Question 1

An investment contract:

Accepted Answer

A)  is used to bring enforcement actions against investors who violate provisions of the 1934 Act. 
B)  regulates the sale of securities while they are passing from the hands of the issuer into the hands of the public investors. 
C)  is defined as an investment of money in a common enterprise with an expectation of profits from the efforts of others. 
D)  is the basic investment document of a 1933 Act registered offering. 
A)  is used to bring enforcement actions against investors who violate provisions of the 1934 Act. 
B)  regulates the sale of securities while they are passing from the hands of the issuer into the hands of the public investors. 
C)  is defined as an investment of money in a common enterprise with an expectation of profits from the efforts of others. 
D)  is the basic investment document of a 1933 Act registered offering.

Question 2

The U.S. Supreme Court has ruled that fraud claims under Section 10(b) and Rule 10b-5 must be brought within:

Accepted Answer

A)  one year after discovery of the facts constituting the violation and no more than three years after the violation has occurred. 
B)  three years after discovery of the facts constituting the violation and no more than five years after the violation has occurred. 
C)  five years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred. 
D)  two years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred. 
A)  one year after discovery of the facts constituting the violation and no more than three years after the violation has occurred. 
B)  three years after discovery of the facts constituting the violation and no more than five years after the violation has occurred. 
C)  five years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred. 
D)  two years after discovery of the facts constituting the violation and no more than ten years after the violation has occurred.

Question 3

Under the Securities Exchange Act of 1934, a 10-K annual report:

Accepted Answer

A)  must include audited financial statements for the fiscal year and current information about the conduct of business. 
B)  must include only a summarized and unaudited operating statement. 
C)  requires only summarized and unaudited figures on capitalization and shareholders' equity. 
D)  is required within 15 days of the end of any month in which any specified event occurs. 
A)  must include audited financial statements for the fiscal year and current information about the conduct of business. 
B)  must include only a summarized and unaudited operating statement. 
C)  requires only summarized and unaudited figures on capitalization and shareholders' equity. 
D)  is required within 15 days of the end of any month in which any specified event occurs.

Question 4

Jack Monroe had bought 200 GE common shares on the New York Stock Exchange that he could easily sell without any SEC registration. Jack was able to do so because:

Accepted Answer

A)  it was not a large number of shares. 
B)  he wasn't selling an insurance policy. 
C)  it was a nonprofit private offering. 
D)  he was not an issuer, underwriter, or dealer. 
A)  it was not a large number of shares. 
B)  he wasn't selling an insurance policy. 
C)  it was a nonprofit private offering. 
D)  he was not an issuer, underwriter, or dealer.

Question 5

Which of the following statements is true of securities regulation?

Accepted Answer

A)  The Securities Exchange Act of 1934 requires periodic disclosures from issuers of securities. 
B)  The 1933 Act regulates the sale of securities while they are passing from the hands of the issuer into the hands of the private investors. 
C)  The Securities and Exchange Commission was created by the 1933 Act. 
D)  Unlike other federal administrative agencies, the Securities and Exchange Commission has only legislative functions. 
A)  The Securities Exchange Act of 1934 requires periodic disclosures from issuers of securities. 
B)  The 1933 Act regulates the sale of securities while they are passing from the hands of the issuer into the hands of the private investors. 
C)  The Securities and Exchange Commission was created by the 1933 Act. 
D)  Unlike other federal administrative agencies, the Securities and Exchange Commission has only legislative functions.

Question 6

Which of the following statements is true of the registration requirements of the 1933 Act?

Accepted Answer

A)  It requires the issuer of securities to register the securities with the Securities and Exchange Commission prior to their offer or sale to the public. 
B)  The buyer of the securities must file a registration statement with the Securities and Exchange Commission. 
C)  Exempt securities need to be registered regardless of who sells the securities or how they are sold. 
D)  The registration statement should exclude the timing, manner, and content of offers and sales. 
A)  It requires the issuer of securities to register the securities with the Securities and Exchange Commission prior to their offer or sale to the public. 
B)  The buyer of the securities must file a registration statement with the Securities and Exchange Commission. 
C)  Exempt securities need to be registered regardless of who sells the securities or how they are sold. 
D)  The registration statement should exclude the timing, manner, and content of offers and sales.

