Question 1

Which of the following is not a requirement for the application of the exemption involving intrastate issues?

Accepted Answer

A)  Issuers must plan to use at least 80 percent of the profits within the state.
B)  Issuers must do at least 80 percent of their business within the state.
C)  Issuers must conduct at least 80 percent of advertising in the state.
D)  Issuers must have at least 80 percent of their assets within the state.
E)  Issuers must have their main offices in the state.F) C) and D)
G) A) and B)

Question 2

DotCom,Inc. ,told an investor that it had hired an investment firm to take the company public.However,DotCom had not in fact hired an investment firm and instead went bankrupt a year after the investor's purchase of significant shares.When the investor sues,DotCom claims that its prospectus includes the cautionary statements required by law,and thus cannot be held liable under the safe harbor provision of the Private Securities Litigation Reform Act.Would DotCom likely be held liable for the investor's loss?

Accepted Answer

A)  No,unless the cautionary language in the prospectus was hidden or unclear.
B)  Yes,the cautionary statements only protect against forward-looking statements,not misrepresentations about the past or present.
C)  No,because the prospectus contained the appropriate language.
D)  Yes,because DotCom was not a public company and thus the safe harbor provision is inapplicable.
E)  No,but only if DotCom can prove that the investor had been provided with a copy of the prospectus.F) A) and E)
G) B) and E)

Question 3

Which of the following is true regarding the case opener,the case in which Martha Stewart was charged with insider trading after selling stock in a company based on information that her stockbroker gave her that the CEO of the company and his daughter had just sold all of their company stock?

Accepted Answer

A)  She was not convicted of insider trading,but she went to prison for convictions relating to statements made to SEC investigators.
B)  Charges were dismissed after she agreed to repurchase all shares of stock.
C)  She was not convicted of insider trading and sentenced to prison.
D)  She pled guilty to lesser offenses on all counts,paid a large fine,and all charges were dismissed.
E)  After a jury trial she was found innocent of insider trading and did not go to prison for anything.F) C) and D)
G) B) and D)

Question 4

Which of the following,if any,is a securities regulation term that would describe Annaliese as an investor?

Accepted Answer

A)  Sophisticated
B)  Accredited
C)  Superior
D)  Approved
E)  There is no specific term to describe Annaliese,as she is considered the same as any other investor.F) C) and D)
G) A) and D)

Question 5

Laws that regulate interstate securities are called blue-sky laws.

Accepted Answer

A) True 
 B)False

Question 6

In most situations,an issuer of securities usually files a written registration statement and a prospectus with the SEC.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is not a responsibility of the SEC?

Accepted Answer

A)  Regulation of the activities of brokers,dealers,and advisers.
B)  Adoption of rules to regulate securities transactions.
C)  Enforcement of securities laws.
D)  Criminal prosecution of alleged violations.
E)  Regulation of trades on securities exchanges.F) A) and E)
G) C) and E)

Question 8

________ are investment banking firms that purchase securities from the issuing corporation with the intent of selling them to brokerage houses,which then sell them to the public.

Accepted Answer

A)  Offerors
B)  Issuers
C)  Unaccredited purchasers
D)  Underwriters
E)  Accredited purchasersF) C) and D)
G) A) and C)

Question 9

How are the heads of the Securities and Exchange Commission chosen?

Accepted Answer

A)  They are appointed by a majority vote of the Senate.
B)  They are appointed by a majority vote of the House of Representatives.
C)  They are appointed by the president.
D)  They are appointed by a two-thirds vote of the Senate.
E)  Each state has one appointee appointed by the governor of each state.F) B) and C)
G) D) and E)

Question 10

Fraud associated with the purchase or sale of all securities is prohibited by which of the following?

Accepted Answer

A)  Rule 2c.-5
B)  Section 32c.
C)  Rule 10b-5
D)  Rule 5c.-2
E)  Section 15b.F) A) and C)
G) B) and D)

Question 11

Which of the following prohibits the use of manipulative devices to bypass SEC rules under the 1934 act?

Accepted Answer

A)  Rule 25.
B)  Section 5
C)  Section 10b.
D)  Section 15a.
E)  Rule 2F) A) and D)
G) A) and B)

Question 12

Which of the following is true regarding exempt transactions?

