Question 1

Global Resources Corporation,and its officers,directors,and shareholders,buy and sell securities. Section 10(b)of the Securities Exchange Act of 1934 applies to the purchase or sale of a security

Accepted Answer

Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of securities in almost any circumstances, including those involving Global Resources Corporation, its officers, directors, and shareholders, regardless of whether it involves an investment company, short-swing profits, or a tipper and tippee relationship.

Question 2

Household Products Corporation wants to make an offering of securities to the public. This offering is not exempt from registration under the Securities Act of 1933. Before Household Products sells its securities,it must provide investors with

Accepted Answer

Household Products Corporation must provide investors with a prospectus before selling its securities, as this document contains important information about the company, its financials, and the risks associated with investing in its securities. A forward-looking financial forecast is not required by law and may be considered speculative. An investment contract is a legal agreement between two parties and not a document required for public offerings. Samples of products are not relevant to the offering of securities.

Question 3

To raise $120 million to expand operations,Premiere Movies Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated,but unaccredited investors. Premiere Movies plans to notify the SEC of sales. Under the Securities Act of 1933,this issue may qualify as an "exempt" transaction

Accepted Answer

The transaction may qualify as an exempt offering under Regulation D, Rule 506(b), which allows sales to up to 35 sophisticated but unaccredited investors, provided they receive material information about the firm.

Question 4

Global Trade Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that Global Trade must

Accepted Answer

Since the securities do not qualify for an exemption from registration, Global Trade Corporation must file a registration statement with the SEC before issuing the securities. This is required by law to ensure that investors receive full and fair disclosure of material information about the securities being offered.

Question 5

Bonds & Stocks Corporation,and its officers,directors,and shareholders,buy and sell securities. SEC Rule 10b-5 applies to the purchase or sale of

Accepted Answer

SEC Rule 10b-5 applies to any security, regardless of the specific entity involved in the purchase or sale. This rule prohibits fraudulent, manipulative, or deceptive conduct in connection with the purchase or sale of securities. Therefore, it is applicable to Bonds & Stocks Corporation, its officers, directors, and shareholders, as well as any other individuals or entities involved in the securities market.

Question 6

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 tells Geoff. Both Fay and Geoff buy 100 shares. Geoff knows that Fay got her information from Dhani. When Eureka! publicly announces its new laptop,Dhani,Fay,and Geoff sell their stock for a profit.
-Under the Securities Exchange Act of 1934,Fay is most likely

Accepted Answer

Fay is most likely liable for insider trading because she traded on non-public information that she received from Dhani, who is an insider of Eureka! Inc. It does not matter that she did not prevent others from profiting or whether she misappropriated any information. Additionally, her employment status is irrelevant in determining liability under the Securities Exchange Act of 1934.

Question 7

As part of a stock offering for Designer Studio Corporation,the firm's accountant Evelyn intentionally misrepresents material facts in the prospectus. Flores buys the stock unaware of the misrepresentation and suffers a loss. Evelyn may be subject to

Accepted Answer

Evelyn may be subject to a fine, imprisonment, and damages because intentionally misrepresenting material facts in a prospectus is considered securities fraud, which is illegal under federal law. Securities fraud can result in both criminal and civil penalties, including fines, imprisonment, and orders to compensate those who suffered losses as a result of the fraud.

Question 8

Orbital Flights,Inc.,is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 16(b)of the act covers

Accepted Answer

Section 16(b) of the Securities Exchange Act of 1934 covers the short-swing activities of insiders, which includes officers, directors, and beneficial owners of more than 10% of the company's stock. These insiders must disclose their transactions and any profits made from buying or selling securities within a six-month period.

Question 9

Karin,an officer for Liquified Natural Gas Corporation (LNG),buys 10,000 shares of LNG stock. One week later,LNG announces that it will merge with a competitor,Mining & Piping Company,and the price of LNG stock increases. One month later,Karin sells her shares for a profit. Under Section 16(b)of the Securities Exchange Act of 1934,Karin 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 officers or directors of a company must wait at least six months before profiting from the purchase and sale of stock. Therefore, Karin would not be liable if she had waited more than six months to sell her shares.