Question 7

While auditing the financial statements of Forble Corp. (which are to be included in a Securities Act registration statement), Ernie, a certified public accountant, fails to review any of Forble's journal entries, does not read the details of meetings of the board of directors, and does not even speak with the comptroller of Forble. Consequently, Ernie does not discover that substantial loans, which went unmentioned in the financial statements, had been made to Forble officers. As a result, the registration statement omits any mention of the loans. Assuming the omitted fact is a material one and that Ernie is not an officer or director of Forble, does Ernie face potential liability under Section 11 of the Securities Act of 1933? Discuss the reasons for your answer.

Accepted Answer

Yes. Section 11 of the 1933 Act provides

Question 8

_____ are important securities exemptions from the registration provisions of the 1933 Act.

Accepted Answer

A)  Securities of profit issuers 
B)  Short-term notes and drafts 
C)  Private offerings 
D)  Initial market securities 
A)  Securities of profit issuers 
B)  Short-term notes and drafts 
C)  Private offerings 
D)  Initial market securities

Question 9

According to the registration requirements of the 1933 Act, a prospectus:

Accepted Answer

A)  should make forecasts of the annual return on a company's common stocks. 
B)  should include most of the information present in the registration statement. 
C)  should include statements that tout securities. 
D)  is a public offer by a bidder to purchase a target company's equity securities. 
A)  should make forecasts of the annual return on a company's common stocks. 
B)  should include most of the information present in the registration statement. 
C)  should include statements that tout securities. 
D)  is a public offer by a bidder to purchase a target company's equity securities.

Question 10

Which of the following statements is true about blue-sky laws?

Accepted Answer

A)  They are state laws that provide penalties for fraudulent sales and permit the issuance of injunctions to protect investors from anticipated fraudulent acts. 
B)  They are state laws that give investors the information they need to make intelligent decisions about whether to purchase securities. 
C)  They provide civil penalties for selling fraudulent securities and conducting fraudulent transactions. 
D)  They give the bidder and the target company equal opportunities to present their cases to the shareholders. 
A)  They are state laws that provide penalties for fraudulent sales and permit the issuance of injunctions to protect investors from anticipated fraudulent acts. 
B)  They are state laws that give investors the information they need to make intelligent decisions about whether to purchase securities. 
C)  They provide civil penalties for selling fraudulent securities and conducting fraudulent transactions. 
D)  They give the bidder and the target company equal opportunities to present their cases to the shareholders.

Question 11

Registration by coordination:

Accepted Answer

A)  allows the issuer to file the 1933 Act registration statement with the state securities administrator. 
B)  is prohibited by both the 1933 and 1934 Acts. 
C)  increases the issuer's expense of complying with state laws when making an interstate offering. 
D)  is concerned primarily with public distributions of securities. 
A)  allows the issuer to file the 1933 Act registration statement with the state securities administrator. 
B)  is prohibited by both the 1933 and 1934 Acts. 
C)  increases the issuer's expense of complying with state laws when making an interstate offering. 
D)  is concerned primarily with public distributions of securities.

Question 12

Why are some securities exempted from the registration provisions of the 1933 Act? Give two examples of such securities. Are they exempted from the antifraud provisions of the act as well?

Accepted Answer

Examples may vary. Some securities are e

Question 13

Under Section 11 of the 1933 Act, the purchaser need not prove that the defendant negligently or intentionally misstated or omitted a material fact.

Accepted Answer

A) True 
 B)False

Question 14

Under the _____, a person's undisclosed, self-serving use of another's information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the individual who provided the information.

Accepted Answer

A)  blue-sky law 
B)  misappropriation theory 
C)  fraud-on the-market theory 
D)  price disparity law 
A)  blue-sky law 
B)  misappropriation theory 
C)  fraud-on the-market theory 
D)  price disparity law

Question 15

The Williams Act amendments to the 1934 Act were designed to:

Accepted Answer

A)  provide penalties for fraudulent sales and permit the issuance of injunctions to protect investors from anticipated fraudulent acts. 
B)  protect investors from promoters and security salespersons who offered stock in companies organized to pursue visionary schemes. 
C)  force corporations to comply with stockholders' social goals of meeting the EPA's new source emission standards. 
D)  give the bidder and the target company equal opportunities to present their cases to the shareholders. 
A)  provide penalties for fraudulent sales and permit the issuance of injunctions to protect investors from anticipated fraudulent acts. 
B)  protect investors from promoters and security salespersons who offered stock in companies organized to pursue visionary schemes. 
C)  force corporations to comply with stockholders' social goals of meeting the EPA's new source emission standards. 
D)  give the bidder and the target company equal opportunities to present their cases to the shareholders.

