Deck 28: Securities Regulation

Question 1

Blue sky laws were not designed to reconcile the conflicting philosophies of state regulation but to take them into account and to make the various forms of regulation as consistent as possible.

Answer 1

True

Question 2

Initial public offering is considered as a primary market transaction.

Answer 2

True

Question 3

The law that relates to the recapture of short-swings profit, under Section 16b) of the Securities Exchange Act, applies to any company with more than $10 million in assets and at least five hundred or more shareholders of any class of stock.

Answer 3

True

Question 4

A ruling by the Supreme Court stating that "aiders and abettors" of fraud cannot be held secondarily liable under Rule 10b) for a private cause of action.

Question 5

Section 24 of the Securities Act of 1933 provides for fines to exceed $10,000.

Question 6

The Securities and Exchange Commission is bipartisan: not more than three commissioners may be from the same political party.

Question 7

Members of the Securities and Exchange Commission have staggered _____ terms.

A) five-year
B) seven-year
C) two-year
D) three-year
E) ten-year

Question 8

Every October 22^nd, the term of one of the commissioners in the Securities and Exchange Commission expires.

Question 9

In the Securities and Exchange Commission, the president cannot remove commissioners during their terms of office.

Question 10

The Securities and Exchange Commission was created by Congress in the Securities Exchange Act of 1933.

Question 11

The proof of scienter is required in private damage actions under Rule 10b-5.

Question 12

It is lawful to state or imply in the prospectus that the commission has the power to disapprove securities for lack of merit.

Question 13

Which of the following transactions of sale of securities would be exempt from the registration requirement?

A) Transactions made by an issuer.
B) Transactions made by an underwriter.
C) Offerings of small business investment companies not made in accordance with rules and regulations of the Securities and Exchange Commission.
D) Private offerings to a limited number of people who do not propose to redistribute their securities.
E) Securities of municipal, state, federal and other government instrumentalities, of charitable institutions, of banks, and of carriers not subject to the Interstate Commerce Act.

Question 14

Rule 10b-5 of the Securities Exchange Act is limited to the securities registered under the 1934 Securities Exchange Act.

Question 15

The Foreign Corrupt Practices Act permits payments made to expedite routine governmental actions, such as obtaining a visa.

Question 16

A civil injunction is a judicial process or order requiring a person or entity to do a particular act or to refrain from doing a particular act.

Question 17

Daniel, one of the most influential members of the board of Fun Sports Inc., holds 15 percent of the registered security of the company. It can be said that Daniel is a corporate insider.

Question 18

A transferable share is known as an) _____.

A) statute
B) legislation
C) article of incorporation
D) writ
E) security

Question 19

The _____ is the fundamental "truth in securities" law.

A) Securities and Exchange Commission
B) Securities Act of 1933
C) Securities Act of 1934
D) registration statement
E) blue sky law

Question 20

The Securities and Exchange Commission believed that Regal Corp. had committed a securities fraud and hence, it asked the court to impose civil penalties. In the context of the Securities Exchange Act, the maximum penalty that the court could impose for Regal's. violation is _____.

A) $100,000
B) $50,000
C) $200,000
D) $500,000
E) $300,000

Question 21

_____ is a legal term that refers to having intent or knowledge of wrongdoing.

A) Quasi
B) Novation
C) Scienter
D) Escrow
E) Escheat

Question 22

Hannah owned 12 percent of the shares of Floating Walls Inc., a furniture manufacturing company, and had significant influence on the members of the board. She was informed about all the important decisions of the company and was also called for various board meetings. On obtaining information-from one of the senior board members-about the fall in the prices of the company's share, Hannah immediately sold 5 percent of her shares in the market. It can be said that Hannah indulged in _____.

A) insider trading
B) proxy solicitation
C) a primary market transaction
D) a capital market transaction
E) a false-swing

Question 23

According to the Supreme Court, notes that are not "investment contracts" can still be considered as securities if certain factors are present. State those factors.

Question 24

_____ of the Securities Exchange Act of 1934 prohibits any person from using mails or facilities of interstate commerce "to use or employ, in connection with the purchase or sale of any security… any manipulative or deceptive device…"

A) Section 16b)
B) Section 10b)
C) Section 11a)
D) Section 13d)
E) Section 15d)

Question 25

According to the _____, any person stealing information from an employee and then trading securities based on that information will have to face insider trading liability.

A) broken windows theory
B) misappropriation theory
C) broken window fallacy
D) Stigmergy theory
E) conduit theory

Question 26

In 2010, Congress passed the _____, which is the largest amendment to financial regulation in the United States since the Great Depression.

A) Depository Institutions Deregulation and Monetary Control Act
B) Gramm-Leach-Bliley Act
C) Riegle-Neal Interstate Banking and Branching Efficiency Act
D) Garn-St. Germain Depository Institutions Act
E) Dodd-Frank Wall Street Reform and Consumer Protection Act

Question 27

The _____ is a body created by the Sarbanes-Oxley that oversees, inspects, and regulates accounting firms in their capacity as auditors of public companies.

A) Securities and Exchange Commission
B) Public Company Accounting Oversight Board
C) Foreign Corrupt Practices Commission
D) International Accounting Standards Board
E) Financial Accounting Standards Board

Question 28

Dino, a director of LetsGo Inc., purchases 100 shares of the company at $100 per share on 5^th January 2011 and sells them on 15^th February at $110 per share. Because the shares were bought and sold within a six-month period, Dino will have to return the $1,000 profit to the company under the _____ rule.

A) res judicata profit
B) preemptive profit
C) short-swing profit
D) proxy solicitation profit
E) ultra vires profit

Question 29

What is a blue sky law?

A) It is one of the laws used by the Supreme Court to ratify the formation of the Federal Trade Commission Act.
B) It is a state law that regulates employment discrimination practices against people with disabilities.
C) It is a state law that regulates the formation of agency shop agreements.
D) It is a state law that regulates the formation of closed shop agreements.
E) It is a state law that regulates the offering and sale of securities to protect the public from fraud.

Question 30

What are the three options that the Securities and Exchange Commission SEC) has when it believes that a violation has occurred?

Question 31

Fun Toon Inc., a large chocolate manufacturing company, sells its shares directly to the public at $50 per share. Ron purchases 100 shares of the company. When the price of the shares goes up to $60, Ron decides to sell 50 shares. He approaches a broker who sells these shares to John at $60. This resale of the shares by the broker represents a sale in the _____ market.

A) primary
B) secondary
C) reverse takeover
D) initial public offering
E) stock market launch

Question 32

Gloria purchased 200 shares of New You Inc., a cosmetic company, after Dora-a director of New You Inc.-informed her about the company's new undertaking that might boost the share value in the market. Here, Gloria would be considered as an) _____.

A) promisee
B) promisor
C) assignor
D) tippee
E) franchisor