Question 1

List the four major responsibilities of the SEC as set forth in the text.

Accepted Answer

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Question 2

Noelle,a Montana resident,purchases Valley Vineyard securities in January.In July,after the restaurant opens,Noelle wants to sell the securities to a well-known investor from Idaho.Is the sale permissible?

Accepted Answer

A)During the period of sale and for at least nine months after the period of sale,
buyers of intrastate securities under the intrastate exemption may not resell them to nonresidents.
B)During the period of sale and for at least nine months after the period of sale,buyers of intrastate securities under the intrastate exemption may not resell them to nonresidents.
C)During the period of sale and for at least nine months after the period of sale,buyers of intrastate securities under the intrastate exemption may not resell them to nonresidents.
D)During the period of sale and for at least nine months after the period of sale,buyers of intrastate securities under the intrastate exemption may not resell them to nonresidents.
E)During the period of sale and for at least nine months after the period of sale,buyers of intrastate securities under the intrastate exemption may not resell them to nonresidents.

Question 3

What is a proxy solicitation and how is it regulated by the SEC?

Accepted Answer

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Question 4

Which of the following statements is false about marketing securities on the internet?

Accepted Answer

A)The web permits companies to sell securities in an online initial public offering
IPO),Some websites allow customers to buy and sell securities online.The SEC has issued cease-and-desist orders against companies that illegally offered free stock on their websites because they had not registered their stocks with the SEC.The SEC maintains a database to help investors access information about IPOs.SEC regulations apply to online advertising and securities transactions.
B)The web permits companies to sell securities in an online initial public offering IPO),Some websites allow customers to buy and sell securities online.The SEC has issued cease-and-desist orders against companies that illegally offered free stock on their websites because they had not registered their stocks with the SEC.The SEC maintains a database to help investors access information about IPOs.SEC regulations apply to online advertising and securities transactions.
C)The web permits companies to sell securities in an online initial public offering IPO),Some websites allow customers to buy and sell securities online.The SEC has issued cease-and-desist orders against companies that illegally offered free stock on their websites because they had not registered their stocks with the SEC.The SEC maintains a database to help investors access information about IPOs.SEC regulations apply to online advertising and securities transactions.
D)The web permits companies to sell securities in an online initial public offering IPO),Some websites allow customers to buy and sell securities online.The SEC has issued cease-and-desist orders against companies that illegally offered free stock on their websites because they had not registered their stocks with the SEC.The SEC maintains a database to help investors access information about IPOs.SEC regulations apply to online advertising and securities transactions.
E)The web permits companies to sell securities in an online initial public offering IPO),Some websites allow customers to buy and sell securities online.The SEC has issued cease-and-desist orders against companies that illegally offered free stock on their websites because they had not registered their stocks with the SEC.The SEC maintains a database to help investors access information about IPOs.SEC regulations apply to online advertising and securities transactions.

Question 5

Describe what a registration statement filed with the SEC generally contains.

Accepted Answer

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Question 6

Provide the Howey three-part test for determining if a security exists.

Accepted Answer

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Question 7

ABC Company,a designer of computer software,had a number of new products ready to launch.Sean,a seller of office supplies to ABC Company,was talking with Yumi,the president of the company,regarding a product order.Yumi was called away from her office for a few minutes,and Sean,who liked to be curious,took the opportunity to go through the papers on her desk.Sean discovered a description of the new software products.He immediately bought lots of ABC Company stock and made a significant profit following the public announcement of the new software and the resulting increase in the price of ABC Company stock.Is there any theory on which Sean could be held liable for a securities violation,and,if so,what? Describe any such theory.

Accepted Answer

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Question 8

The concept of insider trading is based on the ________ theory of tort law.

