Question 1

The Private Securities Litigation Reform Act of 1995 ________.

Accepted Answer

The Private Securities Litigation Reform Act of 1995 provides a safe harbor from liability for companies that make statements to the public about future risk factors. It does not enable private investors to sue public corporations for securities violations, enable the Securities and Exchange Commission to sue private corporations for securities violations, or provide payment of punitive damages and attorney fees to successful plaintiffs in cases of securities litigation.

Question 2

Which of the following is true of the Division of Market Regulation?

Accepted Answer

D

Question 3

Which of the following is true of the Financial Stability Oversight Council?

Accepted Answer

The Financial Stability Oversight Council is responsible for identifying banks or nonbanks that pose a threat to the financial system and subjecting them to further regulation or oversight.

B) is incorrect as the council is not subject to oversight by the Government Accountability Office.

C) is also incorrect as both the Treasury and the Federal Reserve are members of the council.

D) is incorrect as the council was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, not the Securities Exchange Act of 1934.

Question 4

________ supervises investigations and the initiation of injunctive actions.

Accepted Answer

The Division of Enforcement supervises investigations and the initiation of injunctive actions, as well as initiates litigation through the Department of Justice when necessary to enforce federal securities laws. The Division of Market Regulation oversees the securities markets and the brokers and dealers who conduct business on those markets, while the Division of Corporation Finance ensures that companies provide investors with accurate and complete information. The Division of Investment Management helps to protect investors by overseeing the investment management industry.

Question 5

________ is responsible for setting and administering the disclosure requirements prescribed by the 1933 and the 1934 Securities Acts, the Public Utility Holding Company Act, and the Investment Company Act.

Accepted Answer

The Division of Corporation Finance is responsible for setting and administering the disclosure requirements prescribed by the 1933 and the 1934 Securities Acts, the Public Utility Holding Company Act, and the Investment Company Act. The Division of Market Regulation is responsible for regulating stock exchanges and markets, the Division of Enforcement is responsible for enforcing securities laws, and the Division of Investment Management is responsible for regulating investment companies and investment advisers.

Question 6

Which of the following is true of securities?

Accepted Answer

Securities derive their value from the underlying asset or company they represent, they do not have intrinsic value in and of themselves.

Question 7

Chapter 11 of the ________ gives the Securities and Exchange Commission the authority to render advice when certain debtor corporations have filed for reorganization.

Accepted Answer

Chapter 11 of the Bankruptcy Abuse Prevention and Consumer Protection Act gives the Securities and Exchange Commission the authority to render advice when certain debtor corporations have filed for reorganization.

Question 8

The Trust Indenture Act of 1939 regulates the public issuance of ________ in excess of $5 million.

Accepted Answer

The Trust Indenture Act of 1939 regulates the public issuance of bonds and other debt securities in excess of $5 million. This act was passed to protect the rights of bondholders and ensure that issuers of these securities are transparent in their reporting and disclosure. The act requires companies to appoint an independent trustee to monitor compliance with the terms of the indenture, a legal agreement between the issuer and the bondholders. It also establishes minimum standards for the content of the indenture and requires issuers to file reports with the Securities and Exchange Commission (SEC) to keep investors informed.

Question 9

Which of the following acts requires all companies to set up a system of internal controls to provide reasonable assurance that the company's records accurately and fairly reflect its transactions?

Accepted Answer

The Foreign Corrupt Practices Act of 1977 requires companies to maintain accurate books and records and to have a system of internal controls sufficient to provide reasonable assurance that transactions are executed and assets are accounted for in accordance with management's authorization.

Question 10

Which of the following is true of the Securities Litigation Uniform Standards Act of 1998?

Accepted Answer

The Securities Litigation Uniform Standards Act (SLUSA) of 1998 sets national standards for securities class action lawsuits involving nationally traded securities. It does not provide a safe harbor from liability for companies that make statements to the public about future risk factors, give the Securities and Exchange Commission cease-and-desist powers and the power to impose substantial monetary penalties in administrative proceedings, or amend the Private Securities Litigation Reform Act of 1995.

