1 How many individuals head the Securities and Exchange Commission (SEC) Multiple Choice Five (5) Seven (7) Nine (9) Eleven (11) Twelve (12) 2 Which of the following laws created the Securities and Exchange Commission (SEC) Multiple Choice The Securities Exchange Regulation Act of 1929 The Securities Exchange Act of 1934 The Stock Market Restoration Act of 1932 The New York Stock Exchange Reformation Act of 1929 The Stock Brokers and Dealers Accountability Act of 1932 3 Which of the following are main functions purposes of the Sarbanes Oxley Act of 2002 Multiple Choice To issue cease and desist orders against violators of any federal securities law and to seek civil monetary penalties against any violators To create rules to require brokers and dealers to provide information concerning prices and risks associated with the penny stock market and to seek civil monetary penalties against those who violate such rules To permit the Securities and Exchange Commission (SEC) to exempt persons, securities, and transactions from securities regulations, thereby promoting private sector economic growth To increase corporate disclosure requirements and penalize violators of securities laws more heavily To decrease the regulatory authority of the SEC and to promote corporate self regulation in terms of the issuance and sale of corporate stock 4 Who is responsible for appointing the individuals that head the Securities and Exchange Commission (SEC) Multiple Choice The United States (U S ) Senate and House of Representatives The U S Supreme Court The Federal Reserve Board of Governors The SEC Board of Directors The U S president 5 A security is merely , but investors are buying it for what it represents Multiple Choice a piece of paper a bill of exchange commercial paper a negotiable instrument a non negotiable instrument 6 Who can assert the due diligence defense Multiple Choice Any defendant, except the issuer Only the issuer Only an officer of the corporation Only a member of the board of directors Any defendant, including the issuer 7 Underwriters are investment banking firms that purchase securities from the issuing corporation with the intent to sell them to brokerage houses, which then sell them to Multiple Choice the public third party beneficiaries securities dealers securities market intermediaries securities marketing intermediaries 8 In Trouble Bruno, an issuer of stock, may be in trouble He sold stock in a new health club venture before the effective date of registration He did so because he was in financial trouble involving other ventures of his and needed additional funds Bruno thought that the health club venture would be such a success that he would never get caught in regard to the stock sale Unfortunately, he was wrong The health club venture was going very poorly and investors were looking for some way to hold Bruno responsible Another problem Bruno has is that he inflated information regarding the prospects of the health club in the prospectus Investors bitterly complained Rick, a new lawyer, told Bruno that as far as he knew, the Securities and Exchange Commission (SEC) could fine Bruno under the Securities Act of 1933 but could not send him to jail Bruno told Rick that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture Bruno says that he plans to rely on the due diligence defense Bruno also asks Rick if he is aware of any other defenses Bruno says that he has never previously been in trouble with the SEC Is Rick correct in that the SEC would have no authority to send Bruno to jail Multiple Choice Rick is correct, since there are no criminal penalties for violating the Securities Act of 1933 Rick is incorrect because the SEC criminally prosecutes some violators, although the action would only be a misdemeanor Rick is correct in that the SEC itself would not send Bruno to jail, but the SEC could recommend criminal action to the United States Department of Justice resulting in imprisonment for up to five (5) years for a violation Rick is incorrect because the SEC criminally prosecutes some violators, and a violation of the act is considered a felony that could lead to a prison term of ten (10) years Rick is correct in that the SEC itself would not send Bruno to jail, but the SEC could recommend criminal action to the Federal Bureau of Investigation (FBI) resulting in imprisonment for up to ten (10) years for a violation 9 Which of the following occurs after an issuer files a registration statement and prospectus Multiple Choice The waiting period The resolution period The post filing denouement The expectancy interval The prospectus interval 10 Which of the following refers to the time period that begins when the Securities and Exchange Commission (SEC) declares the registration statement effective and ends when the issuer sells all securities offered or withdraws them from sale Multiple Choice The post effective period The acknowledgement period The post filing denouement The waiting period The expectancy interval 11 In Trouble Bruno, an issuer of stock, may be in trouble He sold stock in a new health club venture before the effective date of registration He did so because he was in financial trouble involving other ventures of his and needed additional funds Bruno thought that the health club venture would be such a success that he would never get caught in regard to the stock sale Unfortunately, he was wrong The health club venture was going very poorly and investors were looking for some way to hold Bruno responsible Another problem Bruno has is that he inflated information regarding the prospects of the health club in the prospectus Investors bitterly complained Rick, a new lawyer, told Bruno that as far as he knew, the Securities and Exchange Commission (SEC) could fine Bruno under the Securities Act of 1933 but could not send him to jail Bruno told Rick that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture Bruno says that he plans to rely on the due diligence defense Bruno also asks Rick if he is aware of any other defenses Bruno says that he has never previously been in trouble with the SEC Which of the following, if any, may be defenses for Bruno Multiple Choice Except for the violation of selling securities before the effective registration date, Bruno could raise the defense that an omitted or false statement was immaterial to the sale of the security Except for the violation of selling securities before the effective registration date, Bruno could raise the defense that the plaintiff was aware of the omission or false statement when the security was purchased Except for the violation