Accepted Answer

A)  Resales of securities and intrastate issues are exempt transactions,but limited offers are not.
B)  Limited offers,intrastate issues,and resales of securities are all exempt transactions.
C)  Limited offers are exempt transactions,but intrastate issues and resales of securities are not.
D)  Limited offers and resales of securities are exempt transactions,but intrastate issues are not.
E)  Intrastate issues and limited offers are exempt transactions,but resales of securities are not.F) None of the above
G) A) and B)

Question 13

Which of the following is true regarding examples of securities?

Accepted Answer

A)  Warrants and stocks are securities,but debentures and bonds are not.
B)  Stocks,warrants,and debentures are securities,but bonds are not.
C)  Debentures,warrants,bonds,and stocks are all securities.
D)  Stocks and bonds are securities,but debentures and warrants are not.
E)  Stocks,warrants,and bonds are securities,but debentures are not.F) A) and B)
G) A) and D)

Question 14

The SEC may issue bounty payments to insider-trading whistle-blowers.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following limits shareholders' ability to bring class action suits against nationally traded companies?

Accepted Answer

A)  The Sarbanes-Oxley Act of 2002
B)  The National Securities Markets Improvement Act of 1996
C)  The Securities Litigation Uniform Standards Act of 1998
D)  The Market Reform Act of 1990
E)  The Class Prohibition Act of 1997F) B) and E)
G) A) and B)

Question 16

Was Alessia's press release prior to the filing of her registration document and prospectus permissible?

Accepted Answer

A)  Yes,an long as it was not an express offer to sell securities.
B)  Yes,as long as the information was truthful.
C)  Yes,as long as the information included the names of the underwriters.
D)  No,because it did not go to all prospective shareholders.
E)  No,an issuer cannot offer to sell securities during the prefiling period.F) B) and E)
G) A) and B)

Question 17

Which of the following is not an example of material information under Section 10b.and Rule 10b-5?

Accepted Answer

A)  Any change in the financial status of the company.
B)  A new product,process,or discovery.
C)  A change in dividends.
D)  A change in the status of litigation against the company.
E)  A contract for the sale of corporate assets or for the purchase of assets.F) All of the above
G) A) and B)

Question 18

Which of the following allows the SEC to suspend securities trading if prices vary excessively in a short time period?

Accepted Answer

A)  The Sarbanes-Oxley Act of 2002
B)  The Market Reform Act of 1990
C)  The Securities Acts Amendments of 1990
D)  The National Securities Markets Improvement Act of 1996
E)  The Securities Enforcement Remedies and Penny Stock Reform Act of 1990F) B) and E)
G) B) and C)

Question 19

[In Trouble] Isaiah,an issuer of stock,may be in trouble.He sold stock in a new health club venture before the effective date of registration.He did so because he was in financial trouble due to other projects.Isaiah thought that the health club venture would be such a success that he would never get caught.Unfortunately,he was wrong.The health club venture has significant problems,and investors are looking for some way to hold Isaiah responsible.Another problem Isaiah has is that he inflated information regarding the prospects of the health club in the prospectus.Rafal,a new lawyer,told Isaiah that as far as he knew,Isaiah could be fined for violations under the Securities Act of 1933,but he could not be sent to prison.Isaiah told Rafal that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture.Isaiah says that he plans to rely on the due diligence defense.Isaiah also asks Rafal if he is aware of any other defenses.Isaiah says that once before he was held liable for a violation of the Securities Act of 1933,and he does not want to be in trouble again.
-Is Rafal correct in that the SEC would have no authority to send Isaiah to prison?

Accepted Answer

A)  Rafal is incorrect because the SEC criminally prosecutes some violators although the action would only be a misdemeanor.
B)  Rafal is correct because there are no criminal penalties for violating the 1933 act.
C)  Rafal is incorrect because the SEC criminally prosecutes some violators,and a violation of the act is considered a felony.
D)  Rafal is correct in that the SEC itself would not send Isaiah to prison,but the SEC could recommend criminal action to the Department of Justice resulting in imprisonment for up to five years for a violation.
E)  Rafal is correct in that the SEC itself would not send Isaiah to prison,but the SEC could recommend criminal action to the Federal Bureau of Investigation resulting in imprisonment for up to ten years for a violation.F) B) and C)
G) B) and D)

Question 20

Which of the following did Congress pass in an effort to prevent exploitation of small investors?

