Exam 17: Regulation of Securities, Corporate Governance, and Financial Markets

When a corporation issues securities under a nonpublic offering or safe-harbor exemption from SEC regulations, it is free of the burden of supplying any disclosures to the investor due to the investor's experience and knowledge of the process.

Joan is the CFO of Para Corp. and is a year from retirement. In order to guarantee herself a very substantial bonus and to boost her retirement package, she knowingly certifies false financial reports that make the company appear to be much more profitable than it really is. She further takes steps to ensure that the financial report does not get reviewed through internal controls maintained by Para Corp. Under provisions of the Sarbanes-Oxley Act, what are the possible penalties that may be imposed when her actions are discovered?

Bonds are debt instruments secured by company assets.

Once a corporation has submitted a registration statement to the SEC, what responses may the SEC make and what is the required timing of these responses?

Eve is a promoter and has approached Adam with an investment opportunity. Eve anticipates a generous profit and informs Adam that he too can realize a generous profit. This opportunity is not being offered to others. Assuming all other requirements to classify this as a security are in evidence, the commonality of this transaction would be described as a:

Rule 10(b)(5) of the 34 Act is aggressively used by the SEC in terms of insider-trading enforcement.

In what two ways do federal securities statutes define a security?

A person who receives nonpublic confidential information regarding a company and uses that information to realize a profit is called a _______.

The "safe-harbor" exemption from SEC regulations involves:

Violation of Section 16, a finding of short-swing liability, does not require evidence of the use of insider information and is deemed a strict liability provision.

Under the emergency escrow provisions created by the Sarbanes-Oxley Act:

The SEC maintains ________ regional offices, throughout the United States, where much of its day-to-day work is done.

Micro bonds appeal to small business ventures that wish to take advantage of bond financing in the ________ range.

Blue-sky laws are federal security laws that preempt state security laws.

The SEC has the power to initiate criminal actions against individuals or companies that violate security laws.

The Sarbanes-Oxley Act imposed stricter regulations on how corporations do business through regulations in each of the following areas except:

MFK Corp. wants to raise capital and is considering an offer of bonds and debentures. It is not sure of a particular disclosure requirement, so MFK poses its question to the SEC and request an interpretation letter. If the SEC issues an interpretive letter addressing MFK's question and MFK follows the statements contained in the letter, MFK will not be able to be penalized by the SEC should the advice be incorrect.

Whether a dividend is paid depends on:

Which of the following is not a required preregistration document?

Any officer, director, or shareholder who owns 10 percent or more of a company's stock is considered an _______.