Deck 32: Investor Protection, E-Securities, and Wall Street Reform

Question 1

Which of the following is classified under "common securities"?

A) real estate
B) bullion
C) debenture
D) bank deposit

Answer 1

C

Question 2

Interests in oil,gas,and mineral rights are classified as ________.

A) statutorily defined securities
B) investment contracts
C) common securities
D) implicit securities

Answer 2

A

Question 3

A Form 10-K is a(n)________ report that has to be filed by a reporting company as required by the Securities Exchange Act of 1934.

A) weekly
B) annual
C) monthly
D) quarterly

Answer 3

B

Question 4

A Form 10-Q is a(n)________ report that has to be filed by a reporting company as required by the Securities Exchange Act of 1934.

A) weekly
B) annual
C) monthly
D) quarterly

Question 5

Which of the following best defines an initial public offering?

A) The issuance of an offering statement to the public prior to purchase.
B) The filing of a registration statement by an issuer.
C) The disclosure document released for public scrutiny.
D) The sale of securities by an issuer to the public.

Question 6

A Form 8-K is a(n)________ report that has to be filed by a reporting company as required by the Securities Exchange Act of 1934.

A) weekly
B) annual
C) monthly
D) quarterly

Question 7

The ________ created a federal administrative agency that is empowered to administer federal securities law.

A) Securities Act of 1933
B) Securities Exchange Act of 1934
C) Sarbanes-Oxley Act of 2002
D) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Question 8

Which of the following is regulated by the Securities Act of 1933?

A) fraud in the purchase and sale of securities
B) hedge funds and derivatives
C) investor reports
D) online issuance of securities

Question 9

The ________ is a federal statute that primarily regulates the issue of securities by companies and other businesses.

A) Securities Act of 1933
B) Securities Exchange Act of 1934
C) Sarbanes-Oxley Act of 2002
D) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Question 10

Preferred stock is an example of ________.

A) implicit securities
B) statutorily defined securities
C) common securities
D) investment contracts

Question 11

Which of the following is true of the Securities and Exchange Commission (SEC)?

A) It is an international commission that has jurisdiction over all countries.
B) It is an agency composed of ten members who are appointed by the president.
C) It can bring a civil action to recover monetary damages from violators of securities laws.
D) It has no provision for protecting whistleblowers.

Question 12

The ________ is a federal statute primarily designed to prevent fraud in the trading of securities after they are issued.

A) Securities Act of 1933
B) Securities Exchange Act of 1934
C) Sarbanes-Oxley Act of 2002
D) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Question 13

________ requires securities offered to the public through the use of the mails or any facility of interstate commerce to be registered with the SEC by means of a registration statement and an accompanying prospectus.

A) Section 24 of the Securities Act of 1933
B) Section 12 of the Securities Act of 1933
C) Section 5 of the Securities Act of 1933
D) SEC Rule 506

Question 14

Bonds are examples of ________.

A) common securities
B) implicit securities
C) statutorily defined securities
D) investment contracts

Question 15

A(n)________ is a flexible standard for defining a security.

A) red herring prospectus
B) investment contract
C) certificate of interest
D) debenture

Question 16

A ________ program allows a person who provides information that leads to a successful SEC action in which more than $1 million is recovered to receive 10 percent to 30 percent of the money collected.

A) whistleblower bounty
B) security bounty
C) surveillance bounty
D) defense bounty

Question 17

The courts apply the ________ in determining whether an arrangement is an investment contract.

A) Howey test
B) misappropriation theory
C) strict scrutiny test
D) intermediate test

Question 18

A(n)________ refers to a document that an issuer of securities files with the SEC that contains required information about the issuer,the securities to be issued,and other relevant information.

A) organization statement
B) operating statement
C) registration statement
D) certificate of interest

Question 19

The federal and state governments have enacted statutes that regulate the issuance and trading of securities that are collectively referred to as ________ law.

A) civil
B) real property
C) securities
D) criminal

Question 20

Interests or instruments that are expressly mentioned in securities acts are known as ________.

A) common securities
B) implicit securities
C) investment contracts
D) statutorily defined securities

Question 21

Which of the following is true of Section 12 of the Securities Act of 1933?

