Question 1

A Ponzi scheme is a fraudulent investment that pays returns from new capital invested with the fraudsters instead of from a legitimate investment.

Accepted Answer

A) True 
 B)False

Question 2

An insider must actually use inside information in connection with the purchase and sale of securities to violate Section 16(b) of the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Trend 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 5

Cattle Ranch Company offers its stock for sale only in a single state. The law in the company's state is like the law in most states. Thus, the firm's offer is subject to state securities statutes that include​

Accepted Answer

A)  ​antifraud and disclosure provisions. 
B)  ​antifraud provisions only. 
C)  ​disclosure provisions only. 
D)  ​neither antifraud nor disclosure provisions.

Question 6

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 million and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to​

Accepted Answer

A)  ​Fresh Fruit and Gourmand Pastries. 
B)  ​Fresh Fruit only. 
C)  ​Gourmand Pastries only. 
D)  ​neither Fresh Fruit nor Gourmand Pastries.

Question 7

Beachware, Inc., wants to issue stock of $4 million in a single offering. The corporation must provide disclosure documents that generally are the same as those used in registered offerings to​

Accepted Answer

A)  ​all investors and the Securities and Exchange Commission. 
B)  ​the Securities and Exchange Commission. 
C)  ​any accredited investors. 
D)  ​any unaccredited investors.

Question 8

Forward-looking forecasts that turn out to be wrong can be protected against liability for securities fraud if they include "meaningful cautionary statements."​

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

Karin, an officer for LNG Corporation, buys 10,000 shares of its stock. One week later, LNG announces that it will merge with a competitor, Mining & Piping Company, and the price of LNG stock increases. One month later, Karin sells her shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Karin would not be liable if, after buying the stock, she 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 11

Fact Pattern 7-3
Dan, an accountant for Eureka! Inc. learns of undisclosed company plans to market a new laptop. Dan buys 1,000 shares of the firm's stock. He reveals the company plans to Fay, who tells Greg. Both Fay and Greg buy 100 shares. Greg knows that Fay got her information from Dan. When Eureka! publicly announces its new laptop, Dan, Fay, and Greg sell their stock for a profit.
-Refer to Fact Pattern 7-3. 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 12

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

Accepted Answer

A) True 
 B)False

Exam 7: Securities Law and Corporate Governance

A Ponzi scheme is a fraudulent investment that pays returns from new capital invested with the fraudsters instead of from a legitimate investment.

An insider must actually use inside information in connection with the purchase and sale of securities to violate Section 16(b) of the Securities Exchange Act of 1934.

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

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

Cattle Ranch Company offers its stock for sale only in a single state. The law in the company's state is like the law in most states. Thus, the firm's offer is subject to state securities statutes that include​

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 million and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to​

Beachware, Inc., wants to issue stock of $4 million in a single offering. The corporation must provide disclosure documents that generally are the same as those used in registered offerings to​

Forward-looking forecasts that turn out to be wrong can be protected against liability for securities fraud if they include "meaningful cautionary statements."​

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

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

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

Cattle Ranch Company offers its stock for sale only in a single state. The law in the company's state is like the law in most states. Thus, the firm's offer is subject to state securities statutes that include

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 million and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to

Beachware, Inc., wants to issue stock of $4 million in a single offering. The corporation must provide disclosure documents that generally are the same as those used in registered offerings to

Forward-looking forecasts that turn out to be wrong can be protected against liability for securities fraud if they include "meaningful cautionary statements."