Deck 18: Governance and Regulation: Securities Law

Question 1

Shareholder proposals that call for a shareholder vote on compensation are proper under SEC rules.

Answer 1

True

Question 2

The SEC prohibits an analyst from issuing a report that is contrary to the analyst's true opinion about a security.

Answer 2

True

Question 3

Rule 504 has no limitations on number of offerees.

Answer 3

True

Question 4

The states did not have federal legislation prior to the time of the federal securities laws.

Question 5

The 1933 Securities Act regulates primary offerings.

Question 6

Rule 505 carries a 35-purchaser maximum (excluding accredited investors).

Question 7

Rule 506 has no dollar limitations.

Question 8

Rule 506 carries a 35-purchaser maximum (excluding accredited investors).

Question 9

A primary offering is a first-time offering of shares for sale.

Question 10

The intrastate registration exemption requires that 100 percent of the issuer's assets be located in its resident state.

Question 11

The 1934 Securities Exchange Act regulates the secondary sale of securities.

Question 12

A bond is not considered a security under federal law.

Question 13

The intrastate registration exemption requires that 100 percent of the offerees be residents of the same state as the issuer.

Question 14

A natural person whose net worth is greater than $1 million is an accredited investor.

Question 15

A bank is an example of an accredited investor for purposes of Regulation D.

Question 16

Regulation A short-form exemptions cannot involve those who have had previous securities laws violations.

Question 17

All Regulation D offerings canuse general solicitations.

Question 18

A limited partnership interest is not considered a security.

Question 19

Municipal bonds are exempt from SEC requirements.

Question 20

An accredited investor includes any corporation.

Question 21

Only directors can be held liable for a Section 11 violation.

Question 22

Section 10(b)applies to corporate insiders and tippees.

Question 23

A merit review standard is the same as the SEC review.

Question 24

Section 16 applies to all stock transactions of directors and officers (of a 1934 Act company).

Question 25

A red herring is a prospectus sent prior to the effective date of the registration date.

Question 26

Only an actual seller or purchaser can bring a suit for civil recovery under 10(b).

Question 27

Selling securities before the effective date of the registration statement is a Section 12 violation.

Question 28

The federal securities laws do not apply to proxy solicitation.

Question 29

Section 10(b)applies to all securities sold in interstate commerce.

Question 30

Registration statements must include audited financial statements.

Question 31

A company registered on the New York Stock Exchange must file a 10-Q report.

Question 32

A Section 12 violation results from making a material misstatement in a registration statement.

Question 33

Blue sky laws are state securities registration laws.

Question 34

There are no resale limitations on Regulation A offerings.

Question 35

Only those who actually signed the registration statement can be liable for a Section 11 violation.

Question 36

The SEC conducts a merit review of its filed registrations.

Question 37

The due diligence defense is one that is easy to establish.

Question 38

Section 10(b)violations carry fines of only $10,000.

Question 39

Section 11 of the 1933 Securities Act imposes liability for the failure to file a registration statement.

Question 40

A tombstone ad can be run before the registration statement is effective.

Question 41

The intrastate exemption violates the commerce clause.

Question 42

State antitakeover statutes that delay takeovers are unconstitutional.

Question 43

The crowd funding provisions of Dodd-Frank allow the use of the Internet by businesses to raise money from nonaccredited investors without registration.

Question 44

A hostile takeover is one supported by management.

Question 45

Short-swing profits are acceptable if there was no inside information.

Question 46

A merger is the combination of two firms into one of the old firms.

Question 47

The Williams Act only applies to National Stock Exchange companies.

Question 48

A 10-K report is the same as the company's annual report.

Question 49

Section 12 violations would include selling before the effective date.

Question 50

A tender offer is another form of business combination.

Question 51

A company filing Williams Act materials is not required to file proxy materials.

Question 52

A registration approved by the SEC need not be registered at the state level.

Question 53

Investors in Internet crowd funding area islimited in the amount they can invest.

Question 54

A false prospectus is covered under Section 11.

Question 55

Asset acquisitions are not subject to any federal regulation.

Question 56

Insider trading rules apply only to officers and directors.

Question 57

Under Section 14,shareholders can make proposals for action in the proxy materials.

Question 58

Regulation A filings are exempt from Section 11 liability.

Question 59

Shares of stock issued pursuant to a corporate reorganization must be registered.

Question 60

In a consolidation,a new firm is established.

Question 61

If the earnings of a company are revealed to be false,the officers who earned bonuses based on these earnings must forfeit them.

Question 62

Black-out periods are timeframes in which trading in company stockby company employees is prohibited.

Question 63

Under Sarbanes-Oxley,a company musthave acode of ethics for a financial reporting officer.

Question 64

An employee who passes along information about his company to a relative and the relative trades in that stock as a result has not violated any securities laws as long as he does not trade in the stock.

Question 65

Accounting firms must register annually with PCAOB if they want to audit publicly traded companies.

Question 66

Only a small minority of states have antitakeover statutes.

Question 67

Publicly traded companies can no longer issue non-GAAP financial statements.

Question 68

Sarbanes-Oxley requires all covered companies to have a code of ethics for financial officers.

Question 69

The penalties for certification of false financial statements are up to $1 million in fines and/or 10 years.

Question 70

Insider trading rules apply to information exchanged over the Internet and chat rooms.

Question 71

To qualify for an intrastate offering exemption,the shares must contain transfer restrictions.

Question 72

Shareholder proposals can include topics such as length of directors' terms.

Question 73

An IPO does not require SEC registration.

Question 74

Shareholders who solicit proxies need not comply with Section 14 of the 1934 Act.

Question 75

The trend in international markets is away from regulating insider trading.

Question 76

Destruction of documents related to the financial reports of a company carries a 20-year penalty.

Question 77

Shelf registration is good for a maximum of two years,provided there are regular filings such as the 10-K.

Question 78

Under Sarbanes-Oxley,audit committees of publicly held companies' boards need not be made up of independent members so long as the majority of the board is independent.

Question 79

Short-swing profit rules apply only to officers and directors.

Question 80

The due diligence defense to Section 11 is difficult to prove.