Exam 21: Public and Private Offerings of Securities

According to the ________ doctrine,a court may determine that the inclusion of sufficient cautionary statements in a prospectus renders immaterial any misrepresentations and omissions contained therein.

The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board.

Which of the following was passed in 2010 and represents the most sweeping reform of U.S.financial markets since the Great Depression?

Assuming requirements are met,Rule 144A permits the resale of unregistered securities to qualified

The ________ is the disclosure document that an issuer of securities provides to each prospective purchaser under the 1933 Act.

Which of the following is true regarding uniform state regulation of securities?

Securities issued in a private placement are called ________ securities.

Assuming Rule 504 of Regulation D otherwise applies,it exempts offerings of up to _______ within a _______ period,and there may be _______ purchasers.

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

Which of the following may be sued under Section 11 of the Securities Act of 1933,which provides a remedy for a person who purchases a security pursuant to a misleading registration statement?

Which of the following was the result at the U.S.Supreme Court level in SEC v.Edwards,the case in the text involving sales of interests in pay telephones and the issue of whether a moneymaking scheme falls outside the definition of an investment contract because the promised rate of return is fixed rather than variable?

Fact Pattern 21-1 Joan enjoys cross stitching, and her husband, John, makes items using a woodworking process. They would like to make more items and open a small shop selling their handiwork, but they need additional capital with which to purchase raw materials, rent space, and advertise. Joan and John discuss the idea with their neighbors during the annual neighborhood picnic. A number of the neighbors say that they would like to invest in the project. This was entirely the initial idea of the neighbors, and Joan and John did not coerce them in any way. Joan and John, however, quickly draw up contracts that the neighbors signed providing that each investor would receive a certain interest in the shop. An attorney who lived in the neighborhood and specialized in family law asked if there were some laws that John and Joan needed to satisfy in order to seek investors. The neighborhood consensus, however, was that, so long as no one was misled and acted voluntarily, no problem existed. John and Joan proceeded with the shop and made a significant amount of profit. Disagreements arose among the neighbors, however, regarding exactly who was entitled to what. -Refer to Fact Pattern 21-1. Which of the following is true regarding the application of federal securities laws to John and Joan's situation?

Fact Pattern 21-2 Alice and her general partner, Greg, own several businesses. Alice is very interested in salt water aquariums and decides that a good venture for the partnership would be the development of a business to raise tropical fish. She plans to issue stock to start the fish business with the idea that she and Greg will purchase a majority of the stock. She has a friend, Tony, 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. Alice 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 should the partnership issue securities. -Refer to fact pattern 21-2. As far as Tony is concerned,which of the following is true?

Which of the following is true regarding whether the "common enterprise" element of the SEC v.W.J.Howey Co.case requires horizontal or vertical commonality?

The definition of "offer" under the Securities Act of 1933 is much broader than that in contract law.

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.

The term "security," for purposes of the Securities Act of 1933,is narrowly interpreted to include only such traditional investments as a stock or a bond.

Investors are prohibited under the Securities Act of 1933 from making highly speculative investments.

A _______ company is a development-stage company that has no specific business plan or has a business plan to acquire a currently unknown business.

Fact Pattern 21-3 Yolanda has filed the registration statement, in connection with a public offering of stock in ABC Corgi, 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 21-3. Which of the following are true regarding selling efforts to institutional investors during this period.