Exam 22: Public and Private Offerings of Securities

A reference to ________ addresses a practice whereby underwriters would distribute initial pubic offering shares to a corporate executive in exchange for the investment banking business of the executive's corporation.

Which of the following activities are not regulated by the 1934 Act?

A(n)________ is defined under the 1933 Act as any person who has purchased from an issuer with a view to,or offers or sells for an issuer in connection with,the distribution of any security.

Fact pattern 22-1 Rodney is unhappy because stock he recently purchased pursuant to an initial public offering has lost value.He would like to get his money back.While he has not real basis for believing that the issuance of stock was illegal,he believes that if he sues,his money will be returned because that would be less expensive than litigation.He decides that his best bet is to sue the issuer in federal court under Section 12 of the 1933 Act alleging that the securities he purchased were offered without an effective registration statement and by mean dos a noncomplying prospectus.He consults,Benny,a recent law school graduate who just passed the bar,regarding his plan.Benny really needs to make some money and is considering filing a lawsuit for Rodney.Benny figures that if the plan does not work,he can always just drop the lawsuit. -Refer to fact pattern 22-1.What concerns should Rodney have regarding expenses of the litigation?

The Sarbanes-Oxley Act does not address the provision of nonaudit services to audit clients of an accounting firm.

Which of the following is not true regarding The Private Securities Litigation Reform Act?

Fact pattern 22-3 Yolanda has filed the registration statement,in connection with a public offering of stock in Corgi Rocks Company,a company dedicated to the production of clothing and toys highlighting the highly prized Welsh Corgi breed of dog.The registration statement is not yet effective.Yolanda would like to move forward with promoting the company as much as possible.She asks for advice regarding activities in which she could legally participate.She is particularly interested in making presentations to large institutional investors. -Refer to fact pattern 22-3.Which of the following is true regarding Yolanda's situation?

Any transaction that involves an investment of money in a common enterprise with profits to come solely from the efforts of others is deemed to be a(n)________ and thus a security.

________,under certain conditions,may be able to avoid joint and several liability for a misleading registration statement under Section 11 of the Securities Act of 1933.

Fact pattern 22-3 Yolanda has filed the registration statement,in connection with a public offering of stock in Corgi Rocks Company,a company dedicated to the production of clothing and toys highlighting the highly prized Welsh Corgi breed of dog.The registration statement is not yet effective.Yolanda would like to move forward with promoting the company as much as possible.She asks for advice regarding activities in which she could legally participate.She is particularly interested in making presentations to large institutional investors. -Refer to fact pattern 22-3.Which of the following are true regarding selling efforts to institutional investors during this period.

A ________ offering of securities is a subsequent offering by a person other than the issuer.

The bespeaks caution doctrine has been adopted by all courts.

Which of the following is not considered a traditional shelf offering?

Investors are prohibited under federal securities law from making highly speculative investments.

Which of the following is false regarding the Sarbanes-Oxley Act?

Fact pattern 22-2 Alice,along with her general partner Greg,owns several businesses.She is very interested in salt water aquariums and decides that a good venture for the partnership is the development of a business to raise tropical fish for that environment.She plans to issue stock to start a business raising fish for that environment with the idea that she and Greg will purchase a majority of the stock.She has a friend,Tony,who is a plastic surgeon with a good practice who has expressed interest in the venture because he believes that the presence of fish in waiting rooms reduces anxiety and encourages patients to spend more money.She does not want to go to the expense and trouble of a formal registration under the 1933 Act and seeks advice on how to avoid that process. -Refer to fact pattern 22-2.As far as Greg is concerned,which of the following is true?

The SEC now requires that all documents filed under the Securities Act of 1933 be written in plain English.

Explain the scope and purpose of Section 11 of the Securities Act of 1933 regarding misleading registration statements.What is the basis for liability regarding the state of mind required?

Rule 144A permits the resale of unregistered securities to qualified

Section 11 of Securities Act of 1933,which provides a remedy for a person who purchases a security pursuant to a misleading registration statement,allows class action suits.