Question 1

The Securities Exchange Act of 1934 is concerned with the secondary distribution of securities in the national securities markets and in the over-the-counter markets.

Accepted Answer

The Securities Exchange Act of 1934 is concerned with the regulation of securities exchanges and secondary trading of securities in both national and over-the-counter markets. It also established the Securities and Exchange Commission (SEC) to enforce the provisions of the Act.

Question 2

Securities acquired under Rules 506,505 and 404 exemption from registration are considered restricted securities,and their resale may require registration.

Accepted Answer

Securities acquired under Rules 506, 505, and 404 exemption from registration are considered restricted securities, which means their resale may require registration. This is due to the fact that they were sold without registration under the Securities Act of 1933, and thus their resale is subject to restrictions under Rule 144.

Question 3

All private or limited offerings of securities are exempt from the SEC registration requirements.

Accepted Answer

Not all private or limited offerings of securities are exempt from the SEC registration requirements. There are certain exemptions under the Securities Act of 1933 that may apply, but they have specific criteria and limitations that must be met.

Question 4

Companies whose securities are listed on a national securities exchange and unlisted companies with assets in excess of $10 million and 500 or more shareholders are exempt from the reporting requirements of the Securities Exchange Act of 1934.

Accepted Answer

Companies whose securities are listed on a national securities exchange are not exempt from the reporting requirements of the Securities Exchange Act of 1934, and unlisted companies with assets in excess of $10 million and 500 or more shareholders are also subject to reporting requirements.

Question 5

Under SEC Rule 504 of Regulation D,an issuer can offer and sell up to $2 million in securities within a 12 month period without registration and without most of the restrictions contained in Rules 505 and 506.

Accepted Answer

The SEC Rule 504 of Regulation D allows an issuer to offer and sell up to $10 million in securities within a 12-month period without registration, not $2 million.

Question 6

Securities covered by the securities acts includes only investment instruments such as stocks and bonds not "investment contracts."

Accepted Answer

Securities covered by the securities acts include investment contracts as well, as defined by the Howey Test.

Question 7

At least 30 days must elapse from the date of a company's filing a registration statement with the SEC to the date the registration becomes effective.

Accepted Answer

The SEC does not have a mandatory 30-day waiting period for a registration statement to become effective. The timing can vary, and the SEC may declare a registration statement effective in less or more time, depending on the review process and any issues that need to be addressed.

Question 8

A prospectus sets forth the key information contained in the registration statement.

Accepted Answer

A prospectus is a legal document that contains key information about a company's securities that has been filed with the SEC. It is typically provided to potential investors before they make an investment in the company. The prospectus includes important information about the company's financial performance, business operations, and the risks associated with investing in its securities. It is derived from the registration statement, which is a comprehensive document filed with the SEC that must be approved before the company can offer its securities to the public. Therefore, a prospectus sets forth the key information contained in the registration statement.

Question 9

State laws designed to protect the public from the sale of worthless stocks and bonds are known as "clear sky" laws.

Accepted Answer

State laws designed to protect the public from the sale of worthless stocks and bonds are actually known as "blue sky" laws.

Question 10

Under the 1990 Remedies Act,the SEC may start administrative proceedings against any person or entity,whether regulated by the SEC or not.

Accepted Answer

The 1990 Remedies Act grants the SEC broad authority to initiate administrative proceedings against any person or entity regardless of whether they are regulated by the SEC or not.

Question 11

The Securities Act of 1933 deals with the original distribution of securities by the issuing corporations.

Accepted Answer

The Securities Act of 1933 primarily regulates the initial public offering (IPO) of securities by companies. It requires registration of securities with the Securities and Exchange Commission (SEC) and disclosure of information to potential investors.

Question 12

The Sarbanes-Oxley Act of 2002 requires written certification of the 10-K and 10-Q reports by each company's CFO and CEO.

Accepted Answer

The requirement for written certification of the 10-K and 10-Q reports by each company's CEO and CFO is a provision of the Sarbanes-Oxley Act.

Question 13

The Securities Act of 1933 imposes civil liability for making false or misleading statements in a registration statement.

Accepted Answer

The Securities Act of 1933 does impose civil liability for making false or misleading statements in a registration statement.

Question 14

Unlisted companies that have assets less than $10 million and fewer than 500 shareholders are subject to the reporting requirements of the Securities Exchange Act of 1934.

Accepted Answer

Unlisted companies that have assets less than $10 million and fewer than 500 shareholders are not subject to the reporting requirements of the Securities Exchange Act of 1934.

Question 15

The Market Reform Act of 1990 empowers the SEC to suspend all trading when markets are excessively volatile.

Accepted Answer

The Market Reform Act of 1990, also known as the Circuit Breaker Rule, gives the SEC authority to halt trading in the event of significant market volatility or a rapid decline in stock prices.

Question 16

The Securities Act of 1933 prohibits the offering or sale of securities to the public in interstate commerce before a registration statement has been filed with the Securities and Exchange Commission (SEC).

Accepted Answer

This is true according to the Securities Act of 1933.

Question 17

Exchanges,brokers,and dealers who deal in the securities traded in interstate commerce or on any national security exchange must register with the SEC unless exempted by it.

Accepted Answer

This is stated in the Securities Exchange Act of 1934 under Section 15(a).

Question 18

Under the United States Supreme Court's definition,an investment contract exists if the following elements are present: (1)an investment of money,(2)a common enterprise,and (3)an expectation of future profits from the efforts of others.

Accepted Answer

This is the correct definition of an investment contract according to the United States Supreme Court.

Question 19

The Securities Act of 1933 requires a seller to provide a prospectus to each potential purchaser of an original issue of securities.

Accepted Answer

This statement is true. The Securities Act of 1933 mandates that a prospectus, a disclosure document containing information about the securities being offered for sale, must be provided to every potential buyer of an original issue of securities.

Question 20

The SEC requires that annual shareholder reports be submitted to shareholders in any proxy solicitation on behalf of management.

Accepted Answer

The SEC does require that annual shareholder reports be submitted to shareholders in any proxy solicitation on behalf of management. This helps ensure that shareholders are informed about the company's performance and can make informed voting decisions.

Quiz 46: Securities Regulation