A) It imposes liability on those who are negligent in not discovering the fraud.
B) It imposes civil liability on persons who intentionally defraud investors by making misrepresentations of material facts in the registration statement.
C) It imposes criminal liability on any person who willfully violates either the act or the rules and regulations.
D) It imposes civil liability on any person who violates the provisions of Section 5 of the act.

Question 22

________ is a provision of the Securities Act of 1933 that imposes civil liability on persons who intentionally defraud investors by making misrepresentations or omissions of material facts in the registration statement.

A) Section 24
B) Section 12
C) Section 11
D) SEC Rule 506

Question 23

The ________ period begins to run when the registration statement is filed with the SEC and continues until the registration statement is declared effective by the SEC.

A) prefiling
B) fixing
C) waiting
D) posteffective

Question 24

The general form for registering with the SEC is called ________.

A) Form 10-K
B) Form 8-K
C) Form 10-Q
D) Form S-1

Question 25

During the ________ period,the issuer cannot offer to sell securities or sell securities.

A) prefiling
B) fixing
C) waiting
D) posteffective

Question 26

Which of the following is true of Section 11 of the Securities Act of 1933?

A) It permits injured private parties to bring criminal action against fraudulent registration statements filed by issuers.
B) It imposes liability on those who are negligent in not discovering the fraud.
C) It allows an issuer to assert a due diligence defense against the imposition of Section 11 liability.
D) It cannot be imposed on cases involving negligent omission of a material fact in a registration statement.

Question 27

Which of the following is true of registration statements?

A) A registration statement must be accompanied by financial statements certified by certified public accountants.
B) A registration statement once submitted cannot be amended.
C) The SEC judges the merits of the securities based on the registration statement.
D) The registration statement need not reveal how a company plans on using the proceeds from the offering.

Question 28

An issuer must have ________ to qualify as a well-known seasoned investor.

A) issued $1 billion of securities in the previous three years
B) issued $1 million of securities in the previous three years
C) at least $900 million of outstanding equity securities owned by nonaffiliate investors
D) at least $1 billion of outstanding equity securities owned by nonaffiliate investors

Question 29

A(n)________ is submitted along with the registration statement to the SEC,and also used as a selling tool to help prospective investors evaluate the financial risk of an investment.

A) organization document
B) final prospectus
C) preliminary prospectus
D) operation agreement

Question 30

Which of the following is true of a Small Company Offering Registration (SCOR)form?

A) It can only be used for raising more than $1 million through sale of securities.
B) Forms are available to both domestic and foreign companies.
C) Forms that have been completed act as the offering circular for potential investors.
D) Forms have to be completed by the issuee before purchasing securities.

Question 31

Which of the following has the largest trading volume of any securities exchange in the world?

A) NYSE
B) Euronext
C) NASDAQ
D) London Stock Exchange

Question 32

The electronic data and record system of the Securities and Exchange Commission is known as ________.

A) EDGAR
B) NASDAQ
C) MICEX
D) SPSE

Question 33

Which of the following must be included in the registration statement?

A) judgments passed by the SEC on the merits of the securities offered
B) how proceeds from the offering will be used
C) date of termination of the initial public offering
D) maximum number of times a share can be sold post issue

Question 34

Which of the following is true of a Regulation A offering?

A) It imposes resale restrictions on the securities it offers.
B) It necessitates the issuers to prepare a registration statement for offers exceeding $100,000.
C) It requires the most disclosure of information to investors at the time of the issuance of the securities.
D) It mandates that an offering circular be provided to the investors prior to the purchase of securities.

Question 35

The ________ period begins when the registration statement becomes active and runs until the issuer either sells all of the securities or withdraws them from sale.

A) prefiling
B) fixing
C) waiting
D) posteffective

Question 36

Utilities Ltd.decided to go public by an initial public offering.It sold securities,some of which were bought by James Jefferson.Six months later,Mr.Jefferson sold the Utilities shares he had purchased to Martha Graham and Mark Franco.Two years later,Mr.Jefferson bought back the Utilities shares from Ms.Graham and Mr.Franco and made a profit out of both transactions.Who is the issuer in this scenario?

A) Utilities Ltd.
B) James Jefferson
C) Martha Graham
D) Mark Franco

Question 37

________ permits issuers to sell up to $50 million of securities to the public during a 12-month period,pursuant to a simplified registration process.

