Question 1

As amended in 2008, SEC Rule 144 imposes stricter requirements on securities resales of issuers subject to 1934 Act reporting requirements than on securities resales of non-reporting issuers.

Accepted Answer

SEC Rule 144 provides a safe harbor for the sale of securities under the Securities Act of 1933, and as amended in 2008, it generally applies the same holding period requirements to both reporting and non-reporting issuers. However, it does impose some additional conditions on affiliates or insiders of the issuer, regardless of the issuer's reporting status.

Question 2

Shelf registrations allow issuers to register securities that are to be offered and sold on a delayed or continuous basis in the future, but the provision allowing it does not apply to all companies.

Accepted Answer

Shelf registration is a provision under the US Securities Act of 1933 that allows companies to register securities to be sold in the future, either continuously or intermittently. However, not all companies are eligible for shelf registration. The SEC has specific eligibility requirements, including market capitalization, public float, and reporting history.

Question 3

Rule 505, as promulgated by the SEC, provides a nonexclusive safe harbor for securing the intrastate exemption.

Accepted Answer

Rule 505 was part of Regulation D, which provided exemptions for certain private offerings, but it did not specifically address intrastate offerings. Rule 147 and Rule 147A are the rules that provide safe harbors for intrastate exemptions.

Question 4

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 5

A registration statement must be signed by the issuer, its CEO, CFO, CAO, and majority of its board of directors.

Accepted Answer

A registration statement, which is a set of documents including a prospectus, required by the Securities and Exchange Commission (SEC) for a company planning to issue new securities to the public, must indeed be signed by the issuer, its principal executive officer(s) (such as the CEO), principal financial officer (CFO), principal accounting officer (CAO), and a majority of its board of directors. This requirement ensures that the company's top management and directors are accountable for the accuracy and completeness of the information provided to potential investors.

Question 6

With few exceptions, an issuer must file preliminary proxy statements and forms with the SEC at least 10 days before they are sent to investors.

Accepted Answer

This is true according to SEC rules.

Question 7

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 upon approval by the SEC, while a prospectus becomes public upon filing with the SEC. There is no requirement for signature by the chief financial officer.

Question 8

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

Accepted Answer

The term "security" includes bonds along with other types of financial instruments such as stocks, options, and mutual funds.

Question 9

Securities sold under Regulation A must be registered if they are resold.

Accepted Answer

Securities sold under Regulation A are exempt from registration under certain conditions, including restrictions on resale. However, if the securities are resold, they must be registered unless an exemption is available.

Question 10

In 2006, 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 for disclosure of compensation paid to senior executives and directors in 2006. The requirement still exists under SEC rules.

Question 11

The due diligence defense generally requires the defendant to show that he had reasonable grounds to believe and did believe that there were no untrue statements or material omissions.

Accepted Answer

This is a correct statement about the due diligence defense. The defendant must show that they made an effort to investigate and had reasonable grounds to believe that their statements were true and complete, in order to avoid liability for any misrepresentations or omissions.

Question 12

The issuer of a registration statement has strict liability for its accuracy.

Accepted Answer

Under the Securities Act of 1933, the issuer of a registration statement is subject to strict liability for any material misstatements or omissions in the statement. This means that the issuer is held accountable regardless of their intent or knowledge of the error.

Question 13

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 granted the SEC the power to issue cease and desist orders and to impose civil penalties.

Accepted Answer

This statement is true. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 did grant the SEC the power to issue cease and desist orders and to impose civil penalties.

Question 14

The tender offer is open to select holders of the class of shares subject to the tender offer.

Accepted Answer

The answer of The tender offer is open to select...

Question 15

The Securities Act of 1934 imposes significant disclosure requirements upon reporting companies.

Accepted Answer

The Securities Act of 1934 does impose significant disclosure requirements upon reporting companies, including the filing of annual and quarterly reports, material event disclosures, and more.

Question 16

Under the Dodd-Frank Act, the SEC must issue rules requiring issuers to disclose in annual proxy statements the reasons the issuer has chosen to combine or separate the positions of CEO and chairman of the board of directors.

Accepted Answer

This statement is true as it is one of the requirements of the Dodd-Frank Act.

Question 17

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 18

The 1934 Act rules governing proxy solicitations would require a proxy statement describing the material facts relating to items to be voted upon.

Accepted Answer

The 1934 Act rules do require a proxy statement to include material facts about items to be voted upon.

Question 19

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 granted the SEC the power to impose administrative, civil penalties up to the current inflation-adjusted amount of $725,000.

Accepted Answer

The statement is correct. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 did grant the SEC the power to impose administrative, civil penalties up to the current inflation-adjusted amount of $725,000.

Question 20

The Securities Act of 1933 identifies a number of securities exemptions that are, in effect, transaction exemptions.

Accepted Answer

The Securities Act of 1933 does provide transaction exemptions for certain types of securities under specific circumstances. These exemptions are commonly known as safe harbors or transaction exemptions.

Quiz 39: Securities Regulation