Question 1

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 is required to certify that the financial reports are complete and accurate, making choice A the correct option. Choice B is incorrect because it refers to a separate provision of the act that requires companies to disclose who they blame for inaccuracies but does not require the CEO to designate a specific official. Choice C is incorrect because the CEO has specific responsibilities under the act. Choice D is also incorrect because the CEO's responsibilities go beyond simply reading the reports and being prepared to answer questions about them.

Question 2

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 refers to profits made from buying and selling securities within a six-month period. It aims to prevent insiders from profiting from information not available to the public.

Question 3

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 aimed at improving corporate governance and financial disclosure for public companies. As a public company, Flux Corporation is subject to the direct corporate governance requirements set forth in this federal law. Therefore, choice C is the correct answer. The other choices are not relevant to the governing laws of Flux Corporation.

Question 4

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 Securities and Exchange Commission's prosecution of Dee is based on the misappropriation theory, which holds that a person who wrongfully obtains and uses inside information for personal benefit has committed securities fraud. The theory applies even if the person did not owe a fiduciary duty to the company from which the information was obtained.

Question 5

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 6

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 7

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

The Sarbanes-Oxley Act of 2002 requires that the CEO and CFO of publicly traded companies certify that the financial statements filed with the SEC are accurate. Therefore, Kirk, as the CFO of Lemon Corporation, must personally certify that the financial statements are accurate. Choices B, C, and D are not accurate because delegation of responsibility, delivery of statements, and preparation of statements are not the specific responsibilities assigned to the CFO under the Act.

Question 8

Fact Pattern 31-2
Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.
-Refer to Fact Pattern 31-3.Under the Securities Exchange Act of 1934,Hu is most likely

Accepted Answer

Sid, as a director of Tech Software Company, possessed inside information about the new video game. By buying Tech stock and telling his friend Uri to do the same, they both profited from that inside information. Hu, as a tippee who received the insider information from Uri, would also be liable for insider trading.

Question 9

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) regulates the solicitation of proxies from a company's shareholders, requiring companies to provide shareholders with material information in a proxy statement before soliciting their votes for corporate actions such as the election of directors or approval of mergers. Hi-Five Aero Corporation, as a registered issuer under Section 12 of the Securities Exchange Act, would be subject to these regulations.

Question 10

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 states that if an officer purchases and sells securities within a six-month period, any profits earned are considered insider trading and must be returned to the corporation. Therefore, to avoid liability, Della would have needed to wait more than six months to sell her shares after buying them.

Question 11

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 12

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, public companies like Heavy Hauling, Inc. are required to set up and maintain internal "disclosure controls and procedures" to ensure accurate and timely financial reporting. This includes measures to prevent and detect fraud, as well as regular assessments and testing of the effectiveness of these controls. External "release and reveal timetables," personal "peruse and review liability policies," and public "information and discussion forums" are not required by the Sarbanes-Oxley Act.

Quiz 31: Investor Protection, insider Trading, Corp Gov

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

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

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

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

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