of selling securities before the effective registration date, Bruno could raise the defense that a plaintiff was aware of the omission or false statement when the security was purchased, and that any omitted or false statement was immaterial to the sale of the security For any alleged violations, Bruno could raise the specific filing rule No defenses are available to Bruno, since he had already been held liable by the SEC on one occasion 12 The prefiling period begins when an issuer starts to think about issuing securities and ends when the issuer files the registration statement and prospectus with the Multiple Choice Securities and Exchange Commission (SEC) Federal Trade Commission (FTC) New York Stock Exchange (NYSE) Internal Revenue Service (IRS) Interstate Commerce Commission (ICC) 13 Coffee shops Bernice wants to open a chain of coffee shops and begins by asking her friends in various states around the country to invest through the purchase of securities in the coffee shops Her friend Robbie says that he would like to invest but that she should be sure that she satisfies requirements of the Securities and Exchange Commission (SEC) He tells her that she has to provide information to the SEC involving a description of the securities, an explanation of how proceeds will be used, information regarding the management of the company, and other matters He tells her that she also has to provide a document to the SEC that will be provided as an advertising tool to potential investors who can rely on it to decide whether they should buy securities Bernice says that she does not want to do that She explains to Robbie that insofar as the coffee shop venture is concerned, she does not want to advertise, and she wants to offer securities only to a limited number of wealthy friends Particularly, she has in mind Scott who has a net worth of at least $3 million and Mary, a psychiatrist Mary recently filed bankruptcy because of some bad decisions involving an elaborate decoration of her office Although her income for the past couple of years has been in the range of $80,000, business is improving based on her recent involvement with a number of patients suffering anxiety based upon a fear of alien invasion Considering only the information available, which of the following is a term that would describe Scott as an investor Multiple Choice Approved Sophisticated Accredited Unapproved Unaccredited 14 Presidential Profits Linda was president of a publicly traded tractor company, Tough Tractors Linda became aware that stock in her company would likely increase significantly in value because her company had a contract to purchase the assets of Rough Tractors The boards of both companies wanted the information kept confidential until the purchase was complete and a news release was made Before the news was made public, Linda immediately purchased a significant number of shares in Tough Tractors Linda also told her friend Frank about the contract to purchase assets Frank, who knew that the information was not public, told his brother, George Frank and George purchased a number of shares of stock in Tough Tractors prior to any public announcement of the sale After the public announcement was made and the purchase of assets went through, Linda, George and Frank, all sold their shares in Tough Tractors and made a significant profit Which of the following describes Frank in providing information about the asset sale to George Multiple Choice A tipper A provider An assignor A tippee A delegator 15 Who is liable for the profits of her transactions if she knew or should have known that the material information was not public Multiple Choice A tipster A profiteer A racketeer A saboteur A tippee 16 Which of the following are profits are made by a statutory insider from the sale of company stock within any six month period Multiple Choice Short swing Red herring Stock shorting Prospective Prospectus 17 Presidential Profits Linda was president of a publicly traded tractor company, Tough Tractors Linda became aware that stock in her company would likely increase significantly in value because her company had a contract to purchase the assets of Rough Tractors The boards of both companies wanted the information kept confidential until the purchase was complete and a news release was made Before the news was made public, Linda immediately purchased a significant number of shares in Tough Tractors Linda also told her friend Frank about the contract to purchase assets Frank, who knew that the information was not public, told his brother, George Frank and George purchased a number of shares of stock in Tough Tractors prior to any public announcement of the sale After the public announcement was made and the purchase of assets went through, Linda, George and Frank, all sold their shares in Tough Tractors and made a significant profit In which of the following prohibited practices was Linda engaged by purchasing the shares after she found out about the merger Multiple Choice Insider trading Embezzlement Grafting Receipt of bribery Solicitation of bribery 18 Which of the following was the result on appeal in Securities and Exchange Commission v Texas Gulf Sulphur Co, the case in the textbook in which it was alleged that corporate employees possessed inside information involving the likelihood of a major mineral find precluding them from trading in their company's stock Multiple Choice That the defendants could not be held liable because they were not executives of the company That the defendants could not be held liable because company policy precluded them from disclosing the information at issue to the public That the defendants could not be held liable because a significant mineral discovery was not sufficiently certain to require disclosure to the public That the defendants could be held liable because of their status as insiders, regardless of whether the information would be deemed material That the defendants could be held liable because they failed to reveal material information to the public 19 The Investment Company Act of 1940 excludes several institutions in its definition of an investment company Which of the following institutions is not excluded Multiple Choice A savings and loan A bank A business engaged primarily in the business of trading in securities A finance company An insurance company 20 Which of the following regulate(s) the offering and sale of intrastate securities Multiple Choice The Intrastate Commerce Code (ICC) The Uniform Commerce Code (UCC) Blue Sky laws Blue Moon laws The Restatement (Second) of Securities Law

