Question 1

Utilities Ltd. decided to go public by an initial public offering. It sold securities, some of which were bought by James Jefferson. Six months later, Mr. Jefferson sold the Utilities shares he had purchased to Martha Graham and Mark Franco. Two years later, Mr. Jefferson bought back the Utilities shares from Ms. Graham and Mr. Franco and made a profit out of both transactions. Who is the issuer in this scenario?

Accepted Answer

The issuer in this scenario is Utilities Ltd. because they are the company that went public and sold securities to investors like James Jefferson. The other individuals mentioned are simply investors who bought and sold shares of the company.

Question 2

Which of the following has the largest trading volume of any securities exchange in the world?

Accepted Answer

NASDAQ has the largest trading volume of any securities exchange in the world, largely due to its focus on technology companies, which have seen significant trading activity.

Question 3

________ requires securities offered to the public through the use of the mails or any facility of interstate commerce to be registered with the SEC by means of a registration statement and an accompanying prospectus.

Accepted Answer

Section 5 of the Securities Act of 1933 requires securities offered to the public through the use of the mails or any facility of interstate commerce to be registered with the SEC by means of a registration statement and an accompanying prospectus. The other options, Section 24 and SEC Rule 506, do not specifically address registration requirements for securities offered to the public. Section 12 of the Securities Act of 1933 requires certain disclosures to be made when securities are traded on a national securities exchange, but it does not require registration of securities offered to the public.

Question 4

A(n)________ refers to a document that an issuer of securities files with the SEC that contains required information about the issuer, the securities to be issued, and other relevant information.

Accepted Answer

A registration statement is a document that companies must file with the Securities and Exchange Commission (SEC) before they can make a public offering of securities. It contains important information about the company's business, financial condition, management, and the securities to be offered for sale. This disclosure is designed to give investors the information they need to make informed investment decisions.

Question 5

Which of the following best defines an initial public offering?

Accepted Answer

An initial public offering (IPO) is the first sale of a company's securities to the public, usually to raise capital for the business. It involves the sale of securities by an issuer to the public, and is often referred to as "going public." While an offering statement and registration statement are typically involved in an IPO, they do not define the IPO itself.

Question 6

________ permits issuers to sell up to $5 million of securities to the public during a 12-month period, pursuant to a simplified registration process.

Accepted Answer

Regulation A permits issuers to sell up to $5 million of securities to the public during a 12-month period, pursuant to a simplified registration process. SEC Rule 506 and Section 12 of the Securities Act of 1933 are not related to this specific provision, and Section 5 of the Securities Act of 1934 pertains to registration requirements for broker-dealers.

Question 7

Small businesses can file ________ with the SEC if they plan on raising $1 million or less from the public issue of securities.

Accepted Answer

The answer of Small businesses can file ________ with the...

Question 8

A(n)________ is a flexible standard for defining a security.

Accepted Answer

An investment contract is a flexible standard for defining a security because it can be broadly applied to a variety of situations, such as the sale of a business with the expectation of profits from the efforts of others. The other answer choices listed are types of financial instruments or documents and do not relate to the definition of a security.

Question 9

Which of the following is true of registration statements?

Accepted Answer

A registration statement must be accompanied by financial statements certified by certified public accountants to provide potential investors with important financial information about the company.

Question 10

Which of the following is true of a Regulation A offering?

Accepted Answer

Regulation A mandates that an offering circular be provided to the investors prior to the purchase of securities. This circular contains information about the issuer and the securities being offered, including financial statements, business operations, and risks associated with investing. Resale restrictions are not imposed on Regulation A offerings, and issuers are required to prepare a registration statement only if the offers exceed $5 million. While Regulation A does require some disclosure of information to investors, it is less stringent than the disclosure requirements of other regulations such as Regulation D.

Question 11

Interests in oil, gas, and mineral rights are classified as ________.

Accepted Answer

The answer of Interests in oil, gas, and mineral rights...

Question 12

The courts apply the ________ in determining whether an arrangement is an investment contract.

Accepted Answer

The Howey test is a legal test used by the courts to determine whether an arrangement qualifies as an investment contract. The test asks whether there is an investment of money in a common enterprise with an expectation of profit derived solely from the efforts of others. The other choices, misappropriation theory, strict scrutiny test, and intermediate test, are not relevant to determining whether an arrangement is an investment contract.

Question 13

Which of the following is true of Section 24 of the Securities Act of 1933?

Accepted Answer

Section 24 of the Securities Act of 1933 imposes criminal liability on any person who willfully violates any provisions of the act, or the rules and regulations under the act, including making false statements or omissions in filings. It does not directly impose civil liability or exclusively regulate online securities sales.

Question 14

A(n)________ is submitted along with the registration statement to the SEC, and also used as a selling tool to help prospective investors evaluate the financial risk of an investment.

Accepted Answer

A prospectus is a document that is submitted along with the registration statement to the SEC and is used as a selling tool to help prospective investors evaluate the financial risk of an investment. It provides information about the company's business and financial statements, as well as any risks associated with investing in the company. It is a key document that potential investors use to decide whether to invest in a company or not.

Question 15

________ is a provision of the Securities Act of 1933 that imposes civil liability on persons who intentionally defraud investors by making misrepresentations or omissions of material facts in the registration statement.

Accepted Answer

Section 11 of the Securities Act of 1933 imposes civil liability on persons who intentionally defraud investors by making misrepresentations or omissions of material facts in the registration statement. Section 24 of the Securities Act of 1933 relates to jurisdiction and venue, Section 12 of the Securities Act of 1933 imposes liability for fraudulent statements or omissions in prospectuses, and SEC Rule 506 provides an exemption for certain securities offerings.

Question 16

Which of the following must be included in the registration statement?

Accepted Answer

The registration statement must include information on how the proceeds from the offering will be used. A, C, and D are not required to be included in the registration statement.

Question 17

Which of the following is true of Small Company Offering Registration (SCOR)form?

Accepted Answer

SCOR forms, once completed, act as the offering circular for potential investors. The other options are incorrect as SCOR forms can be used for raising up to $1 million, are only available to domestic companies, and do not have to be completed by the issuer before purchasing securities.

Question 18

Scissorwire Inc. sells shares of its stock to the public, with each share valued at $16. After a year, the company incurs a loss and the price of the stock drops to $5. The company reveals that it had deliberately not registered with the SEC before going public and that it has no money to pay the investors. Which of the following holds well in this context?

Accepted Answer

The answer of Scissorwire Inc. sells shares of its stock...

Question 19

Which of the following is true of Section 11 of the Securities Act of 1933?

Accepted Answer

The answer of Which of the following is true of...

Question 20

The electronic data and record system of the Securities and Exchange Commission is known as ________.

Accepted Answer

EDGAR (Electronic Data Gathering, Analysis, and Retrieval) is the electronic system used by the SEC to receive and analyze company filings required under federal securities laws. NASDAQ is a stock exchange, MICEX is a stock exchange in Russia, and SPSE is not a known abbreviation or acronym related to the SEC or the stock market.

Quiz 17: Investor Protection, E-Securities, and Wall Street Reform