These questions deal with federal regulation of corporations and related state law issues and Blue Sky Laws. Practical application of the law and regulations to common situations encountered by accountants. Topics include SEC and IRS regulation of accountants practicing before those agencies, liability under Federal securities law and regulations, and Federal securities law and tax law issues of corporate reorganizations. Please only respond if you have first hand experience or knowledge of the above stated topic.

Multiple Choice Identify the choice that best completes the statement or answers the question. 1. ABC Corporation is a public company. ABC Corporation's shares are publicly traded. Under the Securities Act of 1933, ABC Corporation is required to a. b. c. d. 2. Under the Securities Act of 1933, a security includes a. b. c. d. 3. almost any stake in the ownership of a corporation. all investments that are guaranteed to make a profit. only such common forms of debt and equity as bonds and stocks. whatever a company represents to the public as a security. DEF Corporation completes its required registration process for a new issue. DEF Corporation then begins advertising that the new issue of securities is available. A tombstone ad is placed in the financial newspapers by DEF Corporation. The purpose of this advertisement is to tell prospective investors a. b. c. d. 4. contribute a certain amount per year to the operations of national stock exchanges. disclose financial and other information about its securities. engage in preventive market surveillance to deter undesirable practices. solicit proxies for voting. about investment alternatives for investors. about the corporation. where the securities may be purchased. where the prospectus may be obtained. Assume GHI Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain which of the following? a. b. a copy of the online and print prospectuses that will be provided to investors. a description of the securities that c. d. e. 5. are being offered for sale. a record of all pre-registration sales in the securities. a sample of advertising that will be used in attracting investors in GHI Corporation. None of the above. JKL Corporation is prepared to issue securities that are exempt under the Securities Act of 1933. Therefore, the securities can be sold a. b. c. d. without liability for any material omission or misrepresentation. on the basis of nonpublic information. within any six-month period but only by certain insiders. without being registered. 6. MNO Corporation wants to make an initial public offering of securities. MNO Corporation believes that the IPO qualifies for an exemption under Regulation A from the full registration requirements of the federal Securities Act of 1933. If MNO Corporation is exempt from the federal registration requirement, then MNO Corporation is a. b. c. d. 7. automatically exempt from any state registration requirement. not subject to any state securities laws. not necessarily exempt under a state registration requirement. automatically subject to all state registration requirements. In order to raise $12 million to expand operations, PQR Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. PQR plans to notify the SEC of sales. Under the Securities Act of 1933, this issue a. b. may qualify as an \"exempt\" transaction as is without anything additional needing to be done. may qualify as an \"exempt\" transaction if all of the investors are also given certain material information. c. d. 8. STU Corporation wants to issue stock of $1 million in a single offering. Under what circumstance must STU Corporation must provide all investors with material information about itself, its business, and its securities? a. b. c. d. 9. If all investors are accredited. Under any circumstances. If any investors are accredited. If any investors are unaccredited. Kirk is the chief financial officer of VWX Corporation, a corporation required to file certain financial statements with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Kirk must personally a. b. c. d. 10. may qualify as an \"exempt\" transaction if the offering is also made available to the general public. cannot qualify as an \"exempt\" transaction as is. certify that the statements are accurate. delegate the responsibility for preparing the statements. deliver the statements to the appropriate SEC officer. prepare the statements. Kate promises high returns to Paul and other investors, who then agree to entrust their funds to Kate. Kate uses these funds to pay previous investors. This is an example of a. b. c. d. 11. a Ponzi scheme. a stock option. an accredited investor. none of the above. Which of the following statements is or are true? I. The Securities and Exchange Commission (SEC) interprets federal securities laws, but the SEC does not investigate violations. II. The definition of \"security\" in the Securities Act of 1933 does not include instruments and interests commonly known as securities. a. I only. b. II only. c. Both I and II are true. d. Neither I nor II is true. 12. Which of the following statements is or are true? I. In an initial public offering, before filing the registration statement, an issuer can sell or offer to sell the securities. II. Most private, small-business, noninvestment