Accepted Answer

A)  The Securities Act Amendments of 1990
B)  The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
C)  The National Securities Market Improvement Act of 1996
D)  The Investment Company Act of 1940
E)  The Market Reform Act of 1990F) B) and C)
G) All of the above

Exam 41: Corporations: Securities and Investor Protection

Which of the following limits shareholders' ability to bring class action suits against nationally traded companies?

Correct Answer
verified

In most situations,an issuer of securities usually files a written registration statement and a prospectus with the SEC.

Correct Answer
verified

Laws that regulate interstate securities are called blue-sky laws.

Correct Answer
verified

Which of the following statements is not a responsibility of the SEC?

Correct Answer
verified

Fraud associated with the purchase or sale of all securities is prohibited by which of the following?

Correct Answer
verified

________ are investment banking firms that purchase securities from the issuing corporation with the intent of selling them to brokerage houses,which then sell them to the public.

Correct Answer
verified

Which of the following is true regarding examples of securities?

Correct Answer
verified

Which of the following,if any,is a securities regulation term that would describe Annaliese as an investor?

Correct Answer
verified

Correct Answer
verified

Was Alessia's press release prior to the filing of her registration document and prospectus permissible?

Correct Answer
verified

How are the heads of the Securities and Exchange Commission chosen?

Correct Answer
verified

Which of the following did Congress pass in an effort to prevent exploitation of small investors?

Correct Answer
verified

Which of the following allows the SEC to suspend securities trading if prices vary excessively in a short time period?

Correct Answer
verified

Which of the following is true regarding exempt transactions?

Correct Answer
verified

Correct Answer
verified

The SEC may issue bounty payments to insider-trading whistle-blowers.

Correct Answer
verified

Which of the following is not an example of material information under Section 10b.and Rule 10b-5?

Correct Answer
verified

Which of the following is not a requirement for the application of the exemption involving intrastate issues?

Correct Answer
verified

Which of the following is true regarding the case opener,the case in which Martha Stewart was charged with insider trading after selling stock in a company based on information that her stockbroker gave her that the CEO of the company and his daughter had just sold all of their company stock?

Correct Answer
verified

Which of the following prohibits the use of manipulative devices to bypass SEC rules under the 1934 act?

Correct Answer
verified

Exam 41: Corporations: Securities and Investor Protection

Which of the following limits shareholders' ability to bring class action suits against nationally traded companies?

Correct AnswerverifiedShow Answer

In most situations,an issuer of securities usually files a written registration statement and a prospectus with the SEC.

Correct AnswerverifiedShow Answer

Laws that regulate interstate securities are called blue-sky laws.

Correct AnswerverifiedShow Answer

Which of the following statements is not a responsibility of the SEC?

Correct AnswerverifiedShow Answer

Fraud associated with the purchase or sale of all securities is prohibited by which of the following?

Correct AnswerverifiedShow Answer

________ are investment banking firms that purchase securities from the issuing corporation with the intent of selling them to brokerage houses,which then sell them to the public.

Correct AnswerverifiedShow Answer

Which of the following is true regarding examples of securities?

Correct AnswerverifiedShow Answer

Which of the following,if any,is a securities regulation term that would describe Annaliese as an investor?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Was Alessia's press release prior to the filing of her registration document and prospectus permissible?

Correct AnswerverifiedShow Answer

How are the heads of the Securities and Exchange Commission chosen?

Correct AnswerverifiedShow Answer

Which of the following did Congress pass in an effort to prevent exploitation of small investors?

Correct AnswerverifiedShow Answer

Which of the following allows the SEC to suspend securities trading if prices vary excessively in a short time period?

Correct AnswerverifiedShow Answer

Which of the following is true regarding exempt transactions?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The SEC may issue bounty payments to insider-trading whistle-blowers.

Correct AnswerverifiedShow Answer

Which of the following is not an example of material information under Section 10b.and Rule 10b-5?

Correct AnswerverifiedShow Answer

Which of the following is not a requirement for the application of the exemption involving intrastate issues?

Correct AnswerverifiedShow Answer

Which of the following is true regarding the case opener,the case in which Martha Stewart was charged with insider trading after selling stock in a company based on information that her stockbroker gave her that the CEO of the company and his daughter had just sold all of their company stock?

Correct AnswerverifiedShow Answer

Which of the following prohibits the use of manipulative devices to bypass SEC rules under the 1934 act?

Correct AnswerverifiedShow Answer

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