Question 16

Under the classical theory of insider trading liability, Section 10(b) and Rule 10b-5 are violated when a corporate insider trades in the securities of his corporation on the basis of material, nonpublic information.

Accepted Answer

A) True 
 B)False

Question 17

The safe harbor legislation:

Accepted Answer

A)  is implemented with the goal of giving the bidder and the target company equal opportunities to present their cases to the shareholders. 
B)  applies only when the target company's equity securities are registered under the 1934 Act. 
C)  holds companies immune from liability as long as they warn the public about factors that might undermine their forecasts. 
D)  applies to transactions executed on a securities exchange as well as face-to-face transactions. 
A)  is implemented with the goal of giving the bidder and the target company equal opportunities to present their cases to the shareholders. 
B)  applies only when the target company's equity securities are registered under the 1934 Act. 
C)  holds companies immune from liability as long as they warn the public about factors that might undermine their forecasts. 
D)  applies to transactions executed on a securities exchange as well as face-to-face transactions.

Question 18

Which section of the 1933 Act imposes liability on any person who has violated the timing, manner, and content restrictions on offers and sales of new issues?

Accepted Answer

A)  12(2) 
B)  17(a) 
C)  12(1) 
D)  11 
A)  12(2) 
B)  17(a) 
C)  12(1) 
D)  11

Question 19

Jodie's brother is a director at Trip Corporation. He calls her and says that Trip's earnings, not yet announced, will be up by 75 percent and that Jodie should buy Trip's common stock. Under these circumstances, Jodie:

Accepted Answer

A)  can trade because she obtained public information from an insider. 
B)  cannot trade because she is not an insider. 
C)  can trade because the information will eventually be made public. 
D)  cannot trade because she is the relative of an insider. 
A)  can trade because she obtained public information from an insider. 
B)  cannot trade because she is not an insider. 
C)  can trade because the information will eventually be made public. 
D)  cannot trade because she is the relative of an insider.

Question 20

Securities of nonprofit issuers are exempted from the registration provisions of the 1933 Act.

Accepted Answer

A) True 
 B)False

Exam 31: Securities Regulation

An investment contract:

The U.S. Supreme Court has ruled that fraud claims under Section 10(b) and Rule 10b-5 must be brought within:

Under the Securities Exchange Act of 1934, a 10-K annual report:

Jack Monroe had bought 200 GE common shares on the New York Stock Exchange that he could easily sell without any SEC registration. Jack was able to do so because:

Which of the following statements is true of securities regulation?

Which of the following statements is true of the registration requirements of the 1933 Act?

_____ are important securities exemptions from the registration provisions of the 1933 Act.

According to the registration requirements of the 1933 Act, a prospectus:

Which of the following statements is true about blue-sky laws?

Registration by coordination:

Why are some securities exempted from the registration provisions of the 1933 Act? Give two examples of such securities. Are they exempted from the antifraud provisions of the act as well?

Under Section 11 of the 1933 Act, the purchaser need not prove that the defendant negligently or intentionally misstated or omitted a material fact.

Under the _____, a person's undisclosed, self-serving use of another's information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the individual who provided the information.

The Williams Act amendments to the 1934 Act were designed to:

Under the classical theory of insider trading liability, Section 10(b) and Rule 10b-5 are violated when a corporate insider trades in the securities of his corporation on the basis of material, nonpublic information.

The safe harbor legislation:

Which section of the 1933 Act imposes liability on any person who has violated the timing, manner, and content restrictions on offers and sales of new issues?

Jodie's brother is a director at Trip Corporation. He calls her and says that Trip's earnings, not yet announced, will be up by 75 percent and that Jodie should buy Trip's common stock. Under these circumstances, Jodie:

Securities of nonprofit issuers are exempted from the registration provisions of the 1933 Act.

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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