Question 1

The safe-harbor exemption from SEC regulations involves

Accepted Answer

A) The safe-harbor exemption from SEC regulations involves offerings with specified dollar limitations and/or limitations on the number of nonaccredited investors.
_) The safe-harbor exemption from SEC regulations involves offerings with specified dollar limitations and/or limitations on the number of nonaccredited investors.
`) The safe-harbor exemption from SEC regulations involves offerings with specified dollar limitations and/or limitations on the number of nonaccredited investors.
a) The safe-harbor exemption from SEC regulations involves offerings with specified dollar limitations and/or limitations on the number of nonaccredited investors.

Question 2

With regard to financial reporting and corporate governance,what is now required of public companies under the Sarbanes-Oxley Act?

Accepted Answer

The answer of With regard to financial reporting and corporate...

Question 3

Drew is the president and CEO of Formerly Fat,Inc.,a health and diet company that promotes weight loss through its "revolutionary" feast and famine diet.The diet calls for eating anything you want on Tuesdays and Thursdays,with fasting on Mondays,Wednesdays,and Fridays.On weekends,food is limited to one big lunch each day.Formerly Fat has a celebrity spokesperson who claims she and all her Hollywood friends swear by this diet,and the company has infomercials running on television constantly.On a Friday afternoon,Drew is called by a reporter,who asks if he's concerned that the New England Journal of Medicine,one of the most respected and prestigious medical journals in the country,is about to publish an article on Tuesday documenting that numerous practitioners of this diet suffer from serious medical problems and that three deaths have occurred relating to the diet.The article's authors will be calling for an investigation and eventual ban on advertising and promotion of the diet.Drew laughs and claims the article will be challenged and shown to be inaccurate.As soon as he hangs up,he calls his wife,who has the company stock in her name for liability reasons,and then his brother and says to each,"I just got word that the company is in trouble,and we will have problems soon.Sell your stock immediately." On Monday morning,his wife and brother sell all of their holdings.On Tuesday the article is published,and by Wednesday the stock value is down 40 percent.Discuss this situation.

Accepted Answer

The answer of Drew is the president and CEO of...

Question 4

In what two ways do federal securities statutes define a security?

Accepted Answer

The answer of In what two ways do federal securities...

Question 5

Imagine that the SEC had investigated ENRON prior to its collapse and had found extremely serious violations of various securities statutes and regulations.What two things might the SEC have done in the exercise of its delegated executive powers and administrative enforcement powers?

Accepted Answer

The answer of Imagine that the SEC had investigated ENRON...

Question 6

Eve is a promoter and has approached Adam with an investment opportunity.Eve anticipates a generous profit and informs Adam that he too can realize a generous profit.This opportunity is not being offered to others.Assuming all other requirements to classify this as a security are in evidence,the commonality of this transaction would be described as a

Accepted Answer

A) When the promoter of a security and the single investor share a common
expectation of profit, the transaction is classified as having a vertical commonality.
A) When the promoter of a security and the single investor share a common expectation of profit, the transaction is classified as having a vertical commonality.
B) When the promoter of a security and the single investor share a common expectation of profit, the transaction is classified as having a vertical commonality.
C) When the promoter of a security and the single investor share a common expectation of profit, the transaction is classified as having a vertical commonality.

Question 7

Which of the following is not a component in the definition of a security?

Accepted Answer

A) Tangible collateral is not required regarding security instruments.
k) Tangible collateral is not required regarding security instruments.
l) Tangible collateral is not required regarding security instruments.
m) Tangible collateral is not required regarding security instruments.

Question 8

Under the emergency escrow provisions created by the Sarbanes-Oxley Act

Accepted Answer

A) The SEC may require payment into the fund before wrongdoing is uncovered.
\) The SEC may require payment into the fund before wrongdoing is uncovered.
]) The SEC may require payment into the fund before wrongdoing is uncovered.
^) The SEC may require payment into the fund before wrongdoing is uncovered.

Question 9

Giana is the executive secretary to the CEO of a large public corporation.One day her boss takes her into a back room containing numerous cardboard file boxes and three shredding machines,and he tells her to shred every document and file in the room.He then says,"We're under investigation by the SEC,and if they get their hands on anything in this room,we're ruined." She asks what is going on and is told that the company has been perpetrating fraud for years and needs to destroy all the evidence.If Giana then agrees to shred the documents and files,what,if anything,could happen to Giana?

Accepted Answer

A) Since Giana is aware of the fraud, she may be imprisoned if she shreds evidence
before, during, or after a formal investigation.
b) Since Giana is aware of the fraud, she may be imprisoned if she shreds evidence before, during, or after a formal investigation.
c) Since Giana is aware of the fraud, she may be imprisoned if she shreds evidence before, during, or after a formal investigation.
d) Since Giana is aware of the fraud, she may be imprisoned if she shreds evidence before, during, or after a formal investigation.

