Question 1

Eddie,an accountant for Fresh Dairy,Inc.,learns of undisclosed company plans to market a new smooth-tasting,fat-free butter. Eddie buys 10,000 shares of Fresh Dairy stock. He reveals the company plans to Giselle,who buys 5,000 shares. Giselle tells Hong,who tells Irwin,each of whom buy 1,000 shares. They know that Giselle got her information from Eddie. When Fresh Dairy publicly announces its new product,Eddie,Giselle,Hong,and Irwin sell their stock for a profit.
-If Eddie is liable under the Securities Exchange Act of 1934,it will be because the information on which he based his purchase of Fresh Dairy stock was

Accepted Answer

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

Question 2

Solder Welding Corporation is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002,Solder Welding is subject to the direct corporate governance requirements of

Accepted Answer

A) any other public company with which Solder Welding exchanges shares. 
B) any state in which Solder Welding does business. 
C) the federal government. 
D) the state in which Solder Welding incorporated.

Question 3

The Securities Exchange Act of 1934 is a one-time disclosure law.

Accepted Answer

A) True 
 B)False

Question 4

Orbital Flights,Inc.,is required to register its securities under Section 12 of the Securities Exchange Act of 1934. 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 5

Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 apply just to corporate "insiders."

Accepted Answer

A) True 
 B)False

Question 6

Anyone who wrongfully obtains inside information and trades on it for his or her personal gain can be liable under SEC Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 7

Once a registration statement has been filed,a waiting period begins while the Securities and Exchange Commission reviews the statement.

Accepted Answer

A) True 
 B)False

Question 8

A well-known seasoned issuer cannot file a registration statement until after it announces a new offering.

Accepted Answer

A) True 
 B)False

Question 9

Dhani,an accountant for Eureka! Inc. learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka! stock. He reveals the company plans to Fay,who tells Geoff. Both Fay and Geoff buy 100 shares. Geoff knows that Fay got her information from Dhani. When Eureka! publicly announces its new laptop,Dhani,Fay,and Geoff sell their stock for a profit.
-Under the Securities Exchange Act of 1934,Geoff is most likely

Accepted Answer

A) liable for insider trading. 
B) not liable because Geoff is only a tippee,not a tipper. 
C) not liable because Geoff is too far down the chain of disclosure. 
D) not liable because Geoff traded on the basis of a material fact.

Question 10

Guitar Factory Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by

Accepted Answer

A) market professionals to explain to all investors. 
B) government regulators to disclose to the general public. 
C) sophisticated investors only. 
D) unsophisticated investors.

Question 11

The Securities and Exchange Commission has implemented no new regulations since Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Accepted Answer

A) True 
 B)False

Question 12

Social Media Sites Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain

Accepted Answer

A) a copy of prospectuses to be provided to investors. 
B) a description of securities being offered for sale. 
C) a record of pre-registration sales in securities. 
D) all of the choices.

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

Solder Welding Corporation is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002,Solder Welding is subject to the direct corporate governance requirements of

The Securities Exchange Act of 1934 is a one-time disclosure law.

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

Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 apply just to corporate "insiders."

Anyone who wrongfully obtains inside information and trades on it for his or her personal gain can be liable under SEC Rule 10b-5.

Once a registration statement has been filed,a waiting period begins while the Securities and Exchange Commission reviews the statement.

A well-known seasoned issuer cannot file a registration statement until after it announces a new offering.

Guitar Factory Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by

The Securities and Exchange Commission has implemented no new regulations since Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Social Media Sites Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain