liable 
D)  the plaintiff is generally not required to prove that she relied on the defendant's false statement 
A)  selective disclosure by a defendant doesn't make him liable for omission of material facts 
B)  the plaintiff must prove that the defendant acted with the intent to deceive, manipulate, or defraud 
C)  negligence on the part of the defendant is enough to make the defendant liable 
D)  the plaintiff is generally not required to prove that she relied on the defendant's false statement B

Question 2

One of the principal regulatory components of the 1933 Act is _____.

Accepted Answer

A)  the prospectus 
B)  antifraud provisions 
C)  securities provisions 
D)  the registration statement 
A)  the prospectus 
B)  antifraud provisions 
C)  securities provisions 
D)  the registration statement B

Question 3

Which of the following is a feature of the Securities Exchange Act of 1934 but not the Act of 1933?

Accepted Answer

A)  It has several sections prohibiting fraud in securities transactions. 
B)  The 1934 Act requires additional information in the registration statement. 
C)  It has registration provisions for issuance of securities. 
D)  The 1934 Act requires periodic disclosure by issuers with publicly held equity securities. 
A)  It has several sections prohibiting fraud in securities transactions. 
B)  The 1934 Act requires additional information in the registration statement. 
C)  It has registration provisions for issuance of securities. 
D)  The 1934 Act requires periodic disclosure by issuers with publicly held equity securities. D

Question 4

What are the two types of securities that must be registered under the Securities Exchange Act of 1934?

Accepted Answer

Two types of securities must be register

Question 5

The Securities Act of 1933:

Accepted Answer

A)  is concerned primarily with private distributions of securities and does not provide provisions to cover fraudulent sale of securities. 
B)  regulates the sale of securities while they are passing from the hands of the issuer into the hands of the private investors. 
C)  requires that issuers selling securities publicly make necessary disclosures at the time the issuer sells the securities to the public. 
D)  requires that all material information about the issuer be disclosed. 
A)  is concerned primarily with private distributions of securities and does not provide provisions to cover fraudulent sale of securities. 
B)  regulates the sale of securities while they are passing from the hands of the issuer into the hands of the private investors. 
C)  requires that issuers selling securities publicly make necessary disclosures at the time the issuer sells the securities to the public. 
D)  requires that all material information about the issuer be disclosed.

Question 6

Which of the following is true of Rule 10b-5 of the 1934 Act?

Accepted Answer

A)  Securities need not be registered under the 1933 Act or the 1934 Act for Rule 10b-5 to apply. 
B)  The rule applies only to transactions executed on a securities exchange. 
C)  The rule applies only to face-to-face transactions. 
D)  Misstatements or omissions of material fact, scienter, and reliance are not elements of Rule 10b-5. 
A)  Securities need not be registered under the 1933 Act or the 1934 Act for Rule 10b-5 to apply. 
B)  The rule applies only to transactions executed on a securities exchange. 
C)  The rule applies only to face-to-face transactions. 
D)  Misstatements or omissions of material fact, scienter, and reliance are not elements of Rule 10b-5.

Question 7

According to the Securities and Exchange Commission (SEC), per se fraudulent statements include those that:

Accepted Answer

A)  tout securities and make unreasonable forecasts. 
B)  specify the use of the proceeds of the issuance. 
C)  outline the annual return on an investment. 
D)  give full details about the securities to be offered. 
A)  tout securities and make unreasonable forecasts. 
B)  specify the use of the proceeds of the issuance. 
C)  outline the annual return on an investment. 
D)  give full details about the securities to be offered.

Question 8

The classical theory of insider trading liability holds that a person violates Section 10(b) and Rule 10b-5 when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the individual from whom he learned of the information.

Accepted Answer

A) True 
 B)False

Question 9

Section 16(b) of the 1934 Act requires that insiders individually file a statement disclosing their holdings of any class of equity securities of the issuer.

Accepted Answer

A) True 
 B)False

Question 10

Under the Securities Act of 1933, liability is imposed for improper offers and sales when:

Accepted Answer

A)  a person sells his securities to another private party without notifying the Securities and Exchange Commission. 
B)  a person offers or sells unregistered and nonexempt securities in violation of the Act. 
C)  the investor finds that the registration statement for the security contained an untrue statement. 
D)  the issuer inadvertently omits a few material facts in the registration statement. 
A)  a person sells his securities to another private party without notifying the Securities and Exchange Commission. 
B)  a person offers or sells unregistered and nonexempt securities in violation of the Act. 
C)  the investor finds that the registration statement for the security contained an untrue statement. 
D)  the issuer inadvertently omits a few material facts in the registration statement.

