Question 1

Most private,midsize-business,noninvestment company offers of securities are exempt from the registration requirements.

Accepted Answer

A) True 
 B)False  True

Question 2

Corporate "outsiders" may be held liable for insider trading under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

Accepted Answer

A) True 
 B)False  True

Question 3

Fleet Trucking Corporation is a public company with a market capitalization of less than $75 million.Fleet is poised to issue securities in a transaction that,under the Securities Act of 1933,is exempt.This enables Fleet to

Accepted Answer

A)   reduce the compliance costs by not requiring an auditor report.
B)   buy and sell the securities without liability for recaptured profit.
C)   make forward-looking financial forecasts without liability.
D)   withhold inside information from accredited investors. A

Question 4

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

Question 5

Medico Corporation is a public company whose shares are traded in public securities markets.Medico's officers want to set up and maintain a system of "good corporate governance." What is "corporate governance"? What is its practical significance? What,at a minimum,should a "good" system of corporate governance include?

Accepted Answer

The answer of Medico Corporation is a public company whose...

Question 6

Space Flight Inc.files a registration statement with the SEC before making an offering to the general public.The registration contains false,immaterial statements of which the investors are unaware.The firm is charged with violating the Securities Act of 1933.Its best defense is

Accepted Answer

A)   the investors were not aware of the misrepresentations.
B)   the issuer reasonably believed the misstatements were true.
C)   the offering was made available to the general public.
D)   the untrue statements were not material.

Question 7

Only the Securities and Exchange Commission can sue violators of Section 10(b)and Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 8

To avoid sanctions under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5,scienter must exist.

Accepted Answer

A) True 
 B)False

Question 9

The Securities Exchange Act of 1934 provides for continuous periodic disclosures by certain publicly held companies.

Accepted Answer

A) True 
 B)False

Question 10

Misrepresenting facts in a registration statement or prospectus is known as puffery and does not violate the Securities Act of 1933.

Accepted Answer

A) True 
 B)False

Question 11

Dairy Stores Inc.owns and operates convenience stores.The firm wants to make an initial public offering of securities.If Dairy qualifies for an exemption from the federal registration requirement,the firm is

Accepted Answer

A)   exempt from any state registration requirement.
B)   not subject to any state securities laws.
C)   not necessarily exempt from a state registration requirement.
D)   subject to all state registration requirements.

Question 12

Chris,a coder for Drones Inc. ,learns of undisclosed company plans to market a new,smart drone.Chris buys 10,000 shares of the firm's stock.If Chris is liable under the Securities Exchange Act of 1934,it will be because the information on which he based his purchase of the stock was

Accepted Answer

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

Question 13

Household Products Corporation wants to make an offering of securities to the public.The offering is not exempt from registration under the Securities Act of 1933.Before the firm sells its securities,it must provide investors with

Accepted Answer

A)   a forward-looking financial forecast.
B)   an investment contract.
C)   a prospectus.
D)   a statement that the securities for sale are worth the price.

Question 14

A well-known seasoned investor has less flexibility in filing registration statements and using free-writing prospectuses than other issuers.

Accepted Answer

A) True 
 B)False

Question 15

Insider trading is prohibited because trading on the basis of inside information can give the trader an unfair advantage over the investing public.

Accepted Answer

A) True 
 B)False

Question 16

Eli,an officer for Food Stores Inc. ,buys 10,000 shares of its stock.One week later,the company announces that it will merge with a competitor,Grocery Mart Corporation,and the price of Food Stores' stock increases.One month later,Eli sells his shares for a profit.Under Section 16(b)of the Securities Exchange Act of 1934,Eli would not be liable if,after buying the stock,he 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.

Question 17

Orbital Flights Inc.is required to register its securities under Section 12 of the Securities Exchange Act of 1934.This means that,with respect to Orbital,Section 16(b)of the act covers

Accepted Answer

A)   the declaration of dividends by Orbital's board of directors.
B)   the later re-registration of Orbital's securities.
C)   the short-swing activities of Orbital's insiders.
D)   the solicitation of proxies from Orbital's shareholders.

Question 18

Most securities cannot be resold without registration.

Accepted Answer

A) True 
 B)False

Question 19

Ridley is an officer of Sun Watts,Inc.Ridley knows that a Sun Watts engineer recently developed a new,inexpensive method for collecting,storing,and converting solar power into fuel.Ridley takes advantage of this information to buy Sun Watts stock from Taylor and,after the discovery is announced,to sell the stock to Ulrich at a profit.Taylor claims that this is a violation of federal law.Is Taylor correct? If so,what federal law has Ridley violated,and what are its possible penalties?

Accepted Answer

The answer of Ridley is an officer of Sun Watts,Inc.Ridley...

Question 20

Small-business issues can use a registration and reporting system that requires simpler forms than the full registration system.

Accepted Answer

A) True 
 B)False

Exam 19: Investor Protection and Corporate Governance

Most private,midsize-business,noninvestment company offers of securities are exempt from the registration requirements.

Corporate "outsiders" may be held liable for insider trading under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

Fleet Trucking Corporation is a public company with a market capitalization of less than $75 million.Fleet is poised to issue securities in a transaction that,under the Securities Act of 1933,is exempt.This enables Fleet to

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

Space Flight Inc.files a registration statement with the SEC before making an offering to the general public.The registration contains false,immaterial statements of which the investors are unaware.The firm is charged with violating the Securities Act of 1933.Its best defense is

Only the Securities and Exchange Commission can sue violators of Section 10(b)and Rule 10b-5.

To avoid sanctions under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5,scienter must exist.

The Securities Exchange Act of 1934 provides for continuous periodic disclosures by certain publicly held companies.

Misrepresenting facts in a registration statement or prospectus is known as puffery and does not violate the Securities Act of 1933.

Dairy Stores Inc.owns and operates convenience stores.The firm wants to make an initial public offering of securities.If Dairy qualifies for an exemption from the federal registration requirement,the firm is

Chris,a coder for Drones Inc. ,learns of undisclosed company plans to market a new,smart drone.Chris buys 10,000 shares of the firm's stock.If Chris is liable under the Securities Exchange Act of 1934,it will be because the information on which he based his purchase of the stock was

Household Products Corporation wants to make an offering of securities to the public.The offering is not exempt from registration under the Securities Act of 1933.Before the firm sells its securities,it must provide investors with

A well-known seasoned investor has less flexibility in filing registration statements and using free-writing prospectuses than other issuers.

Insider trading is prohibited because trading on the basis of inside information can give the trader an unfair advantage over the investing public.

Orbital Flights Inc.is required to register its securities under Section 12 of the Securities Exchange Act of 1934.This means that,with respect to Orbital,Section 16(b) of the act covers

Most securities cannot be resold without registration.

Small-business issues can use a registration and reporting system that requires simpler forms than the full registration system.