Question 1

Heavy Hauling,Inc.,is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,to ensure that Heavy Hauling's financial results are accurate and timely,the firm's senior officers must set up and maintain

Accepted Answer

According to the Sarbanes-Oxley Act, public companies like Heavy Hauling are required to establish and maintain internal controls and procedures for financial reporting to ensure accuracy and timeliness. These internal controls and procedures are referred to as "disclosure controls and procedures." Therefore, option A is the correct answer. Option B, C, and D are not relevant to the requirements of the Sarbanes-Oxley Act.

Question 2

When Looking Glass Corporation wishes to issue certain securities,it must provide sufficient information for Alice,and other unsophisticated investors,to evaluate the financial risk involved.Specifically,the law imposes liability for making a false statement or omission that is "material." What sort of information would Alice consider material

Accepted Answer

The answer of When Looking Glass Corporation wishes to issue...

Question 3

Dee,an accountant,does not work for Emergent Company,but wrongfully obtains inside information concerning Emergent.Based on the information,Dee buys and sells Emergent stock for personal gain.The Securities and Exchange Commission prosecutes Dee,arguing that she is liable because she stole information rightfully belonging to another.This argument is

Accepted Answer

The misappropriation theory applies when someone wrongfully obtains and uses material nonpublic information for personal gain. This theory can be used to hold outsiders liable for insider trading if they obtain information from a source that owed a duty of trust and confidence to the company (such as an accountant). The other answer choices (blue-sky, red-herring, and tipper/tippee) are unrelated to this scenario.

Question 4

Della,an officer for Energy Petrol Corporation (EPC),buys 100 shares of EPC stock.One week later,EPC announces that it will merge with a competitor,Fuel Oil Company,and the price of EPC stock increases.One month later,Della sells her shares for a profit.Under Section 16(b)of the Securities Exchange Act of 1934,Della would not be liable if,after buying the stock,she had waited

Accepted Answer

Section 16(b) of the Securities Exchange Act of 1934 requires corporate insiders, including officers, directors, and shareholders owning more than 10% of a company's stock, to disgorge any profits made from buying and selling the company's stock within a six-month period. Since Della is an officer of EPC, she is considered a corporate insider. Therefore, to avoid liability under Section 16(b), Della would need to wait more than six months to sell her shares. Choice B, more than six months to sell it, is the only option that satisfies this requirement.

Question 5

Madison is the chief executive officer of Nitro Medico,Inc.,which is required to file certain financial reports with the Securities and Exchange Commission (SEC).Under the Sarbanes-Oxley Act of 2002,Madison must

Accepted Answer

Under the Sarbanes-Oxley Act of 2002, the CEO (Madison) must personally certify that the financial reports are complete and accurate.

Question 6

Refer to Fact Pattern 24-3.Under the Securities Exchange Act of 1934,Hu is most likely

Accepted Answer

Hu is most likely liable for insider trading as he received material nonpublic information from his friend and traded on the basis of that information, which constitutes a violation of the SEC rules and regulations.

Question 7

Riley,an engineer for Shur-2-Gro Seed Corporation,learns that Shur-2-Gro has developed a corn hybrid to triple the output of any farm.Riley buys 20,000 shares of Shur-2-Gro stock.He tells Tess,who buys 15,000 shares.After the new hybrid is announced publicly,the price of Shur-2-Gro stock increases.Riley and Tess sell their shares for a profit.Under the Securities Exchange Act of 1934,liability may be imposed on

Accepted Answer

The answer of Riley,an engineer for Shur-2-Gro Seed Corporation,learns that...

Question 8

In May 2009,National Biotech Corporation generally advertises that it will make a $4 million offering of stock in June.National makes the offering as advertised and,ten days after the first sale,notifies the Securities and Exchange Commission (SEC).All buyers of the stock are given material information about the company,its business,and the stock.Before the end of the year,the offering is completely sold out.The buyers include forty unaccredited investors and fifty accredited investors.National does not register the offering.The SEC files a suit against National,seeking civil sanctions on the ground that this offering was not exempt from registration.National argues that the applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that because of this exemption,any resale of the stock is also exempt.Who is correct

Accepted Answer

The answer of In May 2009,National Biotech Corporation generally advertises...

Question 9

Flux Corporation is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,Flux is subject to the direct corporate governance requirements of

Accepted Answer

The Sarbanes-Oxley Act of 2002 is a federal law that sets standards for corporate governance and reporting for public companies. As such, Flux Corporation would be subject to the direct corporate governance requirements of the federal government. The other choices are not accurate because public companies do not have governance requirements between themselves, state requirements vary and are not applicable nationwide, and where Flux is incorporated does not necessarily determine its governance requirements.

Question 10

North American Properties,Inc.,and its officers,directors,and shareholders,buy and sell securities.Section 16(b)of the Securities Exchange Act of 1934 covers

Accepted Answer

Section 16(b) of the Securities Exchange Act of 1934 covers only purchases and sales of securities involving short-swing profits. This means that if a company insider, such as an officer or director, buys and sells the company's stock within a six-month period, any profit made from the transaction must be returned to the company. This rule is intended to prevent insiders from taking advantage of their access to privileged information to make quick profits at the expense of the company's shareholders.

Question 11

Kirk is the chief financial officer of Lemon Corporation,which is required to file certain financial statements with the Securities and Exchange Commission (SEC).Under the Sarbanes-Oxley Act of 2002,Kirk must personally

Accepted Answer

According to the Sarbanes-Oxley Act of 2002, the CFO is required to personally certify the accuracy of the financial statements filed with the SEC.

Question 12

Hi-Five Aero Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934.Section 14(a)of the act regulates

Accepted Answer

Section 14(a) of the Securities Exchange Act of 1934 regulates the solicitation of proxies from a company's shareholders. This means that Hi-Five Aero Corporation, as a registered issuer, must comply with the rules and regulations governing proxy solicitations, such as providing shareholders with a proxy statement containing relevant information about the company and the matters to be voted on.

Quiz 24: Investor Protection and Corporate Governance

Heavy Hauling,Inc.,is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,to ensure that Heavy Hauling's financial results are accurate and timely,the firm's senior officers must set up and maintain

Madison is the chief executive officer of Nitro Medico,Inc.,which is required to file certain financial reports with the Securities and Exchange Commission (SEC) .Under the Sarbanes-Oxley Act of 2002,Madison must

Refer to Fact Pattern 24-3.Under the Securities Exchange Act of 1934,Hu is most likely

Flux Corporation is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,Flux is subject to the direct corporate governance requirements of

North American Properties,Inc.,and its officers,directors,and shareholders,buy and sell securities.Section 16(b) of the Securities Exchange Act of 1934 covers

Kirk is the chief financial officer of Lemon Corporation,which is required to file certain financial statements with the Securities and Exchange Commission (SEC) .Under the Sarbanes-Oxley Act of 2002,Kirk must personally

Hi-Five Aero Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934.Section 14(a) of the act regulates