company offers of securities are not exempt from the registration requirements. a. b. c. d. 13. I only. II only. Both I and II are true. Neither I nor II is true. Which of the following statements is or are false? I. Securities that are exempt from the registration requirement cannot generally be resold without being registered. II. Selling securities after the effective date of the registration statement results in liability for gun jumping. a. b. c. d. 14. ZYX 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 a. b. c. d. 15. I only. II only. Both I and II are false. Neither I nor II is false. market professionals to explain to all investors. government regulators to disclose to the general public. sophisticated investors only. unsophisticated investors. WVU Corporation is a public company that is ready to issue securities that do not qualify for an exemption from registration. This means that WVU Corporation must a. b. c. file a registration statement with the SEC. issue the securities through an online registration site. only refrain from issuing the securities to unregistered investors. d. register the securities with a national stock exchange. 16. TSR Corporation wants to make an offering of securities to the public. This offering is not exempt from registration under the Securities Act of 1933. Before TSR Corporation sells its securities, the corporation must provide investors with which of the following? a. b. c. d. a forward-looking financial forecast. an investment contract. a prospectus. None of the above. 17. QPO Corporation completes its registration process and issues a free-writing prospectus. Among other things, a free-writing prospectus a. b. c. d. 18. NML Corporation is a noninvestment company. NML Corporation wants to issue stock of $3 million in a twelve-month period. NML Corporation, with less than $20 million in annual sales, qualifies as a small business issuer. Before NML Corporation sells the stock, NML Corporation must provide investors with a. b. c. d. 19. tells prospective investors about investing freely in the market. tells prospective investors how to write their checks to the corporation. generally must be filed with the SEC. none of the above. an offering circular. a notice of the issue. a red herring prospectus. a tombstone ad. KJI Corporation 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. KJI Corporation is charged with violating the Securities Act of 1933. KJI Corporation's best defense is that a. the investors were not aware of the misrepresentations. b. the issuer reasonably believed the misstatements were true. the offering was made available to the general public. the untrue statements were not material. c. d. 20. 21. The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to a. public companies. b. private investors. c. state regulators d. None of the above. Under the Securities Act of 1933, a security generally includes a. almost any stake in the ownership of a general partnership all investments in member managed limited liability companies. co-ownership of real estate of undeveloped real estate. none of the above. b. c. d. 22. Which of the following statements is or are true? I. The Securities and Exchange Commission creates regulations governing the purchase and sale of securities. II. The Securities and Exchange Commission can seek sanctions only against those who violate United States securities laws, not foreign securities laws. a. b. c. d. 23. I only. II only. Both I and II are true. Neither I nor II is true. Which of the following statements is or are true? I. A prospectus is a contract in which a person (1) invests (2) in a common enterprise (3) reasonably expecting profits. II. Once the registration statement has been filed, the issuer can, without restrictions, offer to sell securities. a. I only. b. II only. c. Both I and II are true. d. Neither I nor II is true. 24. Which of the following statements is or are true? I. To be considered material, a fact must be significant enough that it would likely affect an investor's decision to buy or sell a company's securities. II. It is always wrong to disclose material, nonpublic information about a company to a person who would not otherwise be privy to it. a. b. c. d. I only. II only. Both I and II are true. Neither I nor II is true. 25. Which of the following are securities that are exempt from Sec. 5 registration requirements? a. b. c. d. e. government securities. securities issued by banks. short term notes meeting certain requirements. insurance policies. all of the above. 26. Which of the following are considered advantages of \"going public?\" a. b. c. d. May increase ability of corporation to obtain loans. Increased public visibility of the corporation. Increased liquidity. All of the above. 27. Which of the following are considered disadvantages of \"going public?\" a. b. c. d. Corporation can no longer issue stock to employees. Corporation can no longer use stock as compensation of employees. Increase in administration and accounting costs. All of the above. 28. What is a corporation permitted to do in the Post-Effective Period? a. b. c. d. Only offer to sell the security but not close the sale. Sell, but not deliver the security. Use a preliminary prospectus. Sell and deliver the security