Accepted Answer

A)In addition to being a theory of tort,misappropriation can establish liability for
insider trading.Misappropriation theory holds that if an individual wrongfully acquires misappropriates)and uses inside information for trading for her personal gain,she is liable for insider trading.Because she wrongfully acquires inside information,she is essentially stealing information to use for her benefit.
B)In addition to being a theory of tort,misappropriation can establish liability for insider trading.Misappropriation theory holds that if an individual wrongfully acquires misappropriates)and uses inside information for trading for her personal gain,she is liable for insider trading.Because she wrongfully acquires inside information,she is essentially stealing information to use for her benefit.
C)In addition to being a theory of tort,misappropriation can establish liability for insider trading.Misappropriation theory holds that if an individual wrongfully acquires misappropriates)and uses inside information for trading for her personal gain,she is liable for insider trading.Because she wrongfully acquires inside information,she is essentially stealing information to use for her benefit.
D)In addition to being a theory of tort,misappropriation can establish liability for insider trading.Misappropriation theory holds that if an individual wrongfully acquires misappropriates)and uses inside information for trading for her personal gain,she is liable for insider trading.Because she wrongfully acquires inside information,she is essentially stealing information to use for her benefit.
E)In addition to being a theory of tort,misappropriation can establish liability for insider trading.Misappropriation theory holds that if an individual wrongfully acquires misappropriates)and uses inside information for trading for her personal gain,she is liable for insider trading.Because she wrongfully acquires inside information,she is essentially stealing information to use for her benefit.

Question 9

Under the Private Securities Litigation Reform Act of 1995,publicly held issuers of publicly held securities cannot be held liable when actual corporate earnings fall short of forecasted earnings as long as ________.

Accepted Answer

A)The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for publicly held issuers who make financial forecasts as long as the forecasts are "accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement."
B)The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for publicly held issuers who make financial forecasts as long as the forecasts are "accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement."
C)The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for publicly held issuers who make financial forecasts as long as the forecasts are "accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement."
D)The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for publicly held issuers who make financial forecasts as long as the forecasts are "accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement."
E)The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for publicly held issuers who make financial forecasts as long as the forecasts are "accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement."

Question 10

DotCom,Inc. ,told an investor that it had hired an investment firm to take the company public.However,DotCom had not in fact hired an investment firm and instead went bankrupt a year after the investor's purchase of significant shares.When the investor sues,DotCom claims that its prospectus includes the cautionary statements required by law,and thus cannot be held liable under the safe harbor provision of the Private Securities Litigation Reform Act.Would DotCom likely be held liable for the investor's loss?

Accepted Answer

A)At least one Court of Appeals has found that the safe harbor provision of the Private Securities Litigation Reform Act does not protect issuers when they make statements about the past or present,only the future.The court said that "it would be perverse indeed if an offeror could knowingly misrepresent historical facts but at the same time disclaim those misrepresented facts with cautionary language.
B)At least one Court of Appeals has found that the safe harbor provision of the Private Securities Litigation Reform Act does not protect issuers when they make statements about the past or present,only the future.The court said that "it would be perverse indeed if an offeror could knowingly misrepresent historical facts but at the same time disclaim those misrepresented facts with cautionary language.
C)At least one Court of Appeals has found that the safe harbor provision of the Private Securities Litigation Reform Act does not protect issuers when they make statements about the past or present,only the future.The court said that "it would be perverse indeed if an offeror could knowingly misrepresent historical facts but at the same time disclaim those misrepresented facts with cautionary language.
D)At least one Court of Appeals has found that the safe harbor provision of the Private Securities Litigation Reform Act does not protect issuers when they make statements about the past or present,only the future.The court said that "it would be perverse indeed if an offeror could knowingly misrepresent historical facts but at the same time disclaim those misrepresented facts with cautionary language.
E)At least one Court of Appeals has found that the safe harbor provision of the Private Securities Litigation Reform Act does not protect issuers when they make statements about the past or present,only the future.The court said that "it would be perverse indeed if an offeror could knowingly misrepresent historical facts but at the same time disclaim those misrepresented facts with cautionary language.

Quiz 41: Corporations: Securities and Investor Protection