Fred is the chief financial officer for Tellcom Industries. Tellcom is preparing a registration statement to be used in conjunction with a new stock offering. To make the offering attractive to investors, Fred provides inflated financial information about the company in the registration statement. Samantha purchases the stock, and, when she finds out about the fraudulent information, she sues. To successfully sue Tellcom and Fred, Samantha must prove:

that she relied on the registration statement, and that there was a material misstatement or omission.

that she read the registration statement, that there was a material misstatement or omission, and that she lost money.

only that there was a material misstatement or omission and that she lost money.

that she relied on the registration statement, that there was a material misstatement or omission, and that she lost money.

Assessment question

First Federal Savings and Loan sells short-term notes to its customers, the federal government issues a new series of savings bonds, Fennington Corp. issues new stock in its company, and Liberty Insurance Company sells annuity contracts. Which of these offerings must be registered with the Securities and Exchange Commission (SEC)?

The short-term notes sold by First Federal Savings and Loan and the stock issued by Fennington Corp. must be registered with the SEC.

The short-term notes sold by First Federal Savings and Loan, the savings bonds issued by the federal government, and the annuity contracts sold by Liberty Insurance Company must be registered with the SEC.

Only the stock offered by Fennington Corp must be registered with the SEC.

All of these offerings must be registered with the SEC.

Assessment question

Isadora is the chairman of the board of directors of New Hampshire Sales Cooperative (NHS), a corporation with its principal place of business in Concord, New Hampshire. All NHS shareholders are residents of New Hampshire. NHS needs to raise funds to expand its warehouses, so it offers a new stock offering. The offering is only available to New Hampshire residents. Is NHS required to register its new stock offering with the Securities and Exchange Commission (SEC)?

No, registration is not required because it is an interstate offering.

No, registration is not required because it is an intrastate offering.

Yes, registration is required because it is an interstate offering.

Yes, registration is required because it is an intrastate offering.

Assessment question

Penelope wants to open a chain of Yoga studios but does not have the funds to do so. Penelope has not had any luck attracting large investors, so her friend suggests she try crowdfunding. Crowdfunding is a cooperative activity in which people network and pool funds and other resources via the Internet to assist a cause or invest in a venture. Penelope may raise money for her Yoga studios venture by crowdfunding as long as:

she does not prohibit the resale of the security.

she sells the funds on at least seven online sites.

she provides detailed offering information in all outside advertising.

sales of securities are no more than $1 million in any 12-month period.

Assessment question

Ariana owns fifty shares of stock in Ban Ray Enterprises. Ariana bought the stock when it was first issued, and the offering was required to be registered with the Securities and Exchange Commission (SEC) because the securities were traded on the New York Stock Exchange. Ariana offers to sell her fifty shares to Edwardo. Does the sale between Ariana and Edwardo have to be registered with the SEC?

No, it is not required because the securities are traded on the New York Stock Exchange.

Yes, it must be registered because the original offering was required to be registered with the SEC.

No, the average investor who resells shares of stock does not have to file a registration statement with the SEC.

Yes, it must be registered because the securities are traded on the New York Stock Exchange.