Question 10

Once a corporation has submitted a registration statement to the SEC,what responses may the SEC make and what is the required timing of these responses?

Accepted Answer

The answer of Once a corporation has submitted a registration...

Question 11

Under TARP provisions,

Accepted Answer

A) Under TARP provisions, shareholders have more say on compensation of
directors and officers.
h) Under TARP provisions, shareholders have more say on compensation of directors and officers.
i) Under TARP provisions, shareholders have more say on compensation of directors and officers.
j) Under TARP provisions, shareholders have more say on compensation of directors and officers.

Question 12

The Securities Act of 1933 focuses on the

Accepted Answer

A) The Securities Act of 1933 regulates the original issuance and reissuance of
securities to investors by issuers.
A) The Securities Act of 1933 regulates the original issuance and reissuance of securities to investors by issuers.
B) The Securities Act of 1933 regulates the original issuance and reissuance of securities to investors by issuers.
C) The Securities Act of 1933 regulates the original issuance and reissuance of securities to investors by issuers.

Question 13

Fremont is a corporate insider and has made some very large profits through the buying and selling of his corporation's stock during the previous six months.These profits would be called

Accepted Answer

A) The prohibition against short-swing profits is intended to deter insiders from
profiting by manipulating the stock's short-term performance.
A) The prohibition against short-swing profits is intended to deter insiders from profiting by manipulating the stock's short-term performance.
B) The prohibition against short-swing profits is intended to deter insiders from profiting by manipulating the stock's short-term performance.
C) The prohibition against short-swing profits is intended to deter insiders from profiting by manipulating the stock's short-term performance.

Question 14

One form of private placement exemption involves sales of securities

Accepted Answer

A) Private placements involve sales to accredited investors only or purely local
offerings with residency requirements for purchase and resale.
e) Private placements involve sales to accredited investors only or purely local offerings with residency requirements for purchase and resale.
f) Private placements involve sales to accredited investors only or purely local offerings with residency requirements for purchase and resale.
g) Private placements involve sales to accredited investors only or purely local offerings with residency requirements for purchase and resale.

Question 15

The SEC maintains _______ regional offices,throughout the United States,where much of its day-to-day work is done.

Accepted Answer

A) Much of the day-to-day work of the SEC is conducted by its 11 regional offices located throughout the United States.
A) Much of the day-to-day work of the SEC is conducted by its 11 regional offices located throughout the United States.
B) Much of the day-to-day work of the SEC is conducted by its 11 regional offices located throughout the United States.
C) Much of the day-to-day work of the SEC is conducted by its 11 regional offices located throughout the United States.

Question 16

Johanna is the CFO of Para Corp.and is a year from retirement.In order to guarantee herself a very substantial bonus and to boost her retirement package,she knowingly certifies false financial reports that make the company appear to be much more profitable than it really is.She further takes steps to ensure that the financial report does not get reviewed through internal controls maintained by Para Corp.Under provisions of the Sarbanes-Oxley Act,what are the possible penalties that may be imposed when her actions are discovered?

Accepted Answer

The answer of Johanna is the CFO of Para Corp.and...

Question 17

Fernando is the president and CEO of a publicly held corporation and is quoted in the paper as saying that the company is solid and has a bright future.He mentions a number of projects and plans that he anticipates will be successful in both the short term and long term,thus benefiting the company.Braenna reads this article and calls a broker,directing him to buy shares in Fernando's company.After two years the stock is below the price she paid for it,and she brings suit,claiming that Fernando committed fraud when he stated that the company was solid and would be very successful in the future.What must be proved by each side,and what is the likely outcome of this suit?

Accepted Answer

The answer of Fernando is the president and CEO of...

Question 18

Brent has opened a fruit and vegetable business named Brent's Country Stand near an affluent suburban neighborhood.After six months Brent wishes to raise capital for expansion,so he offers a number of his customers the following deal: If the individual gives Brent $10,000,Brent will provide a promissory note,payable in five years with full repayment of the principal and a 10 percent interest rate of return.Brent's Country Stand is the maker of the notes,and about 10 customers have purchased these notes.Do these promissory notes qualify as securities? Why or why not?

Accepted Answer

The answer of Brent has opened a fruit and vegetable...

Question 19

What authority does the Bureau of Consumer Financial Protection have?

Accepted Answer

The answer of What authority does the Bureau of Consumer...

Question 20

The Supreme Court decision in SEC v.W.J.Howey Co.led to what is commonly called the Howey test to determine whether something qualifies as a security.Identify and explain the four components of this test.

Accepted Answer

The answer of The Supreme Court decision in SEC v.W.J.Howey...

Quiz 16: Regulation of Securities, Corporate Governance, and Financial Markets