Question 11

If a manager of an unprofitable business induces shareholders to sell their stock to him by representing that the business will fail, although he knows that the business has become potentially profitable, he violates Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 12

Under the _____, the investor's reliance on the integrity of the market was found to justify a presumption of reliance on the misrepresentation.

Accepted Answer

A)  misappropriation theory 
B)  classical theory 
C)  fraud-on-the-market theory 
D)  efficient markets theory 
A)  misappropriation theory 
B)  classical theory 
C)  fraud-on-the-market theory 
D)  efficient markets theory

Question 13

A wash sale:

Accepted Answer

A)  refers to a legal activity that manipulates the price of a security. 
B)  occurs each time new securities are issued. 
C)  comes under the liability provisions of the 1934 Act. 
D)  is a violation under Section 10(b) of the 1934 Act. 
A)  refers to a legal activity that manipulates the price of a security. 
B)  occurs each time new securities are issued. 
C)  comes under the liability provisions of the 1934 Act. 
D)  is a violation under Section 10(b) of the 1934 Act.

Question 14

"These are the best securities you can buy" is an example of a per se fraudulent statement.

Accepted Answer

A) True 
 B)False

Question 15

Discuss whether "grease" payments are prohibited by the Foreign Corrupt Practices Act (FCPA).

Accepted Answer

The Foreign Corrupt Practices Act (FCPA)

Question 16

Securities sold in exempt transactions are exempt from:

Accepted Answer

A)  registrations in all transactions. 
B)  registration on subsequent sales of the securities. 
C)  the registration requirements for those particular transactions only. 
D)  the antifraud provisions of the 1933 Act. 
A)  registrations in all transactions. 
B)  registration on subsequent sales of the securities. 
C)  the registration requirements for those particular transactions only. 
D)  the antifraud provisions of the 1933 Act.

Question 17

Average investors who offer and sell the securities they own, yet avoid the need to have the issuer register the securities, are called _____.

Accepted Answer

A)  nonissuers 
B)  issuers 
C)  dealers 
D)  brokers 
A)  nonissuers 
B)  issuers 
C)  dealers 
D)  brokers

Question 18

A public offer by a bidder to purchase a target company's equity securities directly from its shareholders at a specified price for a fixed period of time is called a(n) _____.

Accepted Answer

A)  bond exchange offer 
B)  prospectus 
C)  investment contract 
D)  tender offer 
A)  bond exchange offer 
B)  prospectus 
C)  investment contract 
D)  tender offer

Question 19

The 1933 Act does not require the issuer of securities to register the securities with the Securities and Exchange Commission (SEC) prior to their offer or sale to the public.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is designed to stop speculative insider trading on the basis of insider information?

Accepted Answer

A)  Regulation of short-swing profits 
B)  Wash sale 
C)  Blue sky laws 
D)  Certificate of interest of participation 
A)  Regulation of short-swing profits 
B)  Wash sale 
C)  Blue sky laws 
D)  Certificate of interest of participation

Exam 31: Securities Regulation

In a Rule 10b-5 case, _____.

One of the principal regulatory components of the 1933 Act is _____.

Which of the following is a feature of the Securities Exchange Act of 1934 but not the Act of 1933?

What are the two types of securities that must be registered under the Securities Exchange Act of 1934?

The Securities Act of 1933:

Which of the following is true of Rule 10b-5 of the 1934 Act?

According to the Securities and Exchange Commission (SEC), per se fraudulent statements include those that:

The classical theory of insider trading liability holds that a person violates Section 10(b) and Rule 10b-5 when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the individual from whom he learned of the information.

Section 16(b) of the 1934 Act requires that insiders individually file a statement disclosing their holdings of any class of equity securities of the issuer.

Under the Securities Act of 1933, liability is imposed for improper offers and sales when:

If a manager of an unprofitable business induces shareholders to sell their stock to him by representing that the business will fail, although he knows that the business has become potentially profitable, he violates Rule 10b-5.

Under the _____, the investor's reliance on the integrity of the market was found to justify a presumption of reliance on the misrepresentation.

A wash sale:

"These are the best securities you can buy" is an example of a per se fraudulent statement.

Discuss whether "grease" payments are prohibited by the Foreign Corrupt Practices Act (FCPA).

Securities sold in exempt transactions are exempt from:

Average investors who offer and sell the securities they own, yet avoid the need to have the issuer register the securities, are called _____.

A public offer by a bidder to purchase a target company's equity securities directly from its shareholders at a specified price for a fixed period of time is called a(n) _____.

The 1933 Act does not require the issuer of securities to register the securities with the Securities and Exchange Commission (SEC) prior to their offer or sale to the public.

Which of the following is designed to stop speculative insider trading on the basis of insider information?

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Legal Liability of Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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