Question 1

Which of the following describes investment banking firms that purchase securities from the issuing corporation with the intent of selling them to brokerage houses,which then sell them to the public?

Accepted Answer

Underwriters are investment banking firms that purchase securities from the issuing corporation with the intent of selling them to brokerage houses, which then sell them to the public.

Question 2

For how long does each member at the head of the Securities and Exchange Commission serve?

Accepted Answer

The SEC is headed by five individuals appointed by the president. These five individuals serve fixed five-year terms.

Question 3

Which of the following is a person who controls,is controlled by,or is in common control with the issuer?

Accepted Answer

An affiliate is a person who controls, is controlled by, or is in common control with the issuer.

Question 4

Which of the following is true regarding the case opener,the case in which Martha Stewart was charged with insider trading after selling stock in a company based on information that her stockbroker gave her that the CEO of the company and his daughter had just sold all of their company stock?

Accepted Answer

Although the SEC sought to charge Martha Stewart with illegal insider trading, a grand jury did not indict Stewart on that charge. Later, a jury convicted her of counts against her relating to her statements to SEC investigators in their investigation of her sale of ImClone stock, and she went to jail.

Question 5

Which of the following prohibits the use of manipulative devices to bypass SEC rules?

Accepted Answer

One of the most important sections of the 1934 act is Section 10(b), which prohibits the use of manipulative and deceptive devices to bypass SEC rules.

Question 6

Which of the following oversees the purchase and sale of securities?

Accepted Answer

The Securities Exchange Act of 1934 oversees the purchase and sale of securities.

Question 7

Once an issuer files a registration statement and prospectus,the ______ period begins.

Accepted Answer

Once an issuer files a registration statement and prospectus, the waiting period begins.

Question 8

Which of the following permits the SEC to exempt persons,securities,and transactions from securities regulations?

Accepted Answer

The National Securities Markets Improvement Act of 1996 permits the SEC to exempt persons, securities, and transactions from securities regulations.

Question 9

Which of the following created the Public Company Accounting Oversight Board to regulate public accounting firms?

Accepted Answer

The Sarbanes-Oxley Act of 2002 creates and establishes SEC oversight over the Public Company Accounting Oversight Board to regulate public accounting firms.

Question 10

Which of the following begins when the SEC declares the registration statement effective,and ends when the issuer sells all securities offered or withdraws them from sale?

Accepted Answer

The posteffective period begins when the SEC declares the registration statement effective, and it ends when the issuer sells all securities offered or withdraws them from sale.

Question 11

Which of the following allows the SEC to suspend securities trading if prices vary excessively in a short time period?

Accepted Answer

The Market Reform Act of 1990 allows the SEC to suspend securities trading if prices vary excessively in a short time period.

Question 12

Which of the following is not considered an accredited investor?

Accepted Answer

The SEC defines an accredited investor as:
1. Any natural person who has a net worth of at least $1 million.
2. Any natural person whose annual income has been at least $200,000 for the two previous years and expects to make at least $200,000 in the current year.
3. Any corporation or partnership with total assets in excess of $5 million.4. Insiders of the issuers, such as executive officers or directors.5. Registered investment companies, colleges and universities, banks, and insurance companies.

Question 13

Which of the following references a brief ad that may be issued by an issuer during the waiting period?

Accepted Answer

During the waiting period, the issuer may publish a tombstone advertisement, a brief ad with a format similar to that of a tombstone.

Question 14

Which of the following is false regarding what must occur in order for the exemption involving intrastate issues to apply?

Accepted Answer

Issuers must do at least 80 percent of their business within the state, receive at least 80 percent of their profits within the state, have at least 80 percent of their assets within the state, plan to use at least 80 percent of the profits within the state, and have their main offices in the state.

Question 15

Which of the following regulates how companies issue corporate securities?

Accepted Answer

The Securities Act of 1933 regulates how companies issue corporate securities.

Question 16

Which of the following is the period beginning when an issuer begins to think about issuing securities and ends when the issuer files the registration statement and prospectus with the SEC?

Accepted Answer

The prefiling period begins when an issuer begins to think about issuing securities, and it ends when the issuer files the registration statement and prospectus with the SEC.

Question 17

Which of the following permits the SEC to seek punishment of violators of foreign securities laws?

Accepted Answer

The Securities Acts Amendments of 1990 permit the SEC to seek punishment of violators of foreign securities laws.

Question 18

A[n] ______ prospectus is a prospectus with a warning written in red print at the top of the page warning investors that the registration has been filed with the SEC but has not yet been approved.

Accepted Answer

A red-herring prospectus is a prospectus with a warning written in red print at the top of the page alerting investors that the registration has been filed with the SEC but not yet been approved.

Question 19

Which of the following is true regarding exempt transactions?

Accepted Answer

Exempt transactions include limited offers, intrastate issues, and resales of securities.

Question 20

Which of the following permits qualified issuers to register securities that they will sell on a delayed or continuous basis in the future?

Accepted Answer

Shelf registrations permit certain qualified issuers to register securities that they will sell "off the shelf" on a delayed or continuous basis in the future.

Quiz 41: Corporations: Securities and Investor Protection