Question 1

Nester,a salesperson for Olive Grove Corporation,learns that Olive Grove will increase the dividend it pays to shareholders. Nester buys 10,000 shares of Olive Grove stock. When the dividend is announced to the public and the price of the stock increases,Nester sells his shares for a profit. Nester would not be liable for insider trading if the information about the dividend was

Accepted Answer

A) material when he sold the stock. 
B) available to the public after he bought the stock. 
C) available to the public before he bought the stock. 
D) forward-looking when he bought the stock.

Question 2

The Sarbanes-Oxley Act of 2002 attempts to corporate accountability by imposing strict disclosure requirements and harsh penalties for securities laws.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) a forward-looking financial forecast. 
B) an investment contract. 
C) a prospectus. 
D) samples of its products.

Question 4

Securities can be sold after the effective date of the registration statement without restrictions.

Accepted Answer

A) True 
 B)False

Question 5

The Securities Exchange Act of 1933 is a one-time disclosure law.

Accepted Answer

A) True 
 B)False

Question 6

The key to liability under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether information omitted or misrepresented in connection with the purchase or sale of a security is material.

Accepted Answer

A) True 
 B)False

Question 7

For criminal sanctions to be imposed 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 8

Under the Sarbanes-Oxley Act of 2002,chief financial officers must certify the accuracy of information in corporate financial statements and reports that are filed with the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False

Question 9

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 10

State securities laws apply mainly to interstate transactions.

Accepted Answer

A) True 
 B)False

Question 11

Adrian,the chief executive officer of Beds+Sofas,Inc.,intentionally understates the amount of Beds+Sofas' debts in information provided to investors as part of an issue of Beds+Sofas' stock. Cassie buys the stock and suffers a loss. Adrian may be subject to

Accepted Answer

A) government prosecution and Cassie's suit. 
B) negative publicity but no criminal prosecution or civil suit. 
C) only government prosecution. 
D) only Cassie's suit.

Question 12

Private parties may sue violators of Section 10(b)and Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 13

Bonds & Stocks Corporation,and its officers,directors,and shareholders,buy and sell securities. SEC Rule 10b-5 applies to the purchase or sale of

Accepted Answer

A) a security by a financial corporation only. 
B) a security involving a corporate insider only. 
C) a security involving short-swing profits only. 
D) any security.

Question 14

Most private,small-business,non investment company offers of securities are exempt from the registration requirements.

Accepted Answer

A) True 
 B)False

Question 15

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....

Question 16

As part of a stock offering for Designer Studio Corporation,the firm's accountant Evelyn intentionally misrepresents material facts in the prospectus. Flores buys the stock unaware of the misrepresentation and suffers a loss. Evelyn may be subject to

Accepted Answer

A) a fine and damages only. 
B) a fine and imprisonment only. 
C) a fine,imprisonment,and damages. 
D) damages only.

Question 17

NuTrend Clothing Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933,a security is

Accepted Answer

A) almost any stake in the ownership or debt of a company. 
B) an investment that is guaranteed to make a profit. 
C) only such common forms of debt and equity as bonds and stocks. 
D) whatever a company represents to the public as a security.

Question 18

Boats and Yachts Corporation is a public company,which California regulates and in which Dorian 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) the Securities and Exchange Commission.

Question 19

Global Resources Corporation,and its officers,directors,and shareholders,buy and sell securities. Section 10(b)of the Securities Exchange Act of 1934 applies to the purchase or sale of a security

Accepted Answer

A) only by an investment company. 
B) only involving short-swing profits. 
C) only involving a tipper and tippee. 
D) in almost any circumstances.

Question 20

Liability can be imposed on those who are negligent in not discovering fraud in connection with a registration statement or prospectus.

Accepted Answer

A) True 
 B)False

Exam 36: Investor Protection, insider Trading, and Corporate Governance

The Sarbanes-Oxley Act of 2002 attempts to corporate accountability by imposing strict disclosure requirements and harsh penalties for securities laws.

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

Securities can be sold after the effective date of the registration statement without restrictions.

The Securities Exchange Act of 1933 is a one-time disclosure law.

The key to liability under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether information omitted or misrepresented in connection with the purchase or sale of a security is material.

For criminal sanctions to be imposed under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 scienter must exist.

Under the Sarbanes-Oxley Act of 2002,chief financial officers must certify the accuracy of information in corporate financial statements and reports that are filed with the Securities and Exchange Commission.

State securities laws apply mainly to interstate transactions.

Adrian,the chief executive officer of Beds+Sofas,Inc.,intentionally understates the amount of Beds+Sofas' debts in information provided to investors as part of an issue of Beds+Sofas' stock. Cassie buys the stock and suffers a loss. Adrian may be subject to

Private parties may sue violators of Section 10(b)and Rule 10b-5.

Bonds & Stocks Corporation,and its officers,directors,and shareholders,buy and sell securities. SEC Rule 10b-5 applies to the purchase or sale of

Most private,small-business,non investment company offers of securities are exempt from the registration requirements.

As part of a stock offering for Designer Studio Corporation,the firm's accountant Evelyn intentionally misrepresents material facts in the prospectus. Flores buys the stock unaware of the misrepresentation and suffers a loss. Evelyn may be subject to

NuTrend Clothing Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933,a security is

Boats and Yachts Corporation is a public company,which California regulates and in which Dorian invests. The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to

Global Resources Corporation,and its officers,directors,and shareholders,buy and sell securities. Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of a security

Liability can be imposed on those who are negligent in not discovering fraud in connection with a registration statement or prospectus.