Question 1

For civil sanctions to be imposed under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5,scienter must not exist.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

Accepted Answer

A) True 
 B)False

Question 5

Exemptions from federal securities law are notexemptions from state laws.

Accepted Answer

A) True 
 B)False

Question 6

Rico does not work for Street Bikes Company, but wrongfully obtains inside information concerning the firm. Based on the information, Rico buys and sells Street Bikes stock for personal gain. The Securities and Exchange Commission prosecutes Rico, arguing that he is liable because he stole information rightfully belonging to another. This argument is​

Accepted Answer

A)  ​the blue-sky theory. 
B)  ​the misappropriation theory. 
C)  ​the free-writing prospectus theory. 
D)  ​the tipper/tippee theory.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

On Spec, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving​

Accepted Answer

A)  ​corporate insiders. 
B)  ​misappropriation. 
C)  ​short-swing profits. 
D)  ​tippers and tippees.

Question 9

In the context of Section 16(b) of the Securities Exchange Act of 1934, insiders include officers, directors, and large stockholders of Section 12 corporations.

Accepted Answer

A) True 
 B)False

Question 10

Space Trips 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. Space Trips is charged with violating the Securities Act of 1933. Space Trips's 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 11

The Securities Exchange Act of 1934 applies to companies that have assets in excess of $5 million and five hundred or more employees.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

Sun & Ski Tours Corporation is poised to issue securities that, under the Securities Act of 1933, are “exempt.” This means that the securities can be sold

Accepted Answer

A) on the basis of a material omission or misrepresentation. 
B) on the basis of nonpublic information. 
C) within any six-month period by certain insiders. 
D) without being registered.

Question 15

Lyman is the chief financial officer of Moneysworth Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Lyman must personally​

Accepted Answer

A)  ​certify that the statements are accurate. 
B)  ​delegate the responsibility for preparing the statements. 
C)  ​deliver the statements to the appropriate SEC officer. 
D)  ​prepare the statements.

Question 16

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 17

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 18

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates

Accepted Answer

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

Question 19

If a security does not qualify for an exemption, an issuer cannot offer it to the public.

Accepted Answer

A) True 
 B)False

Question 20

Fact Pattern 30-1
Drilling Tools, Inc., wants to make an initial public offering of securities. Drilling Tools believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.
-Refer to Fact Pattern 30-1. Drilling Tools decides to sell its new securities via the Internet. This offering

Accepted Answer

A) will avoid the payment of commissions to brokers or underwriters. 
B) is an investment scam. 
C) is a Ponzi scheme. 
D) constitutes insider trading.

Exam 30: Investor Protection, Insider Trading, and Corporate Governance

For civil sanctions to be imposed under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5,scienter must not exist.

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

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

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

Exemptions from federal securities law are notexemptions from state laws.

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

On Spec, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving

In the context of Section 16(b) of the Securities Exchange Act of 1934, insiders include officers, directors, and large stockholders of Section 12 corporations.

Space Trips 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. Space Trips is charged with violating the Securities Act of 1933. Space Trips's best defense is

The Securities Exchange Act of 1934 applies to companies that have assets in excess of $5 million and five hundred or more employees.

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

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

Sun & Ski Tours Corporation is poised to issue securities that, under the Securities Act of 1933, are “exempt.” This means that the securities can be sold

Lyman is the chief financial officer of Moneysworth Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC) . Under the Sarbanes-Oxley Act of 2002, Lyman must personally

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

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

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates

If a security does not qualify for an exemption, an issuer cannot offer it to the public.

Exam 30: Investor Protection, Insider Trading, and Corporate Governance

For civil sanctions to be imposed under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5,scienter must not exist.

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

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

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

Exemptions from federal securities law are notexemptions from state laws.

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

On Spec, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving​

In the context of Section 16(b) of the Securities Exchange Act of 1934, insiders include officers, directors, and large stockholders of Section 12 corporations.

Space Trips 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. Space Trips is charged with violating the Securities Act of 1933. Space Trips's best defense is​

The Securities Exchange Act of 1934 applies to companies that have assets in excess of $5 million and five hundred or more employees.

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​

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

Sun & Ski Tours Corporation is poised to issue securities that, under the Securities Act of 1933, are “exempt.” This means that the securities can be sold

Lyman is the chief financial officer of Moneysworth Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC) . Under the Sarbanes-Oxley Act of 2002, Lyman must personally​

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

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​

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates

If a security does not qualify for an exemption, an issuer cannot offer it to the public.

On Spec, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving

Space Trips 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. Space Trips is charged with violating the Securities Act of 1933. Space Trips's best defense is

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

Lyman is the chief financial officer of Moneysworth Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC) . Under the Sarbanes-Oxley Act of 2002, Lyman must personally

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