Question 1

A person engaged in the business of buying and selling securities for others' accounts is called a dealer.

Accepted Answer

A) True 
 B)False

Question 2

Credit rating agencies evaluated and rated billions in mortgage securities, and both the private sector and governments at all levels relied on these ratings.

Accepted Answer

A) True 
 B)False

Question 3

State laws require that securities be registered (or qualified) with authorities.

Accepted Answer

A)  state, not federal 
B)  federal, not state 
C)  both state and federal 
D)  neither state nor federal 
A)  state, not federal 
B)  federal, not state 
C)  both state and federal 
D)  neither state nor federal

Question 4

An exchange market is a securities market that provides a physical facility for the buying and selling of stocks and prescribes the number and qualifications of its broker-members. These brokers buy and sell stocks through the exchange's registered specialists, who are dealers on the floor of the exchange.

Accepted Answer

A) True 
 B)False

Question 5

Describe the criminal penalties under the Sarbanes-Oxley Act of 2002.

Accepted Answer

The criminal penalties under the Sarbane

Question 6

A negotiable instrument is a stock, a bond, or any other instrument of interest that represents an investment in a common enterprise with reasonable expectations of profits that are derived solely from the efforts of those other than the investor.

Accepted Answer

A) True 
 B)False

Question 7

What is Regulation Fair Disclosure? Explain the views of those favoring and opposing Regulation FD.

Accepted Answer

Regulation Fair Disclosure (FD) became e

Question 8

Which of the following is true of the Dodd-Frank Act with regard to regulating executive compensation?

Accepted Answer

A)  Shareholders were allowed a nonbinding vote on executive compensation, as directed by the Federal Reserve. 
B)  Company executives received lower compensation when firms sold mortgage-backed securities and derivatives. 
C)  Companies cannot take back compensation if it is based on inaccurate accounting statements. 
D)  Only independent directors of a company could sit on compensation committees of the board. 
A)  Shareholders were allowed a nonbinding vote on executive compensation, as directed by the Federal Reserve. 
B)  Company executives received lower compensation when firms sold mortgage-backed securities and derivatives. 
C)  Companies cannot take back compensation if it is based on inaccurate accounting statements. 
D)  Only independent directors of a company could sit on compensation committees of the board.

Question 9

The Howey test for defining a security is based on three elements or characteristics: a) a common enterprise; b) a reasonable expectation of profit; and c) profits derived exclusively from one's own efforts.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a characteristic of the Public Company Accounting Oversight Board?

Accepted Answer

A)  It regulates all firms providing financial services. 
B)  It is a six-member board with legislative and disciplinary power. 
C)  A majority of the board is dependent on publicly held accounting companies. 
D)  The board is funded by publicly held companies overseen by the Securities and Exchange Commission. 
A)  It regulates all firms providing financial services. 
B)  It is a six-member board with legislative and disciplinary power. 
C)  A majority of the board is dependent on publicly held accounting companies. 
D)  The board is funded by publicly held companies overseen by the Securities and Exchange Commission.

Question 11

During the post-effective period, the registration statement usually becomes effective days after it is filed.

Accepted Answer

A)  10 
B)  20 
C)  60 
D)  90 
A)  10 
B)  20 
C)  60 
D)  90

Question 12

Which of the following is true of registration of securities under the Securities Act of 1933?

Accepted Answer

A)  The act authorizes the Securities and Exchange Commission to decide whether or not a public offering of stock is meritorious and should be sold to the public. 
B)  The prospectus of a registration statement does not include pending lawsuits. 
C)  The registration statement provides the use to be made of the funds garnered by a public offering of stock and the risks involved for investors. 
D)  Part II of a registration statement is given to prospective buyers, but it is not open for public inspection at the Securities and Exchange Commission. 
A)  The act authorizes the Securities and Exchange Commission to decide whether or not a public offering of stock is meritorious and should be sold to the public. 
B)  The prospectus of a registration statement does not include pending lawsuits. 
C)  The registration statement provides the use to be made of the funds garnered by a public offering of stock and the risks involved for investors. 
D)  Part II of a registration statement is given to prospective buyers, but it is not open for public inspection at the Securities and Exchange Commission.

Question 13

If a payment is known to violate the FCPA, officers, directors, stockholders, employees, and U.S. agents of a corporation can be imprisoned for up to .

Accepted Answer

A)  6 months 
B)  1 year 
C)  5 years 
D)  7 years 
A)  6 months 
B)  1 year 
C)  5 years 
D)  7 years

Question 14

A tender offer is a public offer made by an individual or a corporation made directly to the shareholders of another corporation in an effort to acquire the targeted corporation at a specific price.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true of the Division of Market Regulation?

Accepted Answer

A)  Accountants, lawyers, financial officers, and underwriters all rely heavily on advice from this division. 
B)  This division reviews all registration statements, prospectuses, and quarterly and annual reports of corporations, as well as their proxy statements. 
C)  It can recommend to the full commission the suspension of an exchange for up to three years. 
D)  It seeks to discourage manipulation or fraud in the issuance, sale, or purchase of securities. 
A)  Accountants, lawyers, financial officers, and underwriters all rely heavily on advice from this division. 
B)  This division reviews all registration statements, prospectuses, and quarterly and annual reports of corporations, as well as their proxy statements. 
C)  It can recommend to the full commission the suspension of an exchange for up to three years. 
D)  It seeks to discourage manipulation or fraud in the issuance, sale, or purchase of securities.