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 03, 2024

1.How many individuals head the Securities and Exchange Commission (SEC)? Multiple Choice Five (5) Seven (7) Nine (9) Eleven (11) Twelve (12) 2.Which of the

1.How many individuals head the Securities and Exchange Commission (SEC)?

Multiple Choice

Five (5)
Seven (7)
Nine (9)
Eleven (11)
Twelve (12)

2.Which of the following laws created the Securities and Exchange Commission (SEC)?

Multiple Choice

The Securities Exchange Regulation Act of 1929
The Securities Exchange Act of 1934
The Stock Market Restoration Act of 1932
The New York Stock Exchange Reformation Act of 1929
The Stock Brokers and Dealers Accountability Act of 1932

3.Which of the following are main functions/purposes of the Sarbanes-Oxley Act of 2002?

Multiple Choice

To issue cease-and-desist orders against violators of any federal securities law and to seek civil monetary penalties against any violators
To create rules to require brokers and dealers to provide information concerning prices and risks associated with the penny-stock market and to seek civil monetary penalties against those who violate such rules
To permit the Securities and Exchange Commission (SEC) to exempt persons, securities, and transactions from securities regulations, thereby promoting private-sector economic growth
To increase corporate disclosure requirements and penalize violators of securities laws more heavily
To decrease the regulatory authority of the SEC and to promote corporate self-regulation in terms of the issuance and sale of corporate stock

4.Who is responsible for appointing the individuals that head the Securities and Exchange Commission (SEC)?

Multiple Choice

The United States (U.S.) Senate and House of Representatives
The U.S. Supreme Court
The Federal Reserve Board of Governors
The SEC Board of Directors
The U.S. president

5.A security is merely _____, but investors are buying it for what it represents.

Multiple Choice

a piece of paper
a bill of exchange
commercial paper
a negotiable instrument
a non-negotiable instrument

6.Who can assert the due diligence defense?

Multiple Choice

Any defendant, except the issuer
Only the issuer
Only an officer of the corporation
Only a member of the board of directors
Any defendant, including the issuer

7.Underwriters are investment banking firms that purchase securities from the issuing corporation with the intent to sell them to brokerage houses, which then sell them to _____.

