Question 1

Which of the following information is most likely to be included in a proxy statement?

Accepted Answer

A proxy statement is a statement required of a U.S. corporation when soliciting shareholders' votes. A proxy statement includes the voting procedures, background information about the company's nominated directors, director compensation, the compensation of its executives, and information about auditor fees.

Question 2

The SEC alone cannot enforce all aspects of the securities market so Congress empowers _____ as an enforcement agency.

Accepted Answer

The SEC alone cannot enforce all aspects of the securities market so Congress empowers self-regulatory organizations (SROs) as enforcement agencies.

Question 3

Which of the following statements is definitely true regarding transactions that are called short swing profits?

Accepted Answer

Section 16 is designed to prevent certain persons from unfairly profiting from inside information by engaging in transactions that may have a temporary effect, and to prevent in-and-out transactions that might be used to manipulate securities. These transactions are called short swing profits and are prohibited.

Question 4

Many states permit withdrawal by an attorney when the highest authority of the corporation insists on a criminal action that will substantially injure the corporation. This is called _____.

Accepted Answer

Many states permit withdrawal by an attorney when the highest authority of the corporation insists on a criminal action that will substantially injure the corporation. This is called reporting out.

Question 5

What is a security?

Accepted Answer

The answer of What is a security?...

Question 6

A(n) _____ is a statement required of a U.S. corporation when soliciting shareholders' votes.

Accepted Answer

A proxy statement is a statement required of a U.S. corporation when soliciting shareholders' votes.

Question 7

Which of the following statements is true regarding insider liability under section 16?

Accepted Answer

Section 16 only applies to transactions involving registered equity securities, while Rule 10b-5 applies to all securities, registered or nonregistered, debt or equity. Section 16 does not require that the insider possess material nonpublic information. Section 16 only applies to transactions within six months of each other.

Question 8

This federal law enacted in reaction to a number of major corporation and accounting scandals. The Act established new standards for all U.S. company boards of directors, management, and accounting firms. Identify the federal law in the discussion.

Accepted Answer

The Sarbanes-Oxley Act of 2002 (SOX) is a federal law enacted in reaction to a number of major corporation and accounting scandals. The Act established new standards for all U.S. company boards of directors, management, and accounting firms.

Question 9

Which of the following statements is true regarding a proxy solicitation?

Accepted Answer

Proxy solicitations are communications with potential absentee voters. A proxy solicitation is a writing signed by a shareholder of a corporation authorizing a named person to vote his or her shares of stock at a specified meeting of the shareholders.

Question 10

Purchasers who discover a false or misleading statement in a prospectus cannot bring an action if more than _____ have passed since the purchase of the security.

Accepted Answer

Purchasers cannot bring an action if more than three years have passed since the purchase of the security.

Question 11

In the context of insider trading liability, Section 16 applies to transactions involving _____ securities.

Accepted Answer

In the context of insider trading liability, Section 16 applies to transactions involving registered equity securities.

Question 12

Which of the following sections is NOT one of the eleven sections of the Sarbanes-Oxley Act Of 2002?

Accepted Answer

Accuracy of forward looking statement is not one of the eleven sections of the Sarbanes-Oxley Act Of 2002.

Question 13

What is a Ponzi Scheme?

Accepted Answer

The answer of What is a Ponzi Scheme?...

Question 14

Which of the following is the principal document used by most public companies to disclose corporate information to their shareholders?

Accepted Answer

The annual report to shareholders is the principal document used by most public companies to disclose corporate information to their shareholders. It is usually a comprehensive report containing market information, new products, research and development and other detailed information about the corporation.

Question 15

Which of the following best represents a writing signed by a shareholder of a corporation authorizing a named person to vote his or her shares of stock at a specified meeting of the shareholders?

Accepted Answer

Proxy solicitations are communications with potential absentee voters. A proxy solicitation is a writing signed by a shareholder of a corporation authorizing a named person to vote his or her shares of stock at a specified meeting of the shareholders.

Question 16

What is the difference between debt securities and equity securities?

Accepted Answer

The answer of What is the difference between debt securities...

Question 17

Which of the following statements is true regarding Rule 10b-5?

Accepted Answer

Rule 10b-5 is the most famous rule in securities law. A cause of action exists under Rule 10b-5 for every person who buys or sells securities as a result of fraud or misrepresentation. Rule 10b-5 requires intent to deceive.

Question 18

If a corporation is holding an annual meeting for the purpose of voting on a board of directors, Rule 14 requires that the proxy be accompanied by a(n) _____ containing financial information on the corporation.

Accepted Answer

If a corporation is holding an annual meeting for the purpose of voting on a board of directors, Rule 14 requires that the proxy be accompanied by an annual report containing financial information on the corporation.

Question 19

Which of the following organizations is responsible for regulatory oversight of all securities firms that do business with the public?

Accepted Answer

The Financial Industry Regulatory Authority (FINRA) is responsible for regulatory oversight of all securities firms that do business with the public.

Question 20

According to the Sarbanes-Oxley Act, an attorney has the duty to "report up" any evidence of material violation by an issuer, its officer, director, employee or agent. Here reporting up means:

Accepted Answer

An attorney has the duty to "report up" any evidence of material violation by an issuer, its officer, director, employee or agent. To report up means the report has to be made to a chief legal officer or qualified legal compliance committee.

Quiz 13: Securities Regulation and Compliance