Question 1

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 argument made by the Securities and Exchange Commission is based on the misappropriation theory, which holds that an individual who wrongfully obtains information from a company for personal benefit, even if they do not work for the company, has committed securities fraud. This theory is based on the idea that the information belonged to the company and was misappropriated by the individual for their own gain.

Question 2

Maple Products Corporation is a public company, which New Hampshire regulates and in which Orin invests.The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to

Accepted Answer

The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to public companies, which includes Maple Products Corporation that is a public company.

Question 3

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, which are profits realized within a six-month period. This section is meant to prevent insider trading by officers, directors, and shareholders who have access to material nonpublic information. It does not cover all purchases and sales of securities or those involving misappropriation or tippers and tippees.

Question 4

In May 2013, 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 2013, National Biotech Corporation generally...

Question 5

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 public company's shareholders. This includes any materials sent to shareholders that urge them to vote in a certain way on corporate matters, such as the election of directors or approval of mergers. Hi-Five Aero Corporation, as a publicly traded company required to register its securities under Section 12 of the act, would be subject to these regulations.

Question 6

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

Under the Sarbanes-Oxley Act of 2002, senior officers of publicly traded companies must establish and maintain internal control over financial reporting, including disclosure controls and procedures, to ensure the accuracy and timeliness of financial results. Therefore, the correct answer is A - internal "disclosure controls and procedures."

Question 7

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 mandates that any profits made from the purchase and sale, or sale and purchase, of a company's securities within a six-month period must be returned to the company. Therefore, to avoid liability, Della would have had to wait more than six months to sell her shares. Choices A, C, and D are incorrect as they suggest waiting for shorter periods of time, which would not exempt Della from liability under Section 16(b).

Question 8

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

As the CEO of Nitro Medico, Inc., Madision is required to certify that the financial reports filed with the SEC are complete and accurate under the Sarbanes-Oxley Act of 2002.

Question 9

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,...

Question 10

Catalina promises high returns to Darby and other investors, who then agree to trust their funds to Catalina.She uses these funds to pay previous investors.This is

Accepted Answer

This situation describes a classic Ponzi scheme, where new investors' funds are used to pay previous investors, creating the illusion of high returns and enticing others to invest.

Question 11

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 12

Fact Pattern 20-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed com¬pany plan¬s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re¬veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa¬tion from Dhani. When Eureka publicly an¬nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.

-Refer to Fact Pattern 20-3.Under the Securities Exchange Act of 1934, Hu is most likely

Accepted Answer

Hu is most likely liable for insider trading because he received material nonpublic information from his friend who was an insider and then traded on that information. As a tippee, Hu can be held liable for insider trading if he knew or should have known that the information he received was obtained through a breach of fiduciary duty by the insider (his friend). Therefore, option B and C are incorrect. Option D is also incorrect as trading on material nonpublic information is illegal, regardless of whether the information is true or false.

Quiz 25: Investor Protection, Insider Trading, Corp Gov

Maple Products Corporation is a public company, which New Hampshire regulates and in which Orin invests.The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to

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

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

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

Catalina promises high returns to Darby and other investors, who then agree to trust their funds to Catalina.She uses these funds to pay previous investors.This is