A) SEC Rule 506
B) Section 12 of the Securities Act of 1933
C) Section 5 of the Securities Act of 1934
D) Regulation A

Question 38

Registration statements usually become effective ________ after they are filed.

A) 20 business days
B) 15 business days
C) 90 business days
D) 10 business days

Question 39

Which of the following is true of Section 24 of the Securities Act of 1933?

A) It imposes civil liability on any person who violates the provisions of Section 5 of the act.
B) It imposes criminal liability on any person who willfully violates the 1933 act or the rules or regulations adopted.
C) It imposes civil liability on persons who intentionally defraud investors by making misrepresentations of material facts in the registration statement.
D) It exclusively regulates the sale of securities online.

Question 40

Scissorwire,Inc.sells shares of its stock to the public,with each share valued at $16.After a year,the company incurs a loss and the price of the stock drops to $5.The company reveals that it had deliberately not registered with the SEC before going public and that it has no money to pay the investors.Which of the following scenarios is likely to occur?

A) Scissorwire, Inc. can register with the SEC at any point after the dip in shares.
B) The U.S. government can file a criminal lawsuit against Scissorwire, Inc. to seek criminal penalties.
C) The investors have been negligent in not verifying registration before purchase of shares and cannot rescind their purchase.
D) Scissorwire, Inc. is liable for the violation of the Securities Exchange Act of 1934.

Question 41

The ________ is a federal statute that permits the SEC to obtain a civil penalty of up to three times the illegal benefits received from insider trading.

A) Securities Act
B) Securities Exchange Act
C) Insider Trading Sanctions Act
D) SEC Rule 506

Question 42

________ refers to a method that allows small companies to raise capital from many small-dollar investors through Web-based platforms.

A) Canvassing
B) Hawking
C) Crowd funding
D) Door-to-door selling

Question 43

A(n)________ is a person who receives material nonpublic information from another person.

A) issuee
B) tippee
C) grantor
D) tipper

Question 44

Which of the following best defines short-swing profits?

A) They are profits that are made by an insider by selling shares of the corporation prior to the public disclosure of unfavorable information.
B) They are profits that are made by an insider by personally purchasing shares of the corporation prior to public release of favorable information.
C) They are profits that are made by a statutory insider on trades involving equity securities of their corporation that occur within six months of each other.
D) They are profits that are made by a tippee by personally purchasing shares of the corporation prior to or post public release of favorable information.

Question 45

Who among the following can be considered a statutory insider?

A) Sharon Muller, an editor who was tipped by her friend to buy shares of KYU Corp.
B) Robert Morgan, a government employee who owns ten percent of all equity security of KYU Corp.
C) Jim Downey, a graphics engineer who quit KYU Corp. after five years of service.
D) Kate Harris, a legal consultant to KYU Corp.

Question 46

A(n)________ is a person who discloses material nonpublic information to another person.

A) issuer
B) tippee
C) grantor
D) tipper

Question 47

Which of the following is true of exempt securities?

A) Only the federal government can issue exempt securities.
B) Once a security is exempt, it is exempt forever.
C) An exemption notice must be filed with the SEC every time the exempt security is transferred.
D) Exempt securities cannot be traded publicly.

Question 48

A(n)________ is an exemption from registration which states that securities transactions not made by an issuer,an underwriter,or a dealer do not have to be registered with the SEC.

A) intrastate offering exemption
B) private placement exemption
C) Regulation A offering
D) nonissuer exemption

Question 49

An emerging growth company (EGC)is a class of public company created by the ________ that may issue securities pursuant to specific rules under federal securities laws.

A) Securities Act
B) Securities Exchange Act
C) JOBS Act
D) STOCKS Act

Question 50

________ allows issuers to raise capital from an unlimited number of accredited investors without having to register the offering with the SEC.

A) Nonissuer exemption
B) Intrastate offering exemption
C) Private placement exemption
D) Interstate offering exemption

Question 51

A(n)________ fund is a private investment company that invests in a wide range of risky investments.

A) sector
B) hedge
C) mutual
D) index

Question 52

Which of the following is an example of exempt securities?