Multiple Choice

the public
third party beneficiaries
securities dealers
securities market intermediaries
securities marketing intermediaries

8.In Trouble. Bruno, an issuer of stock, may be in trouble. He sold stock in a new health club venture before the effective date of registration. He did so because he was in financial trouble involving other ventures of his and needed additional funds. Bruno thought that the health club venture would be such a success that he would never get caught in regard to the stock sale. Unfortunately, he was wrong. The health club venture was going very poorly and investors were looking for some way to hold Bruno responsible. Another problem Bruno has is that he inflated information regarding the prospects of the health club in the prospectus. Investors bitterly complained. Rick, a new lawyer, told Bruno that as far as he knew, the Securities and Exchange Commission (SEC) could fine Bruno under the Securities Act of 1933 but could not send him to jail. Bruno told Rick that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture. Bruno says that he plans to rely on the due diligence defense. Bruno also asks Rick if he is aware of any other defenses. Bruno says that he has never previously been in trouble with the SEC. Is Rick correct in that the SEC would have no authority to send Bruno to jail?

Multiple Choice

Rick is correct, since there are no criminal penalties for violating the Securities Act of 1933.
Rick is incorrect because the SEC criminally prosecutes some violators, although the action would only be a misdemeanor.
Rick is correct in that the SEC itself would not send Bruno to jail, but the SEC could recommend criminal action to the United States Department of Justice resulting in imprisonment for up to five (5) years for a violation.
Rick is incorrect because the SEC criminally prosecutes some violators, and a violation of the act is considered a felony that could lead to a prison term of ten (10) years.
Rick is correct in that the SEC itself would not send Bruno to jail, but the SEC could recommend criminal action to the Federal Bureau of Investigation (FBI) resulting in imprisonment for up to ten (10) years for a violation.

9.Which of the following occurs after an issuer files a registration statement and prospectus?

Multiple Choice

The waiting period
The resolution period
The post-filing denouement
The expectancy interval
The prospectus interval

10.Which of the following refers to the time period that begins when the Securities and Exchange Commission (SEC) declares the registration statement effective and ends when the issuer sells all securities offered or withdraws them from sale?

Multiple Choice

The post-effective period
The acknowledgement period
The post-filing denouement
The waiting period
The expectancy interval

11.In Trouble. Bruno, an issuer of stock, may be in trouble. He sold stock in a new health club venture before the effective date of registration. He did so because he was in financial trouble involving other ventures of his and needed additional funds. Bruno thought that the health club venture would be such a success that he would never get caught in regard to the stock sale. Unfortunately, he was wrong. The health club venture was going very poorly and investors were looking for some way to hold Bruno responsible. Another problem Bruno has is that he inflated information regarding the prospects of the health club in the prospectus. Investors bitterly complained. Rick, a new lawyer, told Bruno that as far as he knew, the Securities and Exchange Commission (SEC) could fine Bruno under the Securities Act of 1933 but could not send him to jail. Bruno told Rick that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture. Bruno says that he plans to rely on the due diligence defense. Bruno also asks Rick if he is aware of any other defenses. Bruno says that he has never previously been in trouble with the SEC. Which of the following, if any, may be defenses for Bruno?

Multiple Choice

Except for the violation of selling securities before the effective registration date, Bruno could raise the defense that an omitted or false statement was immaterial to the sale of the security.
Except for the violation of selling securities before the effective registration date, Bruno could raise the defense that the plaintiff was aware of the omission or false statement when the security was purchased.
Except for the violation of selling securities before the effective registration date, Bruno could raise the defense that a plaintiff was aware of the omission or false statement when the security was purchased, and that any omitted or false statement was immaterial to the sale of the security.
For any alleged violations, Bruno could raise the specific filing rule.
No defenses are available to Bruno, since he had already been held liable by the SEC on one occasion.

12.The prefiling period begins when an issuer starts to think about issuing securities and ends when the issuer files the registration statement and prospectus with the _____.

