Deck 23: Securities and Antitrust

Question 1

Section 16 of the 1934 Act addresses what type of insider trading?

A)classic insider trading
B)tipping
C)short-swing trading
D)takeovers

Answer 1

C

Question 2

Jackie learned of insider trading information while talking to Mark, a director of a large corporation. She took advantage of the information to buy stock and make a huge financial gain. If she is accused of violating securities law, what must the government prove in order to gain a conviction against Jackie?

Answer 2

The government must prove that
(1)Jackie knew the information was confidential,
(2)she knew it came from an insider who was violating his fiduciary duty, and
(3)the insider, Mark, expected some personal gain as a result of giving Jackie the insider information.

Question 3

Officials from Vital Corporation are traveling around the country making presentations to prospective investors. The officials are conducting a

A)prospectus.
B)secondary offering.
C)road show.
D)private offering.

Answer 3

C

Question 4

Regulation Crowdfunding permits privately held companies to sell up to $1 million in securities in any 12-month period provided they meet a number of criteria.

Question 5

After the SEC completes its review of a preliminary registration statement, it sends the issuer a comment letter setting forth changes that must be made.

Question 6

Section 16 of the 1934 Act prohibits short-swing trading on the part of officers, directors, and controlling shareholders who

A)own more than 25% of the company.
B)are also on the board of directors of the company.
C)own more than 10% of the company.
D)trade their shares in order to invest in another company.

Question 7

Under the 1934 Act, an issuer must register with the SEC if

A)it has not completed a public offering under the 1933 Act.
B)its securities are not going to be traded on a national exchange.
C)it will not be providing investors with a prospectus.
D)it has at least 2,000 shareholders and total assets that exceed $10 million.

Question 8

The Sherman Act was designed to prevent extreme concentrations of economic power.

Question 9

Both per se and rule of reason violations of the Sherman Act are automatically illegal.

Question 10

A criminal case under the Securities Act of 1933 is prosecuted by

A)the SEC.
B)the Justice Department.
C)the Department of the Treasury.
D)the FTC.

Question 11

The Clayton Act prohibits anti-competitive mergers.

Question 12

The 1933 Act prohibits fraud only in transactions involving registered securities.

Question 13

Under Section 10(b)of the 1934 Act, all of the following would be considered a "corporate insider" EXCEPT

A)the janitorial company who cleans the corporate offices.
B)a major shareholder of the corporation.
C)a member of the board of directors.
D)All of these are correct.

Question 14

Both the Justice Department and the Federal Trade Commission have the authority to enforce antitrust laws.

Question 15

Under Regulation D, institutions such as banks and insurance companies are considered to be what type of investors?

A)accredited
B)unaccredited
C)restricted
D)unrestricted

Question 16

Gary, Louise, and Brian, who own competing gas stations in town, happen to see each other at a restaurant one morning and have breakfast together. While talking, they decide to set their gas prices at the same amount. They have committed an illegal act only if the agreed price is unfair to consumers.

Question 17

Per se violations are subject to both civil and criminal penalties.

Question 18

The "tipper" of inside information can be convicted of a crime, but the "tippee" cannot.

Question 19

What are the purposes of a registration statement and what information must it contain?

Question 20

Which of the following is reported on Form 8-K?

A)audited financial statements
B)the resignation of a director over a policy dispute
C)unaudited financial statements
D)All of these are correct.

Question 21

Explain the overall purposes of the Sherman Antitrust Act, the Clayton Act, and the Robinson-Patman Act. How do each of these Acts relate to each other?

Question 22

As a result of Standard Oil Trust's control of the oil industry, which of the following statutes was enacted?

A)Sherman Act
B)Robinson-Patman Act
C)Clayton Act
D)Chicago School Act

Question 23

Under modern antitrust law analysis, the determinant for a monopoly is a company with a market share between 70 and 90 percent.

Question 24

Predatory pricing occurs when a company lowers its prices below cost to drive competitors out of business.

Question 25

Under which circumstance is it legal to charge a lower price to a particular buyer?

A)if the items are the same
B)if the price discrimination lessens competition
C)if the costs of serving that particular buyer are lower
D)All of these are correct.

Question 26

What type of collusion does the Supreme Court refer to as "the supreme evil of antitrust"?

A)price-fixing
B)reciprocal dealing
C)price discrimination
D)vertical mergers

Question 27

Smalltown has two family-owned hardware stores that have been in business for years. Major Hardware decides that Smalltown would be a good place to build one of its superstores. Major opens, advertising unbelievably low prices; in fact, at below cost. Because Major owns stores nationally, it is able to keep prices extremely low until both of the family-owned stores have to go out of business because they cannot compete. After Major is the only hardware store in town, it raises its prices enough to make up for its former losses and to make some additional profit. Discuss this behavior in relation to antitrust law.

Question 28

Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.

Question 29

Violations of antitrust law are either per se violations or rule of reason violations. What are the differences between these two types of violations?

Question 30

Companies with substantial assets must notify the FTC before undertaking a merger.

Question 31

A monopoly is illegal

A)under any circumstances, under Section 2 of the Sherman Act.
B)only if it is gained or maintained by using wrongful tactics.
C)if you have greater than 50 percent of market share.
D)any time there are no interchangeable products.

Question 32

A major motion picture distributor offers to provide a television station with three very popular, desirable films. However, as part of the agreement, the distributor requires that the television station also purchase four films that are not very desirable. This type of arrangement is called a

A)reciprocal dealing agreement.
B)reverter arrangement.
C)joint custody arrangement.
D)tying arrangement.

Question 33

What law prohibits mergers that are anti-competitive?

A)Sherman Act
B)Clayton Act
C)Robinson-Patman Act
D)Radmon Act

Question 34

In vertical price-fixing, the manufacturer sets the

A)minimum prices that retailers may charge.
B)maximum prices that retailers may charge.
C)number of items a retailer may sell at a specific price.
D)date by which a retailer must sell products.