Question 1

State securities laws are known as "blue sky laws".

Accepted Answer

State securities laws are frequently referred to as blue-sky laws,since the early state securities statutes were designed protected investors from promoters.

Question 2

An insurance policy is exempt from registration under the 1933 Act.

Accepted Answer

An insurance policy is exempt from registration under the 1933 Act.

Question 3

As per the 1934 Act,Section 16(a)prohibits statutory insiders from disclosing their ownership of their company's securities for the first 10 days of ownership.

Accepted Answer

Section 16(a)of the 1934 Act requires statutory insiders to disclose their ownership of their company's securities within 10 days of becoming owners.

Question 4

Section 5 of the 1933 Act provides an exemption from registration for transactions of securities by any person other than an issuer,underwriter,or dealer.

Accepted Answer

Section 4(1)of the 1933 Act provides an exemption from registration for transactions of securities by any person other than an issuer,underwriter,or dealer.

Question 5

The maximum penalty for any person who willfully violates the Securities Act of 1933 or its rules and regulations is a $20,000 fine and 10 years' imprisonment.

Accepted Answer

The maximum penalty for any person who willfully violates the Securities Act of 1933 or its rules and regulations is a $10,000 fine and five years' imprisonment.

Question 6

Securities and Exchange Commission (SEC)has the power to impose civil fines up to $500,000 and issue cease and desist orders.

Accepted Answer

The SEC has the power to impose civil penalties up to $500,000 and to issue cease and desist orders.

Question 7

The Sarbanes-Oxley Act of 2002 extends the statute of limitations to three years after discovery of facts constituting a violation of Section 11 of the 1933 Act and seven years after the violation.

Accepted Answer

The Sarbanes-Oxley Act of 2002 arguably extends the statute of limitations to two years after discovery of facts constituting a violation of Section 11 of the 1933 Act and five years after the violation.

Question 8

Prior to the filing of a 1933 Act registration statement,the issuer may use a Rule 134 tombstone advertisement to make investors aware of the upcoming offering of securities.

Accepted Answer

Prior to the filing of a 1933 Act registration statement (the pre-filing period),the issuer and any other person may not offer or sell the securities to be registered.

Question 9

Securities Act Rule 506 requires an issuer to sell to no more than 35 accredited investors.

Accepted Answer

Securities Act Rule 506 requires an issuer to sell to no more than 35 unaccredited purchasers who have sufficient investment knowledge and experience;the issuer may sell to an unlimited number of accredited purchasers,regardless of their investment sophistication.

Question 10

The most important elements for violation of Rule 10b-5 of the 1933 Securities Act are misstatement or omission of material fact and negligence.

Accepted Answer

The most important elements of a Rule 10b-5 violation are a misstatement or omission of material fact and scienter.

Question 11

Securities Exchange Act Rule 10b-5 liability attaches to anyone who trades in securities for personal profit using confidential information misappropriated in a breach of fiduciary duty owed to the source of the information.

Accepted Answer

In June 1997,the Supreme Court held that Rule 10b-5 liability attaches to anyone who trades in securities for personal profit using confidential information misappropriated in a breach of fiduciary duty owed to the source of the information.

Question 12

Under the Securities Act of 1933,the definition of a security excludes a promissory note that matures not more than nine months from the date of issuance.

Accepted Answer

The 1934 Securities Exchange Act definition of security is similar to that of the Securities Act of 1933,but excludes notes and drafts that mature not more than nine months from the date of issuance.

Question 13

The Securities Act of 1933 regulates the sale of securities when they are sold from the issuer to a public purchaser.

Accepted Answer

The 1933 Securities Act regulates the sale of securities while they are passing from the hands of the issuer into the hands of public investors.

Question 14

The state of Delaware has adopted business combination moratorium statutes to deter tender offers from being made.

Accepted Answer

The state of Delaware has adopted business combination moratorium statutes.These state statutes primarily affect the ability of large shareholders to effectuate a merger after a tender offer and,therefore,may have the effect of deterring hostile acquisitions.

