Question 1

There are rigorously enforced restrictions regarding both number and qualification of investors who purchase securities under Regulation A.

Accepted Answer

Regulation A allows companies to offer and sell securities to the public with less stringent regulatory requirements and without a limit on the number of "unaccredited" investors, unlike other exemptions that have strict investor qualifications and caps.

Question 2

In an election of directors,solicitations of proxies by a person other than the issuer must include an annual report with a written proxy statement.

Accepted Answer

According to SEC Rule 14a-3, any person other than the issuer who solicits proxies in an election of directors must provide a written proxy statement to the shareholders, which includes an annual report.

Question 3

Bonds are included in the definition of the term "security."

Accepted Answer

Bonds are a type of security because they represent an investment in which the investor loans money to a company or government entity in exchange for regular interest payments and the return of the principal investment at maturity. Securities are broadly defined as financial instruments that can be bought and sold in financial markets, and bonds are a common type of security along with stocks, mutual funds, and other investments.

Question 4

In 2016,the SEC abolished the requirement that a registration statement disclose compensation paid to senior executives and directors.

Accepted Answer

The SEC did not abolish the requirement that a registration statement disclose compensation paid to senior executives and directors in 2016. This information is still required to be disclosed under SEC rules.

Question 5

Under Regulation A,as amended in 1992,an issuer may make offers upon filing the offering statement but may make sales only after the SEC has qualified the statement.

Accepted Answer

This is correct according to the SEC's rules for Regulation A. An issuer may begin making offers as soon as the offering statement is filed, but sales can only be made after the SEC has qualified the statement.

Question 6

The profits realized for violation of Rule 16(b)are given directly to the shareholders as a penalty to the corporation.

Accepted Answer

The profits realized from a violation of Rule 16(b) are disgorged and must be paid to the corporation itself, not directly to the shareholders. Rule 16(b) under the Securities Exchange Act of 1934 is designed to prevent insiders from profiting from short-swing transactions based on access to non-public information.

Question 7

Crowdfunding is exempt from registration requirements,subject to a $1 million cap.

Accepted Answer

The Jumpstart Our Business Startups (JOBS) Act of 2012 exempts crowdfunding from registration requirements, subject to a $1 million cap. However, there are certain rules and regulations that must be followed to take advantage of this exemption.

Question 8

Shelf registrations allow issuers to respond more quickly to market conditions,but the provision allowing it does not apply to all companies.

Accepted Answer

This statement is true. Shelf registrations allow issuers to have a pre-approved shelf or blanket registration statement on file with the SEC that can be used to sell securities in the future without going through the entire registration process again, which can be time-consuming and costly. However, not all companies are eligible to use shelf registrations, and there are certain requirements and conditions that must be met in order to do so.

Question 9

Under SEC requirements adopted in 2010,disclosure of any directorships held by each director and nominee at any time during the past seven years at any public company or registered investment company must be made to shareholders.

Accepted Answer

The answer of Under SEC requirements adopted in 2010,disclosure of...

Question 10

A registration statement becomes public immediately on filing with the SEC,but a prospectus only becomes public upon signature of the chief financial officer.

Accepted Answer

A registration statement becomes public immediately on filing with the SEC, but a prospectus becomes public upon filing with the SEC. The signature of the CFO is not required to make it public.

Question 11

The SEC may not advance the effective date of a registration statement.

Accepted Answer

The SEC can accelerate the effective date of a registration statement upon request by the issuer, allowing the securities to be sold sooner than they would be under the standard review timeline.

Question 12

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 gives the SEC power to issue cease and desist orders and to impose criminal fines up to $1 million.

Accepted Answer

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 does give the SEC the power to issue cease and desist orders, but it does not grant the SEC the authority to impose criminal fines. Criminal fines are typically pursued by the Department of Justice, not the SEC. The SEC can, however, impose civil penalties.

Question 13

In 2009,Congress enacted the Investor Protection and Securities Reform Act,which imposes new corporate governance and investor protection rules on privately and publicly held companies.

Accepted Answer

There is no such act as "Investor Protection and Securities Reform Act" enacted by Congress in 2009. However, there is a similar act called the "Dodd-Frank Wall Street Reform and Consumer Protection Act" enacted in 2010 which imposes new corporate governance and investor protection rules on privately and publicly held companies.

Question 14

All fifty states have enacted identical statutes regulating tender offers.

Accepted Answer

While all states have laws regarding tender offers, they are not identical. Each state has its own specific regulations and requirements.

Question 15

Under Regulation A,as amended in 1992,issuers may use a simple question-and-answer disclosure document.

Accepted Answer

Under Regulation A as amended in 1992, issuers are allowed to use a simplified question-and-answer disclosure document known as an offering circular.

Question 16

The Foreign Corrupt Practices Act makes it illegal for an American company to pay money to a foreign official to influence a decision of that person in his official capacity.

Accepted Answer

The Foreign Corrupt Practices Act (FCPA) indeed makes it illegal for an American company or individual to pay bribes to foreign officials with the intent to obtain or retain business. This applies to both direct payments and payments made through intermediaries or third-party agents.

Question 17

The Foreign Corrupt Practices Act makes it illegal to offer a payment of money to a foreign official to influence a decision even if the payment is not made.

Accepted Answer

The Foreign Corrupt Practices Act prohibits the offer, authorization, or payment of anything of value to a foreign official in order to influence a decision or obtain or retain business, even if the payment is not actually made.

Question 18

The definition of "insider" is clearly and consistently defined in both Rule 10b-5 and Section 16(b)of the 1934 Act.

Accepted Answer

The definition of "insider" is not clearly and consistently defined across different provisions of securities laws, including Rule 10b-5 and Section 16(b) of the Securities Exchange Act of 1934. These rules focus on different aspects of insider trading and the obligations of insiders, leading to variations in how an "insider" might be interpreted in different contexts.

Question 19

In 1992,the SEC issued new rules tightening the registration and reporting system for small business issuers,which increase the cost for such issuers wishing to trade their securities publicly.

Accepted Answer

The SEC's 1992 rules aimed to simplify and reduce the regulatory burden for small business issuers, not increase it.

Question 20

The SEC has adopted rules requiring an issuer's chief executive and chief financial officers to certify the financial and other information contained in the issuer's annual and quarterly reports.

Accepted Answer

The SEC has indeed adopted rules that require an issuer's CEO and CFO to certify the accuracy of financial and other information in the issuer's annual and quarterly reports. This requirement is intended to increase accountability and accuracy in financial reporting.

Quiz 43: Securities Regulation