Exam 16: Regulation of Securities, corporate Governance, and Financial Markets

Security sales to venture capitalists often do not require full registration.

Brent has opened a fruit and vegetable business named Brent's Country Stand,near an affluent suburban neighborhood.After six months Brent wishes to raise capital for expansion so he offers a number of his customers the following deal.If the individual gives Brent $10,000,Brent will provide a promissory note,payable in five years with full repayment of the principal and a 10% interest rate of return.Brent's Country Stand is the maker of the notes and about ten customers have purchased these promissory notes.Do these promissory notes qualify as securities? Why or why not?

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

The Securities Act of 1934 focuses on the:

The Restoring American Financial Stability Act of 2010 established the Consumer Financial Protection Bureau.What is the authority of this agency?

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

Preferred stock is the most frequently used form of equity instrument.

Public corporation disclosures and filings are made available to the general public.

Holders of equity securities have no specific right or guarantee of a return on their investment.

Imagine that the SEC had investigated ENRON prior to its collapse and had found extremely serious violations of various securities statutes and regulations.What two things might the SEC have done in the exercise of their delegated executive powers and administrative enforcement powers?

The SEC has the power to suspend or revoke the licenses of brokers that violate securities laws.

Which of the following is an equity instrument?

Payments made to common stock holders based on the profitability of the company are called _______.

In SEC v.W.J.Howey Co.,the Supreme Court decision led to what is commonly called,the Howey test to determine whether something qualified as a security.Identify and explain the four components of this test.

The most commonly used debt instrument is a:

Which of the following is not a component in the definition of a security?

Sunshine Corporation has just filed bankruptcy.Among the investors,who will be paid first?

Securities may not be sold or marketed to the public until the SEC has completed its review phase and the registration becomes effective.

MFK Corp.wants to raise capital and is considering an offer of bonds and debentures.They are not sure of a particular disclosure requirement so they pose their question to the SEC and they 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 incorrect.

Only the Congress may enact securities regulations and only the courts may interpret securities statutes.