Question 1

The Securities and Exchange Commission is an administrative agency composed of five (5)members who are appointed by the United States president.

Accepted Answer

The SEC is composed of five members who are appointed by the US president and confirmed by the Senate.

Question 2

In 2010,the United States Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act to regulate hedge funds,derivatives,and abusive practices in the securities industry.

Accepted Answer

The statement is true. The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010 and its purpose was to regulate various aspects of the securities industry, including hedge funds, derivatives, and abusive practices.

Question 3

The Securities Act of 1933 primarily regulates the issuance of securities by corporations,limited partnerships,and companies.

Accepted Answer

The Securities Act of 1933 (also known as the "truth in securities" law) requires companies to provide full and fair disclosure of all material information about securities offerings when they are sold to the public. It primarily regulates the issuance of securities by corporations, limited partnerships, and companies, among other entities.

Question 4

Common stock,preferred stock,bonds,debentures,and warrants are examples of statutorily-defined securities.

Accepted Answer

The answer of Common stock,preferred stock,bonds,debentures,and warrants are examples of...

Question 5

A subscription contract is any contract whereby an investor invests money or other consideration in a common enterprise and expects to make a profit from the significant efforts of others.

Accepted Answer

The answer of A subscription contract is any contract whereby...

Question 6

Following the stock market crash in 1939,Congress enacted a series of statutes designed to regulate securities markets.

Accepted Answer

The stock market crash actually occurred in 1929, not 1939. Congress did enact a series of statutes to regulate securities markets in response to the crash, including the Securities Act of 1933 and the Securities Exchange Act of 1934.

Question 7

The Securities and Exchange Commission was created as part of the Securities Act of 1933.

Accepted Answer

The Securities and Exchange Commission (SEC) was created by the Securities Exchange Act of 1934, not the Securities Act of 1933.

Question 8

The courts apply the Dewey test in determining whether an arrangement is an investment contract and therefore a security.

Accepted Answer

The courts apply the Howey test, not the Dewey test, to determine if an arrangement is an investment contract and thus a security.

Question 9

Pre-organization subscription agreements,interests in oil,gas,and mineral rights,and deposit receipts for foreign securities are examples of common securities.

Accepted Answer

These are examples of less common or specialized securities, not common securities like stocks or bonds.

Question 10

The Sarbanes-Oxley Act of 2002 was enacted by the United States Congress to bring more transparency to securities markets and to eliminate conflicts of interests that previously existed in the securities industry.

Accepted Answer

The statement accurately describes the purpose of the Sarbanes-Oxley Act of 2002.

Question 11

The SEC may bring a civil action to recover monetary damages from violators of securities laws.

Accepted Answer

The SEC has the authority to bring civil actions against violators of securities laws and may seek monetary damages as a remedy.

Question 12

Under the Howey test,an arrangement is considered an investment contract if there is an investment of money by an investor in a common enterprise and the investor expects to make profits based on the sole or substantial efforts of the promoter or others.

Accepted Answer

This is the definition of an investment contract according to the Howey test.

Question 13

The Federal Trade Commission (FTC)regulates the activities of securities brokers and advisors,and this regulation includes registering brokers and advisors and taking enforcement action against those who violate securities laws.

Accepted Answer

The FTC is not the regulatory agency that oversees securities brokers and advisors. Instead, the Securities and Exchange Commission (SEC) has jurisdiction over these entities and is responsible for registering and enforcing securities laws.

Question 14

A limited partnership interest is an investment contract.

Accepted Answer

A limited partnership interest is a type of investment contract where the investor contributes capital to a partnership, but has limited liability and does not participate in the management of the business.

Question 15

The Interstate Commerce Commission (ICC)has the responsibility to investigate alleged securities violations and bring enforcement actions against suspected violators.

Accepted Answer

The ICC was abolished in 1995 and its responsibilities were transferred to other agencies. The Securities and Exchange Commission (SEC) is the agency responsible for investigating alleged securities violations and bringing enforcement actions against suspected violators.

Question 16

A "whistleblower bounty program" allows persons who provide information that leads to a successful SEC action to recover ten (10)percent to thirty (30)percent of the monetary sanctions over $1 million recovered by the SEC.

Accepted Answer

This statement is true. The SEC has a whistleblower program that rewards individuals who provide original information that leads to a successful enforcement action with sanctions exceeding $1 million. The reward can range from 10% to 30% of the monetary sanctions collected by the SEC.

Question 17

The primary purpose of federal and state securities statutes that regulate the issuance and trading of securities is to promote full disclosure to investors and to prevent fraud.

Accepted Answer

This statement is true. The Securities Act of 1933 and the Securities Exchange Act of 1934 establish disclosure and anti-fraud requirements for companies issuing securities and for traders dealing in securities. The purpose of these statutes is to protect investors by ensuring that they have access to accurate and complete information about the securities they are purchasing and that they are not subject to fraudulent or manipulative activity in the securities markets.

Question 18

Criminal prosecutions of violations of federal securities laws are brought by state attorneys general.

Accepted Answer

Criminal prosecutions of violations of federal securities laws are brought by the Department of Justice, not state attorneys general.

Question 19

The federal and state governments have enacted statutes that regulate the issuance and trading of securities.

Accepted Answer

The Securities Act of 1933 (a federal law) and state "blue sky" laws regulate the issuance and trading of securities.

Question 20

Prior to the 1920s and 1930s,the securities markets in the United States were not regulated by the federal government.

Accepted Answer

Prior to the 1920s and 1930s, there was little to no federal regulation of the securities markets in the United States. This changed with the passage of securities laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws established regulatory agencies such as the Securities and Exchange Commission to oversee and enforce regulations in the securities industry.

Quiz 32: Investor Protection,E-Securities Transactions,and Wall Street Reform