Deck 19: Governance and Regulation: Securities Law

Question 1

Rule 504 has no limitations on number of offerees.

Answer 1

True

Question 2

Registration integration can produce a cumulative violation of several small offerings.

Answer 2

True

Question 3

The states did not have federal legislation prior to the time of the federal securities laws.

Answer 3

False

Question 4

An accredited investor includes any corporation.

Question 5

Municipal bonds are exempt from SEC requirements.

Question 6

The intrastate registration exemption requires that 100 percent of the issuer's assets be located in its resident state.

Question 7

A primary offering is a first-time offering of shares for sale.

Question 8

Rule 505 carries a 35-purchaser maximum (excluding accredited investors).

Question 9

A bond is not considered a security under federal law.

Question 10

The SEC prohibits an analyst from issuing a report that is contrary to the analyst's true opinion about a security.

Question 11

A bank is an example of an accredited investor for purposes of Regulation D.

Question 12

The intrastate registration exemption requires that 100 percent of the offerees be residents of the same state as the issuer.

Question 13

All Regulation D offerings can be sold through advertising.

Question 14

Shareholder proposals that call for a shareholder vote on compensation are proper under SEC rules.

Question 15

Rule 506 carries a 35-purchaser maximum (excluding accredited investors).

Question 16

Regulation A short-form exemptions can be used for offerings of $5 million or less.

Question 17

The 1934 Securities Exchange Act regulates the secondary sale of securities.

Question 18

The 1933 Securities Act regulates primary offerings.

Question 19

A limited partnership interest is not considered a security.

Question 20

A natural person whose net worth is greater than $1 million is an accredited investor.

Question 21

A company registered on the New York Stock Exchange must file a 10-Q report.

Question 22

A merit review standard is the same as the SEC review.

Question 23

The SEC conducts a merit review of its filed registrations.

Question 24

Section 10(b) violations carry fines of only $10,000.

Question 25

Section 10(b) applies to all securities sold in interstate commerce.

Question 26

Only an actual seller or purchaser can bring a suit for civil recovery under 10(b).

Question 27

A tombstone ad can be run before the registration statement is effective.

Question 28

Section 16 applies to all stock transactions of directors and officers (of a 1934 Act company).

Question 29

Blue sky laws are state securities registration laws.

Question 30

Section 12 violations would include selling before the effective date.

Question 31

A registration approved by the SEC need not be registered at the state level.

Question 32

Bernie Madoff was sentenced to 50 years in prison for his fraud convictions.

Question 33

Only those who actually signed the registration statement can be liable for a Section 11 violation.

Question 34

The due diligence defense is one that is easy to establish.

Question 35

All companies required to register under the 1934 Act must file a 10-K report.

Question 36

A red herring is a prospectus sent prior to the effective date of the registration date.

Question 37

Registration statements must include audited financial statements.

Question 38

Only directors can be held liable for a Section 11 violation.

Question 39

A false prospectus is covered under Section 11.

Question 40

Selling securities before the effective date of the registration statement is a Section 12 violation.

Question 41

State laws regulating tender offers are unconstitutional.

Question 42

To qualify for an intrastate offering exemption, the shares must contain transfer restrictions.

Question 43

Asset acquisitions are not subject to any federal regulation.

Question 44

Shares of stock issued pursuant to a corporate reorganization must be registered.

Question 45

Laddering is a safe-harbor section of the 1934 Act.

Question 46

The intrastate exemption violates the commerce clause.

Question 47

State antitakeover statutes that delay takeovers are unconstitutional.

Question 48

A merger is the combination of two firms into one of the old firms.

Question 49

The penalties for certification of false financial statements are up to $1 million in fines and/or 10 years.

Question 50

Shareholder proposals can include topics such as executive compensation.

Question 51

Shelf registration is good for a maximum of two years, provided there are regular filings such as the 10K.

Question 52

A tender offer is another form of business combination.

Question 53

A horizontal merger is a merger among competitors.

Question 54

Insider trading rules apply only to officers and directors.

Question 55

A hostile takeover is one supported by management.

Question 56

Short-swing profits are acceptable if there was no inside information.

Question 57

Publicly traded companies can no longer issue non-GAAP financial statements.

Question 58

PCAOB consists of five presidential appointees.

Question 59

A company filing Williams Act materials is not required to file proxy materials.

Question 60

An IPO does not require SEC registration.

Question 61

Sarbanes-Oxley requires all covered companies to have a code of ethics for financial officers.

Question 62

The trend in international markets is away from regulating insider trading.

Question 63

If the earnings of a company are revealed to be false, the officers who earned bonuses based on these earnings must forfeit them.

Question 64

Under Sarbanes-Oxley, a company must file an 8-K if it has waived its code of ethics for a financial reporting officer.

Question 65

A primary offering is an:

A) initial offering of securities.
B) offering by a 1933 or 1934 Act company.
C) offer of treasury shares to original shareholders.
D) none of the above

Question 66

Section 404 of Sarbanes­Oxley is the section that requires certification of the adequacy of a company's internal
controls.

Question 67

Under Sarbanes-Oxley, every board audit committee must have at least one financial expert.

Question 68

Pump and dump is the act of hyping a stock in order to benefit from a sale once the hype affects the price.

Question 69

Which of the following would not be considered a security under the 1933 Act?

A) limited partnership interest
B) bonds
C) pension fund
D) Subchapter S corporate stock

Question 70

An auditor for a company cannot also perform appraisal functions.

Question 71

Sarbanes-Oxley has special anti-retaliation protections for employees who raise questions about financial reports and internal accounting.

Question 72

Destruction of documents related to the financial reports of a company carries a 20-year penalty.

Question 73

Attorneys who represent publicly traded companies need not report any financial fraud to boards because of attorney-client privilege.

Question 74

Accounting firms must register annually with PCAOB if they want to audit publicly traded companies.

Question 75

Black-out periods are timeframes in which trading by company employees is prohibited.

Question 76

Under Sarbanes­Oxley, audit committees of publicly held companies' boards need not be made up of independent
members so long as the majority of the board is independent.

Question 77

EBITDA is the same as GAAP accounting.

Question 78

Insider trading rules apply to information exchanged over the Internet and chat rooms.

Question 79

Shareholders who solicit proxies need not comply with Section 14 of the 1934 Act.

Question 80

Under Sarbanes-Oxley, audit partners in charge of accounts must be rotated every 10 years.