Question 1

Country Golf Club, Inc., wants to issue stock of $1 million in a single offer?ing. Country does not have to provide any investors with any material in?forma?tion about itself, its business, or its securities if

Accepted Answer

According to Regulation D of the Securities Act, if all investors are accredited, the issuer is exempt from providing any material information about itself, its business or its securities.

Question 2

Instant Retail Company has assets of less than $10 million and fewer than five hun?dred shareholders. Jiffy Outlets, Inc., has assets of more than $10 mil?lion and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to

Accepted Answer

The answer of Instant Retail Company has assets of less...

Question 3

Celfone Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain

Accepted Answer

A registration statement with the SEC must include a description of the securities being offered for sale. Options A, C, and D are not required to be included in the registration statement.

Question 4

Start-Up Enterprises, Inc., completes its registration process and be?gins ad?vertising the availability of its new issue of securi?ties. Start-Up places a tomb?stone ad in the financial papers. This ad tells pro?spective investors

Accepted Answer

The answer of Start-Up Enterprises, Inc., completes its registration process...

Question 5

Hobie, the chief executive officer of Ideal Gamers, Inc. (IGI), inten?tionally understates the amount of IGI's debts in information provided to investors as part of an issue of IGI stock. Jack buys the stock and suffers a loss. Hobie may be subject to

Accepted Answer

Hobie may be subject to both government prosecution and Jack's suit for intentionally understating the amount of debts in information provided to investors. This violates securities laws and misleads investors, resulting in financial loss.

Question 6

To raise $12 million to expand operations, Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. Star plans to notify the SEC of sales. Under the Securities Act of 1933, this issue may qualify as an "exempt" transaction

Accepted Answer

Under the Securities Act of 1933, an offering of securities may qualify as an exempt transaction if certain conditions are met. One of these conditions is that all investors, whether accredited or unaccredited, must be given certain material information about the offering. Therefore, in order for Star Corporation's offering to qualify as exempt, it must provide this material information to all investors.

Question 7

Delta Corporation is a noninvestment company that wants to is?sue stock of $3 million in a twelve-month period. Delta, with less than $20 mil?lion in annual sales, qualifies as a small business issuer. Before Delta sells the stock, it must provide investors with

Accepted Answer

As a small business issuer, Delta Corporation is required to provide investors with an offering circular before selling the stock. An offering circular contains information about the company, the offering, and the risks involved in investing in the securities being offered. Thus, choice A is the best answer.

Question 8

Readmore Bookstore 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 Readmore Bookstore Corporation files a registration statement...

Question 9

Bild-It-Rite Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that Bild-It-Rite must

Accepted Answer

Bild-It-Rite Corporation must file a registration statement with the SEC, as securities that do not qualify for an exemption from registration must be registered with the SEC before they can be offered or sold to the public.

Question 10

RingTone Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933, a security is

Accepted Answer

According to the Securities Act of 1933, a security includes "any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement… or investment contract." This broad definition encompasses almost any stake in the ownership or debt of a company, including stocks, bonds, and other forms of securities.

Question 11

Nouveau Riche Corporation, and its officers, directors, and sharehold?ers, buy and sell securities. SEC Rule 10b-5 applies to

Accepted Answer

SEC Rule 10b-5 applies to the purchase or sale of any security, regardless of whether it involves a financial corporation, officer, director, or shareholder.

Question 12

GR8 Stuf Company 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. GR8 Stuf is charged with violating the Securities Act of 1933. GR8 Stuf's best defense is

Accepted Answer

The best defense for GR8 Stuf Company is that the untrue statements were not material. The materiality of a misrepresentation is determined by whether a reasonable investor would consider it important in making their investment decision. If the misstatements are immaterial, they do not affect the investors' decisions and do not constitute a violation of the Securities Act of 1933. The fact that the investors were not aware of the misrepresentations, the issuer's belief in the truthfulness of the misstatements, or the offering being made available to the general public are not valid defenses in this case.

Question 13

Flo-Thru Corporation is poised to issue securities that, under the Securities Act of 1933, are "exempt." This means that the securities can be sold

Accepted Answer

"Exempt" securities under the Securities Act of 1933 means that they are not required to be registered with the Securities and Exchange Commission (SEC) before they can be sold. Therefore, the correct answer is D – the securities can be sold without being registered. Choices A and B are not allowed under the Securities Act, as it prohibits material omissions or misrepresentations and insider trading. Choice C is not specific enough and is not relevant to the exemption status of the securities.

Question 14

Flite Airline Corporation is poised to issue securities in a transaction that, under the Securities Act of 1933, is "exempt." This enables Flite to

Accepted Answer

The exemption under the Securities Act of 1933 allows Flite to avoid the cost and complications of registration for issuing securities.

Question 15

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

Accepted Answer

Under the Securities Act of 1933, public companies like Frothy Beverage Corporation are required to disclose financial and other information about their securities. This requirement is designed to ensure that investors have access to accurate and transparent information about the company, which is important for making informed investment decisions. While contributions to stock exchanges, market surveillance, and proxy solicitation may be important activities for public companies, they are not specifically required by the Securities Act of 1933.

Question 16

New Discoveries Corporation, and its officers, directors, and share?holders, buy and sell securities. Section 10(b) of the Securities Ex?change Act of 1934 applies to

Accepted Answer

Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of any security. Therefore, both New Discoveries Corporation and its officers, directors, and shareholders buying and selling securities are subject to this provision.

Question 17

Mit-E Clean Corporation wants to make an offering of securities to the pub?lic. This offering is not exempt from registration under the Se?curities Act of 1933. Before the firm sells its securities, it must provide in?vestors with

Accepted Answer

The Securities Act of 1933 requires companies to provide investors with a prospectus when making an offering of securities that is not exempt from registration. A prospectus is a document that provides information about the company's business, financials, risks, and management, among other things. It is intended to help investors make informed investment decisions. A forward-looking financial forecast would not be required, as it is not necessary or advisable to make projections of future performance. An investment contract is a type of security, not a document that provides information to investors. A road show is a marketing event designed to promote the offering and may be held in conjunction with the issuance of a prospectus, but it is not a substitute for the prospectus itself.

Question 18

As part of a stock offering for Equine Corporation, Flem, Equine's accountant, intention?ally misrepresents material facts in the pro?spectus. Gigi buys the stock unaware of the misrepresentation and suf?fers a loss. Flem may be subject to

Accepted Answer

Flem may be subject to both a fine and imprisonment for intentionally misrepresenting material facts in the prospectus. Additionally, Gigi may sue for damages as a result of her loss.

Question 19

Cotton Products Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Cotton's disclosure of financial and other significant information concerning its securities is designed to

Accepted Answer

The Securities Act of 1933 is a federal law that requires public companies to disclose financial and other significant information concerning their securities to protect investors. This disclosure ensures that investors have sufficient information to make informed decisions about whether to buy, sell, or hold securities in a particular company. Thus, option C is the best choice. Option A may be true to some extent, but it is not the primary purpose of the Securities Act of 1933. Option B and D do not accurately describe the purpose of the Act.

Question 20

Lex, a salesperson for Macro Corporation, learns that Macro will in?crease the dividend it pays to shareholders. Lex buys 1,000 shares of Macro stock. When the price increases, Lex sells his shares for a profit. Lex would not be liable for insider trading if the information about the dividend was

Accepted Answer

The answer of Lex, a salesperson for Macro Corporation, learns...

Quiz 41: Corporationssecurities Law Corporate Governance