Question 15

Section 11 of the 1933 Act provides civil liabilities for damages when a 1933 Act registration statement on its effective date misstates or omits a material fact.

Accepted Answer

Section 11 of the 1933 Act provides civil liabilities for damages when a 1933 Act registration statement on its effective date misstates or omits a material fact.

Question 16

As per the test laid down by the Supreme Court (in United States v.Chiarella),the definition of insiders includes not only officers and directors of the company but also anyone who has been entrusted with corporate information for a corporate purpose.

Accepted Answer

As per the test laid down by the Supreme Court (in United States v.Chiarella),insiders include not only officers and directors of the corporation,but also anyone who is entrusted with corporate information for a corporate purpose and the corporation has a proper purpose for keeping the information confidential.

Question 17

Rule 10b-5 relating to liability to false statements in filed documents applies to only those transactions in all securities,which are registered under the 1933 Act or the 1934 Act.

Accepted Answer

Rule 10b-5 relating to liability to false statements in filed documents applies to all transactions in all securities,whether or not registered under the 1933 Act or the 1934 Act.

Question 18

The purpose of security regulation is to make issuers and sellers of security have a duty to disclose important information.

Accepted Answer

The crux of the securities acts is to impose on issuers of securities and other sellers of securities the affirmative duty to disclose important information.

Question 19

The ultimate purpose of the 1934 Act is to keep investors fully informed to allow them to make investment decisions when securities are sold by an issuer to investors.

Accepted Answer

The ultimate purpose of the 1934 Act is to keep investors fully informed to allow them to make intelligent investment decisions at any time.

Question 20

The period of time between the filing and the effective date of a share offering is called the waiting period.

Accepted Answer

The waiting period is the time between the filing date and the effective date of the registration statement.

Quiz 45: Securities Regulation

State securities laws are known as "blue sky laws".

An insurance policy is exempt from registration under the 1933 Act.

As per the 1934 Act,Section 16(a)prohibits statutory insiders from disclosing their ownership of their company's securities for the first 10 days of ownership.

Section 5 of the 1933 Act provides an exemption from registration for transactions of securities by any person other than an issuer,underwriter,or dealer.

The maximum penalty for any person who willfully violates the Securities Act of 1933 or its rules and regulations is a $20,000 fine and 10 years' imprisonment.

Securities and Exchange Commission (SEC)has the power to impose civil fines up to $500,000 and issue cease and desist orders.

The Sarbanes-Oxley Act of 2002 extends the statute of limitations to three years after discovery of facts constituting a violation of Section 11 of the 1933 Act and seven years after the violation.

Prior to the filing of a 1933 Act registration statement,the issuer may use a Rule 134 tombstone advertisement to make investors aware of the upcoming offering of securities.

Securities Act Rule 506 requires an issuer to sell to no more than 35 accredited investors.

The most important elements for violation of Rule 10b-5 of the 1933 Securities Act are misstatement or omission of material fact and negligence.

Securities Exchange Act Rule 10b-5 liability attaches to anyone who trades in securities for personal profit using confidential information misappropriated in a breach of fiduciary duty owed to the source of the information.

Under the Securities Act of 1933,the definition of a security excludes a promissory note that matures not more than nine months from the date of issuance.

The Securities Act of 1933 regulates the sale of securities when they are sold from the issuer to a public purchaser.

The state of Delaware has adopted business combination moratorium statutes to deter tender offers from being made.

Section 11 of the 1933 Act provides civil liabilities for damages when a 1933 Act registration statement on its effective date misstates or omits a material fact.

As per the test laid down by the Supreme Court (in United States v.Chiarella),the definition of insiders includes not only officers and directors of the company but also anyone who has been entrusted with corporate information for a corporate purpose.

Rule 10b-5 relating to liability to false statements in filed documents applies to only those transactions in all securities,which are registered under the 1933 Act or the 1934 Act.

The purpose of security regulation is to make issuers and sellers of security have a duty to disclose important information.

The ultimate purpose of the 1934 Act is to keep investors fully informed to allow them to make investment decisions when securities are sold by an issuer to investors.

The period of time between the filing and the effective date of a share offering is called the waiting period.