Question 11

No more than three of the five commissioners of the Securities and Exchange Commission can be ________.

Accepted Answer

This is a requirement under the Securities and Exchange Act of 1934. No more than three commissioners can be from the same political party to ensure a balance of perspectives on the commission.

Question 12

The ________ gives the Securities and Exchange Commission cease-and-desist powers and the power to impose substantial monetary penalties in administrative proceedings.

Accepted Answer

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 gives the SEC cease-and-desist powers and the power to impose substantial monetary penalties in administrative proceedings. The International Securities Enforcement Cooperation Act of 1990 pertains to international securities enforcement, the Private Securities Litigation Reform Act of 1995 relates to securities litigation, and the Foreign Corrupt Practices Act of 1977 pertains to foreign corrupt practices.

Question 13

Which of the following is true of the Securities Investor Protection Corporation (SIPC)?

Accepted Answer

The Securities Investor Protection Corporation (SIPC) supervises the liquidation of brokerage firms that are in financial trouble. It does not have monitoring and bailout functions like the FDIC and it protects investors up to $500,000 (not $750,000 as stated in option A). SIPC does use trustees in its functions.

Question 14

The Securities Act of 1933 regulates the ________.

Accepted Answer

The Securities Act of 1933 regulates the initial offering of securities by public corporations, requiring them to disclose detailed financial and other information about the securities being offered to the public. This law aims to protect investors from fraudulent activities by ensuring that the information provided is accurate and complete. The other options listed are not regulated by this act.

Question 15

The Public Utility Holding Company Act of 1935 requires that public utility and holding companies ________.

Accepted Answer

The Public Utility Holding Company Act of 1935 requires public utility and holding companies to register with the Securities and Exchange Commission and disclose information about their finances and operations in order to promote transparency and protect investors. The Act also imposed restrictions on their operations such as limiting their ability to engage in mergers and acquisitions without SEC approval. It did not require them to set rates or elect board members. Furthermore, the Environmental Protection Agency did not exist in 1935 as it was founded in 1970.

Question 16

Which of the following acts exempts all documents given to the Securities and Exchange Commission by foreign regulators from Freedom of Information Act disclosure requirements?

Accepted Answer

The International Securities Enforcement Cooperation Act of 1990, also known as the "ISECA," exempts all documents given to the Securities and Exchange Commission by foreign regulators from Freedom of Information Act disclosure requirements. The other acts mentioned in the options do not have this specific exemption.

Question 17

The Market Reform Act of 1990 authorizes the Securities and Exchange Commission to regulate trading practices during ________.

Accepted Answer

The Market Reform Act of 1990 authorizes the Securities and Exchange Commission to regulate trading practices during periods of extreme market volatility.

Question 18

Which of the following was established by the Securities Investor Protection Act of 1970?

Accepted Answer

The Securities Investor Protection Act of 1970 established the Securities Investor Protection Corporation (SIPC) to protect investors from losses due to the failure of a brokerage firm. The other options listed were established by separate legislation. The Securities and Exchange Commission (SEC) was established by the Securities Exchange Act of 1934, the Federal Deposit Insurance Corporation (FDIC) was established by the Banking Act of 1933, and the Federal Savings and Loan Insurance Corporation (FSLIC) was established by the National Housing Act of 1934.

Question 19

Which of the following factors resulted in the federal regulation of securities in Congress?

Accepted Answer

The collapse of the stock market in 1929 was a major event that led to the federal regulation of securities in Congress. The stock market crash revealed the widespread manipulation and abuse of securities, prompting the government to step in and create regulations to protect investors and prevent future financial crises.

Question 20

The Investment Advisers Act of 1940 requires persons and firms giving investment advice to clients to ________.

Accepted Answer

The Investment Advisers Act of 1940 requires persons and firms giving investment advice to clients to register with the Securities and Exchange Commission (SEC). This is to ensure that they are meeting certain standards and guidelines in providing investment advice to their clients.

Quiz 23: Rules Governing the Issuance and Trading of Securities