Exam 45: Securities Regulation

The Securities Exchange Act of 1934 deals with the __________ distribution of securities.

A __________ insider is someone retained by the corporation for professional services, such as an attorney, accountant, or investment banker.

State statutes designed to protect the public from the sale of worthless stocks and bonds are called: ______.

Which of the following acts was passed to ensure that public shareholders faced with a cash tender offer would not be required to respond without sufficient information?

Taylor, a securities lawyer for a major Wall Street law firm, worked on numerous successful takeover bids of companies listed on the New York Stock Exchange. Prior to the public announcement of the takeover bids, Taylor provided information to Rogers (his stockbroker) and to Price (his mistress) about certain planned takeover bids on which he had provided legal services. Rogers, who was aware of the relationship between Taylor and Price, made purchases of the target companies on Rogers' and Price's behalf, netting them more than a million dollars in profits each. The SEC brings an action against Taylor, Rogers, and Price under Rule 10b-5 and the Insider Trading Sanctions Act of 1984. Taylor defends that he is an outsider not subject to the 1984 law and Rule 10b-5, and that he received no personal benefit. Rogers and Price defend that they were merely acting on stock market tips received from a person who did not personally benefit from the disclosure. Decide.

An individual who receives information from an insider or temporary insider is called a:

The Dodd-Frank Act authorizes the Federal Trade Commission to create a whistleblower program to encourage individuals to provide the SEC with information that would lead to the discovery and prosecution of violations of the federal securities laws.

The registration requirement of the Securities Act of 1933 applies to:

State blue sky laws typically deal with fraud and licensing.

Which exemption to registration requirements exempts offerings of less than $5 million to no more than 35 nonaccredited purchasers over a 12-month period?

Under SEC rules, an investment attorney cannot be classified as a temporary insider.

Bart and his brother-in-law, Ted, owned a small corporation. Ted was basically an investor, and Bart ran the entire business. As Ted became increasingly remote from day-to-day operations, Bart began to falsify some records so that Bart could take a greater share of the profits. This continued for years with Bart mailing falsified financial statements to Ted. When Bart suddenly became ill, Ted was forced to assume a greater role in the business on a temporary basis. During this time, Ted discovered the past deceptions and sued Bart under Rule l0b-5 of the Securities Exchange Act of 1934. Bart defended on the procedural ground that the business was local and had never been involved in interstate transactions of any kind. Moreover, the corporation was not listed on any stock exchange, nor did it have assets in excess of $10 million or 500 or more shareholders. Comment on the outcome of this case.

Under the Securities Act of 1933 a corporate bond would not be considered a security.

Under the 1990 Remedies Act, the SEC has the power to suspend all trading when markets are excessively volatile.

The Securities Act of 1933 was created to deal with 'penny stocks' and 'pump and dump schemes'.

The JOBS Act requires the SEC to create a "crowdfunding exemption" that would allow companies to raise $1 million in any 12-month period.

The registration process under Section 5 of the 1933 act is divided into three time periods. In order, they are:

The ______ requires the SEC to create a(n) ______ exemption that would allow companies to raise $1 million in any 12-month period.

Federal regulation of the sale of securities is based on the:

The SEC requires that annual shareholder reports be submitted to shareholders in any proxy solicitation on behalf of management.