Multiple Choice

Securities and Exchange Commission (SEC)
Federal Trade Commission (FTC)
New York Stock Exchange (NYSE)
Internal Revenue Service (IRS)
Interstate Commerce Commission (ICC)

13.Coffee shops. Bernice wants to open a chain of coffee shops and begins by asking her friends in various states around the country to invest through the purchase of securities in the coffee shops. Her friend Robbie says that he would like to invest but that she should be sure that she satisfies requirements of the Securities and Exchange Commission (SEC). He tells her that she has to provide information to the SEC involving a description of the securities, an explanation of how proceeds will be used, information regarding the management of the company, and other matters. He tells her that she also has to provide a document to the SEC that will be provided as an advertising tool to potential investors who can rely on it to decide whether they should buy securities. Bernice says that she does not want to do that. She explains to Robbie that insofar as the coffee shop venture is concerned, she does not want to advertise, and she wants to offer securities only to a limited number of wealthy friends. Particularly, she has in mind Scott who has a net worth of at least $3 million and Mary, a psychiatrist. Mary recently filed bankruptcy because of some bad decisions involving an elaborate decoration of her office. Although her income for the past couple of years has been in the range of $80,000, business is improving based on her recent involvement with a number of patients suffering anxiety based upon a fear of alien invasion. Considering only the information available, which of the following is a term that would describe Scott as an investor?

Multiple Choice

Approved
Sophisticated
Accredited
Unapproved
Unaccredited

14.Presidential Profits. Linda was president of a publicly traded tractor company, Tough Tractors. Linda became aware that stock in her company would likely increase significantly in value because her company had a contract to purchase the assets of Rough Tractors. The boards of both companies wanted the information kept confidential until the purchase was complete and a news release was made. Before the news was made public, Linda immediately purchased a significant number of shares in Tough Tractors. Linda also told her friend Frank about the contract to purchase assets. Frank, who knew that the information was not public, told his brother, George. Frank and George purchased a number of shares of stock in Tough Tractors prior to any public announcement of the sale. After the public announcement was made and the purchase of assets went through, Linda, George and Frank, all sold their shares in Tough Tractors and made a significant profit. Which of the following describes Frank in providing information about the asset sale to George?

Multiple Choice

A tipper
A provider
An assignor
A tippee
A delegator

15.Who is liable for the profits of her transactions if she knew or should have known that the material information was not public?

Multiple Choice

A tipster
A profiteer
A racketeer
A saboteur
A tippee

16.Which of the following are profits are made by a statutory insider from the sale of company stock within any six-month period?

Multiple Choice

Short-swing
Red-herring
Stock-shorting
Prospective
Prospectus

17.Presidential Profits. Linda was president of a publicly traded tractor company, Tough Tractors. Linda became aware that stock in her company would likely increase significantly in value because her company had a contract to purchase the assets of Rough Tractors. The boards of both companies wanted the information kept confidential until the purchase was complete and a news release was made. Before the news was made public, Linda immediately purchased a significant number of shares in Tough Tractors. Linda also told her friend Frank about the contract to purchase assets. Frank, who knew that the information was not public, told his brother, George. Frank and George purchased a number of shares of stock in Tough Tractors prior to any public announcement of the sale. After the public announcement was made and the purchase of assets went through, Linda, George and Frank, all sold their shares in Tough Tractors and made a significant profit. In which of the following prohibited practices was Linda engaged by purchasing the shares after she found out about the merger?

Multiple Choice

Insider trading
Embezzlement
Grafting
Receipt of bribery
Solicitation of bribery

18.Which of the following was the result on appeal inSecurities and Exchange Commission v. Texas Gulf Sulphur Co,the case in the textbook in which it was alleged that corporate employees possessed inside information involving the likelihood of a major mineral find precluding them from trading in their company's stock?

Multiple Choice

That the defendants could not be held liable because they were not executives of the company
That the defendants could not be held liable because company policy precluded them from disclosing the information at issue to the public
That the defendants could not be held liable because a significant mineral discovery was not sufficiently certain to require disclosure to the public
That the defendants could be held liable because of their status as insiders, regardless of whether the information would be deemed material
That the defendants could be held liable because they failed to reveal material information to the public

19.The Investment Company Act of 1940 excludes several institutions in its definition of an investment company. Which of the following institutions is not excluded?

Multiple Choice