A) stock dividends and stock splits
B) IPOs made by multinational corporations
C) securities that have been held by a single investor for longer than a year
D) securities worth $1 million or more

Question 53

Securities coming under the small offering exemptions ________.

A) cannot be advertised to the public
B) can only be sold to accredited investors
C) can only be bought by non-accredited investors
D) have no resale restrictions imposed on them

Question 54

Which of the following is enough to prove a violation of Section 10(b)and Rule 10b-5?

A) non-exemption status
B) scienter
C) aiding and abetting
D) negligent conduct

Question 55

Which of the following constitutes insider trading?

A) An employee makes a profit by personally purchasing shares of the corporation prior to public release of favorable information.
B) A manager purchases all shares of a corporation available to the public.
C) A director purchases enough shares of a public company to gain a majority stake in its management.
D) An employee sells his shares of the company to another employee without notice to the company.

Question 56

A(n)________ is an exemption from registration that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.

A) intrastate offering exemption
B) private placement exemption
C) Regulation A offering
D) nonissuer exemption

Question 57

The ________ imposes liability under Section 10(b)and Rule 10b-5 on an outsider who misappropriates information about a company,in violation of his or her fiduciary duty,and then trades in the securities of that company.

A) Insider Trading Sanctions Act
B) Sarbanes-Oxley Act
C) tort of appropriation
D) misappropriation theory

Question 58

________ is a provision of the Securities Exchange Act of 1934 that prohibits the use of manipulative and deceptive devices in the purchase or sale of securities in contravention of the rules and regulations prescribed by the SEC.

A) Section 10(b)
B) Section 10(a)
C) Section 32
D) Section 30

Question 59

The purpose of the ________ is to make it easier for start-up companies to raise capital through initial public offerings.

A) JOBS Act
B) STOCKS Act
C) Sarbanes-Oxley Act
D) Insider Trading Sanctions Act

Question 60

SEC Rule 506 is known as the ________.

A) nonissuer exemption
B) intrastate offering exemption
C) private placement exemption
D) interstate offering exemption

Question 61

Small Company Offering Registration is a method for small companies to sell up to $1 million of securities during a 12-month period to the public by using a question-and-answer disclosure form called Form U-7.

Question 62

Congress enacted the Securities Exchange Act in 2002 to bring more transparency to securities markets and to eliminate conflicts of interests that previously existed in the securities industry.

Question 63

Interests or instruments that are expressly mentioned in securities acts are common securities.

Question 64

The SEC is an agency composed of twenty-five members who are appointed by the president.

Question 65

The Securities Exchange Act of 1934 requires certain companies,called reporting companies,to file periodic reports with the SEC and to their shareholders.

Question 66

A preliminary prospectus is a written disclosure document that must be submitted to the SEC along with the registration statement.

Question 67

All defendants except the issuer may assert a due diligence defense against the imposition of Section 11 liability.

Question 68

NASDAQ is the world's largest electronic securities exchange.

Question 69

A whistleblower bounty program allows a person who provides information that leads to a successful SEC action in which more than $1 million is recovered to receive 65 percent to 80 percent of the money collected.

Question 70

The primary purpose of securities law is to promote full disclosure to investors and to prevent fraud in the issuance and trading of securities.

Question 71

Civil liability under Section 11 is imposed on those who intentionally defraud investors.

Question 72

A business or party buying securities to the public is called an issuer.

Question 73

The issuance of securities by an issuer is called an initial private offering (IPO).

Question 74

Preferred stock,bonds,debentures,and warrants are examples of common securities.

Question 75

The Securities Exchange Act of 1934 is a federal statute primarily designed to prevent fraud in the subsequent trading of securities.

Question 76

The prefiling period begins to run when the registration statement is filed with the SEC and continues until the registration statement is declared effective by the SEC.

Question 77

Prior to the 1920s and 1930s,the securities markets in this country were regulated by the federal government.

Question 78

Many issuers of securities employ investment bankers,which are independent securities companies,to sell their securities to the public.

Question 79

Regulation A is a regulation that permits an issuer to sell $50 million of securities pursuant to a simplified registration process.

Question 80

Adopting rules that further the purpose of the federal securities statutes is a responsibility of the Securities and Exchange Commission.