Question 10

Adrian,the chief executive officer of Beds+Sofas,Inc.,intentionally understates the amount of Beds+Sofas' debts in information provided to investors as part of an issue of Beds+Sofas' stock. Cassie buys the stock and suffers a loss. Adrian may be subject to

Accepted Answer

Adrian intentionally misled investors about the amount of debts, which constitutes fraud. This means that Adrian may be subject to both government prosecution for committing a crime and Cassie's lawsuit seeking damages for her loss as a result of Adrian's actions.

Question 11

Nester,a salesperson for Olive Grove Corporation,learns that Olive Grove will increase the dividend it pays to shareholders. Nester buys 10,000 shares of Olive Grove stock. When the dividend is announced to the public and the price of the stock increases,Nester sells his shares for a profit. Nester would not be liable for insider trading if the information about the dividend was

Accepted Answer

If the information about the dividend was available to the public before Nester bought the stock, then he would not be liable for insider trading, as the information would not be considered non-public or insider information.

Question 12

Shoes & Sox Corporation is a public company whose shares are traded in the public securities markets. With respect to financial and other significant information concerning its securities,the Securities Act of 1933

Accepted Answer

The Securities Act of 1933 requires disclosure of financial and other significant information concerning securities traded in public markets.

Question 13

Eddie,an accountant for Fresh Dairy,Inc.,learns of undisclosed company plans to market a new smooth-tasting,fat-free butter. Eddie buys 10,000 shares of Fresh Dairy stock. He reveals the company plans to Giselle,who buys 5,000 shares. Giselle tells Hong,who tells Irwin,each of whom buy 1,000 shares. They know that Giselle got her information from Eddie. When Fresh Dairy publicly announces its new product,Eddie,Giselle,Hong,and Irwin sell their stock for a profit.
-If Eddie is liable under the Securities Exchange Act of 1934,it will be because the information on which he based his purchase of Fresh Dairy stock was

Accepted Answer

Eddie is liable under the Securities Exchange Act of 1934 because the information on which he based his purchase of Fresh Dairy stock was not yet public. He had inside information, and by using that information to trade and to pass on to others, he violated securities laws. Materiality and truthfulness of the information are not relevant in this case. A forward-looking forecast is not the issue here because it is not mentioned that the information was based on a forecast.

Question 14

Guitar Factory Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by

Accepted Answer

The answer of Guitar Factory Corporation files a registration statement...

Question 15

Trail Bike Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933,Trail Bike is required to

Accepted Answer

Under the Securities Act of 1933, Trail Bike Corporation is required to disclose financial and other information about its securities to the public. This ensures that investors have access to relevant information before deciding to invest in the company's securities.

Question 16

Space Trips Inc. files a registration statement with the SEC before making an offering to the general public. The registration contains false,immaterial statements of which the investors are unaware. Space Trips is charged with violating the Securities Act of 1933. Space Trips's best defense is

Accepted Answer

The best defense for Space Trips Inc. is that the untrue statements were not material. Materiality is an important element in securities law, and if the false statements in the registration statement are immaterial, the issuer may be able to avoid liability. However, if the false statements are material, the investors may have a cause of action against Space Trips under the Securities Act of 1933.

Question 17

Fleet Delivery Corporation is a public company with a market capitalization of less than $75 million. Fleet is poised to issue securities in a transaction that,under the Securities Act of 1933,is "exempt." This enables Fleet to

Accepted Answer

The answer of Fleet Delivery Corporation is a public company...

Question 18

Hawaiian Shirts,Inc.,wants to issue stock of $4 million in a single offering. The corporation must provide disclosure documents that generally are the same as those used in registered offerings to

Accepted Answer

The answer of Hawaiian Shirts,Inc.,wants to issue stock of $4...

Question 19

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries,Inc.,has assets of more than $50 million and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to

Accepted Answer

The Securities Exchange Act of 1934 primarily applies to companies that have assets exceeding $10 million and more than 500 shareholders, which describes Gourmand Pastries Inc. but not Fresh Fruit Company.

Question 20

Under the Securities Exchange Act of 1934,Giselle is most likely

Accepted Answer

Under the Securities Exchange Act of 1934, insider trading liability can arise if Giselle trades based on material, non-public information, regardless of her employment status or whether she solicited the information.

Quiz 36: Investor Protection, insider Trading, and Corporate Governance

Global Resources Corporation,and its officers,directors,and shareholders,buy and sell securities. Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of a security