Question 1

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 includes the filing of a proxy statement with the Securities and Exchange Commission (SEC) and providing adequate disclosure to shareholders about matters being voted on. Hi-Five Aero Corporation, since it is required to register its securities under Section 12 of the Act, would be subject to Section 14(a) regulations regarding proxy solicitation.

Question 2

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 3

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 4

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, CEOs and CFOs are required to certify that the company's financial reports are complete and accurate.

Question 5

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 are required to establish and maintain internal controls to ensure accurate financial reporting. This includes setting up internal disclosure controls and procedures that ensure the timely and accurate disclosure of information to the public. Therefore, option A is the correct answer. The other options mentioned in the question are not related to the requirements under the Sarbanes-Oxley Act of 2002.

Question 6

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 an officer, director, or shareholder of a company buys and sells the company's securities within a six-month period, any profit from those transactions must be returned to the company. This provision is meant to prevent insiders from using their access to privileged information to make quick profits at the expense of other shareholders.

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 requires that insiders, like officers, directors, and large shareholders, must disgorge any profits made from buying and selling their company's stock within a six-month period. In this scenario, Della bought the stock and sold it within one month, so she would be liable under Section 16(b) unless she had waited more than six months to sell it. Therefore, the correct answer is B.

Question 8

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 specifically to public companies, of which Maple Products Corporation is one. Private investors and state regulators are not subject to these requirements.

Question 9

Fact Pattern 31-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals 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 information from Dhani. When Eureka publicly announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
-Refer to Fact Pattern 31-3. Under the Securities Exchange Act of 1934, Hu is most likely

Accepted Answer

Hu is most likely liable for insider trading as he received insider information from a tipper (Geoff) who received it from a tippee (Fay), who got it from an insider (Dhani). The tippee/tipper liability extends down to the third level (Geoff) and potentially beyond, depending on the circumstances. Therefore, Hu, who is at the fourth level, may be held liable for insider trading.

Question 10

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 11

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 argument that Dee is liable because she wrongfully obtained inside information concerning Emergent and used it for personal gain is based on the misappropriation theory. This theory holds that a person who obtains inside information in breach of a fiduciary duty and uses it for personal gain is liable for insider trading. Dee's actions fit squarely within the scope of the misappropriation theory, as she obtained the information while it rightfully belonged to Emergent and used it to profit personally.

Question 12

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 scenario describes a classic example of a Ponzi scheme, where returns are paid to investors using funds from new investors, rather than through legitimate investments or profits.

Quiz 31: Investor Protection, Insider Trading, Corp Gov

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

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

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

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

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

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