Question 1

A registration statement becomes public immediately on filing with the SEC, but a prospectus only becomes public upon signature of the chief financial officer.

Accepted Answer

A registration statement becomes public immediately on filing with the SEC, but a prospectus becomes public upon filing with the SEC, not upon signature by the CFO.

Question 2

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 gives the SEC power to issue cease and desist orders and to impose criminal fines up to $1 million.

Accepted Answer

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 does give the SEC the power to issue cease and desist orders, but it does not grant the SEC the authority to impose criminal fines. Criminal fines are typically pursued by the Department of Justice, not the SEC. The SEC can, however, impose civil penalties.

Question 3

Bonds are not included in the definition of the term "security."

Accepted Answer

Bonds are included in the definition of "security" as they represent a financial instrument that can be traded.

Question 4

In 2009, Congress enacted the Investor Protection and Securities Reform Act, which imposes new corporate governance and investor protection rules on privately and publicly held companies.

Accepted Answer

There is no such act as the Investor Protection and Securities Reform Act. However, in 2010, Congress did pass the Dodd-Frank Wall Street Reform and Consumer Protection Act, which implemented significant reforms to financial regulation and investor protection.

Question 5

In 2006, the SEC abolished the requirement that a registration statement disclose compensation paid to senior executives and directors.

Accepted Answer

The SEC did not abolish the requirement; instead, it enhanced disclosure requirements for executive compensation in 2006.

Question 6

Under Regulation A, as amended in 1992, an issuer may make offers upon filing the offering statement but may make sales only after the SEC has qualified the statement.

Accepted Answer

This statement is correct. Under Regulation A, an issuer can only make sales after the SEC has qualified the offering statement, but can make offers upon filing the statement.

Question 7

The definition of "insider" is consistent between Rule 10b-5 and Section 16(b) of the 1934 Act.

Accepted Answer

The definition of "insider" differs between Rule 10b-5, which focuses on fraud and insider trading, and Section 16(b), which deals with short-swing profits by corporate insiders.

Question 8

Under SEC requirements adopted in 2010, disclosure of any directorships held by each director and nominee at any time during the past seven years at any public company or registered investment company must be made to shareholders.

Accepted Answer

The answer of Under SEC requirements adopted in 2010, disclosure...

Question 9

The SEC has adopted rules requiring an issuer's chief executive and chief financial officers to certify the financial and other information contained in the issuer's annual and quarterly reports.

Accepted Answer

The statement is true. The SEC adopted such rules in 2002 as part of the Sarbanes-Oxley Act.

Question 10

All fifty states have enacted similar statutes regulating tender offers.

Accepted Answer

Not all fifty states have enacted similar statutes regulating tender offers; state laws can vary significantly.

Question 11

In 1992, the SEC issued new rules tightening the registration and reporting system for small business issuers, which increase the cost for such issuers wishing to trade their securities publicly.

Accepted Answer

The answer of In 1992, the SEC issued new rules...

Question 12

Under Regulation A, as amended in 1992, issuers may use a simple question-and-answer disclosure document.

Accepted Answer

This is true. Regulation A allows issuers to use a simplified disclosure document known as Form 1-A that includes a Q&A format for certain items.

Question 13

There are rigorously enforced restrictions regarding both number and qualification of investors who purchase securities under Regulation A.

Accepted Answer

Regulation A allows companies to offer and sell securities to the public with less stringent regulatory requirements and without a limit on the number of "unaccredited" investors, unlike other exemptions that have strict investor qualifications and caps.

Question 14

In an election of directors, solicitations of proxies by a person other than the issuer must include an annual report with a written proxy statement.

Accepted Answer

According to the Securities Exchange Act of 1934, if a person other than the issuer solicits proxies in an election of directors, they must provide an annual report along with a written proxy statement to the shareholders they are soliciting from.

Question 15

The Foreign Corrupt Practices Act makes it illegal for an American company to pay money to a foreign official to influence a decision of that person in his official capacity.

Accepted Answer

This is the basic definition of the Foreign Corrupt Practices Act (FCPA). It prohibits American companies from offering or giving anything of value to foreign officials to obtain or maintain business relationships or to gain an unfair advantage.

Question 16

The profits realized for violation of Rule 16(b) are given directly to the shareholders as a penalty to the corporation.

Accepted Answer

The profits realized from a violation of Rule 16(b) are disgorged and must be paid to the corporation itself, not directly to the shareholders. Rule 16(b) under the Securities Exchange Act of 1934 is designed to prevent insiders from profiting from short-swing transactions based on access to non-public information.

Question 17

The effective date of a registration statement is the thirtieth day after filing, after which investors can access it using
EDMOND.

Accepted Answer

The effective date of a registration statement is typically the twentieth day after filing, and investors can access it using EDGAR, not EDMOND.

Question 18

The Foreign Corrupt Practices Act makes it illegal to offer a payment of money to a foreign official to influence a decision even if the payment is not made.

Accepted Answer

The Foreign Corrupt Practices Act (FCPA) prohibits the offering or giving of anything of value to a foreign official in order to influence a decision or obtain a business advantage. This includes not only actual payments, but also offers or promises of payments, as well as gifts, entertainment, or other favors. Therefore, it is illegal to offer a payment of money to a foreign official to influence a decision even if the payment is not actually made.

Question 19

Shelf registrations allow issuers to respond more quickly to market conditions, but the provision allowing it does not apply to all companies.

Accepted Answer

Shelf registrations allow certain issuers to register securities with the SEC in advance, so they can be offered and sold quickly when market conditions are favorable. However, not all companies are eligible for shelf registrations under SEC rules.

Question 20

The SEC may not advance the effective date of a registration statement.

Accepted Answer

The SEC can accelerate the effective date of a registration statement upon request by the issuer, allowing the securities to be sold sooner than they would be under the standard review timeline.

Quiz 43: Securities Regulation