Question 16

The regulates the trading in securities once they are issued.

Accepted Answer

A)  Trust Indenture Act of 1939 
B)  Securities Act of 1933 
C)  Securities Exchange Act of 1934 
D)  Investment Company Act of 1940 
A)  Trust Indenture Act of 1939 
B)  Securities Act of 1933 
C)  Securities Exchange Act of 1934 
D)  Investment Company Act of 1940

Question 17

The Private Securities Litigation Reform Act of 1995 .

Accepted Answer

A)  enables private investors to sue public corporations for securities violations 
B)  enables the Securities and Exchange Commission to sue private corporations for securities violations 
C)  provides a safe harbor from liability for companies that make statements to the public about future risk factors 
D)  provides payment of punitive damages and attorney fees to successful plaintiffs in cases of securities litigation 
A)  enables private investors to sue public corporations for securities violations 
B)  enables the Securities and Exchange Commission to sue private corporations for securities violations 
C)  provides a safe harbor from liability for companies that make statements to the public about future risk factors 
D)  provides payment of punitive damages and attorney fees to successful plaintiffs in cases of securities litigation

Question 18

The Public Utility Holding Company Act of 1935 requires that public utility and holding companies .

Accepted Answer

A)  set rates as low as possible without sacrificing a reasonable profit 
B)  register with the Securities and Exchange Commission and disclose information about their finances and operations 
C)  notify the Environmental Protection Agency before building new power facilities 
D)  elect board members at annual elections 
A)  set rates as low as possible without sacrificing a reasonable profit 
B)  register with the Securities and Exchange Commission and disclose information about their finances and operations 
C)  notify the Environmental Protection Agency before building new power facilities 
D)  elect board members at annual elections

Question 19

State securities laws are often referred to as laws.

Accepted Answer

A)  blue sky 
B)  dark water 
C)  open prairie 
D)  barbed wire 
A)  blue sky 
B)  dark water 
C)  open prairie 
D)  barbed wire

Question 20

The Market Reform Act of 1990 authorizes the Securities and Exchange Commission to regulate trading practices during .

Accepted Answer

A)  issuance of new stock by existing corporations 
B)  periods in which stock prices have failed to fluctuate significantly for two consecutive calendar quarters 
C)  periods of extreme market volatility 
D)  initial public offerings 
A)  issuance of new stock by existing corporations 
B)  periods in which stock prices have failed to fluctuate significantly for two consecutive calendar quarters 
C)  periods of extreme market volatility 
D)  initial public offerings

Exam 23: Rules Governing the Issuance and Trading of Securities

A person engaged in the business of buying and selling securities for others' accounts is called a dealer.

Credit rating agencies evaluated and rated billions in mortgage securities, and both the private sector and governments at all levels relied on these ratings.

State laws require that securities be registered (or qualified) with authorities.

Describe the criminal penalties under the Sarbanes-Oxley Act of 2002.

A negotiable instrument is a stock, a bond, or any other instrument of interest that represents an investment in a common enterprise with reasonable expectations of profits that are derived solely from the efforts of those other than the investor.

What is Regulation Fair Disclosure? Explain the views of those favoring and opposing Regulation FD.

Which of the following is true of the Dodd-Frank Act with regard to regulating executive compensation?

The Howey test for defining a security is based on three elements or characteristics: a) a common enterprise; b) a reasonable expectation of profit; and c) profits derived exclusively from one's own efforts.

Which of the following is a characteristic of the Public Company Accounting Oversight Board?

During the post-effective period, the registration statement usually becomes effective days after it is filed.

Which of the following is true of registration of securities under the Securities Act of 1933?

If a payment is known to violate the FCPA, officers, directors, stockholders, employees, and U.S. agents of a corporation can be imprisoned for up to .

A tender offer is a public offer made by an individual or a corporation made directly to the shareholders of another corporation in an effort to acquire the targeted corporation at a specific price.

Which of the following is true of the Division of Market Regulation?

The regulates the trading in securities once they are issued.

The Private Securities Litigation Reform Act of 1995 .

The Public Utility Holding Company Act of 1935 requires that public utility and holding companies .

State securities laws are often referred to as laws.

The Market Reform Act of 1990 authorizes the Securities and Exchange Commission to regulate trading practices during .

Critical Thinking and Legal Reasoning

Introduction to Law and the Legal Environment of Business

The American Legal System

Alternative Tools of Dispute Resolution

Constitutional Principles

White-Collar Crime and the Business Community

Ethics, Social Responsibility, and the Business Manager

The International Legal Environment of Business

The Law of Contracts and Sales I

The Law of Contracts and Sales Ii

The Law of Torts

Product and Service Liability Law

Law of Property: Real and Personal

Intellectual Property

Agency Law

Law and Business Associations I

Law and Business Associations II

The Law of Administrative Agencies

The Employment Relationship and Immigration Laws

Laws Governing Labor-Management Relations

Employment Discrimination

Environmental Law

Antitrust Laws

Laws of Debtor-Creditor Relations and Consumer Protection

Filters