Question 1

RingTone Corporation is a public company whose securities are traded among investors.Under the Securities Act of 1933,a security is

Accepted Answer

A) almost any stake in the ownership or debt of a company. 
B) an investment that is guaranteed to make a profit. 
C) only such common forms of debt and equity as bonds and stocks. 
D) whatever a company represents to the public as a security. 
A) almost any stake in the ownership or debt of a company. 
B) an investment that is guaranteed to make a profit. 
C) only such common forms of debt and equity as bonds and stocks. 
D) whatever a company represents to the public as a security. A

Question 2

Against a charge of a violation of the Securities Act of 1933,only an issuer of stock can assert the due diligence defense.

Accepted Answer

A) True 
 B)False  False

Question 3

A corporation whose security does not qualify for an exemption can avoid the cost and complexity associated with registration.

Accepted Answer

A) True 
 B)False  False

Question 4

Dhani, an accountant for Eureka, Inc., learns of undisclosed com¬pany plan¬s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re¬veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa¬tion from Dhani. When Eureka publicly an¬nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
-Refer to Fact Pattern 37-3.Under the Securities Exchange Act of 1934,Geoff is most likely

Accepted Answer

A) liable for insider trading. 
B) not liable because Geoff did not prevent others from profiting. 
C) not liable because Geoff did not solicit information from Dhani. 
D) not liable because Geoff does not work for Eureka. 
A) liable for insider trading. 
B) not liable because Geoff did not prevent others from profiting. 
C) not liable because Geoff did not solicit information from Dhani. 
D) not liable because Geoff does not work for Eureka.

Question 5

Securities of charitable organizations are exempt from the registration requirement of the 1933 Securities Act.

Accepted Answer

A) True 
 B)False

Question 6

Cotton Products Corporation is a public company whose shares are traded in the public securities markets.The Securities Act of 1933 requires Cotton to disclose financial and other significant information concerning its securities in order to

Accepted Answer

A) increase corporate accountability by imposing responsibility on chief corporate executives. 
B) prevent insiders from trading among themselves. 
C) protect investors. 
D) provide a "safe harbor" for companies that make forward-looking statements. 
A) increase corporate accountability by imposing responsibility on chief corporate executives. 
B) prevent insiders from trading among themselves. 
C) protect investors. 
D) provide a "safe harbor" for companies that make forward-looking statements.

Question 7

Lexy,a salesperson for My-T-Fine Corporation,learns that My-T-Fine will increase the dividend it pays to shareholders.Lexy buys 10,000 shares of My-T-Fine stock.When the price increases,Lexy sells the shares for a profit.Lexy would not be liable for insider trading if the information about the dividend was

Accepted Answer

A) material when she sold the stock. 
B) public after she bought the stock. 
C) public before she bought the stock. 
D) speculative when she bought the stock. 
A) material when she sold the stock. 
B) public after she bought the stock. 
C) public before she bought the stock. 
D) speculative when she bought the stock.

Question 8

Securities that are exempt from the registration requirement can generally be sold and resold without being registered.

Accepted Answer

A) True 
 B)False

Question 9

Dhani, an accountant for Eureka, Inc., learns of undisclosed com¬pany plan¬s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re¬veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa¬tion from Dhani. When Eureka publicly an¬nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
-Refer to Fact Pattern 37-3.Under the Securities Exchange Act of 1934,Hu is most likely

Accepted Answer

A) liable for insider trading. 
B) not liable because Hu is only a tippee,not a tipper. 
C) not liable because Hu is too far down the chain of disclosure. 
D) not liable because Hu traded on the basis of a true fact. 
A) liable for insider trading. 
B) not liable because Hu is only a tippee,not a tipper. 
C) not liable because Hu is too far down the chain of disclosure. 
D) not liable because Hu traded on the basis of a true fact.

Question 10

Readmore Bookstore Corporation files a registration statement with the Securities and Exchange Commission and provides a prospectus describing the securities to investors.These items are intended to provide sufficient information so that the financial risks involved can be evaluated by

Accepted Answer

A) market professionals to explain to all investors. 
B) government regulators to disclose to the general public. 
C) sophisticated investors only. 
D) unsophisticated investors. 
A) market professionals to explain to all investors. 
B) government regulators to disclose to the general public. 
C) sophisticated investors only. 
D) unsophisticated investors.

Question 11

The Securities Exchange Act of 1934 provides for continuous,periodic disclosures by publicly held corporations.

Accepted Answer

A) True 
 B)False

Question 12

Frothy Beverage Corporation is a public company whose shares are traded in the public securities markets.Under the Securities Act of 1933,Frothy is required to

Accepted Answer

A) contribute to the operations of national stock exchanges. 
B) disclose financial and other information about its securities. 
C) engage in market surveillance to deter undesirable practices. 
D) solicit proxies for voting. 
A) contribute to the operations of national stock exchanges. 
B) disclose financial and other information about its securities. 
C) engage in market surveillance to deter undesirable practices. 
D) solicit proxies for voting.

Question 13

Generally,stock offerings that involve a small dollar amount are not exempt from the registration requirement.

Accepted Answer

A) True 
 B)False

Question 14

Private parties cannot sue violators of the Securities Act of 1933.

Accepted Answer

A) True 
 B)False

Question 15

Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.
-Refer to Fact Pattern 37-2.Regarding Sid's profits on the purchase and sale of Tech stock,under Section 16(b)of the Securities Exchange Act of 1934 Tech may recapture

Accepted Answer

A) all of Sid's profits. 
B) half of Sid's profits. 
C) 10 percent of Sid's profits. 
D) none of Sid's profits. 
A) all of Sid's profits. 
B) half of Sid's profits. 
C) 10 percent of Sid's profits. 
D) none of Sid's profits.

Question 16

Before filing a registration statement,an issuer must attempt to sell,or at least offer to sell,the securities.

Accepted Answer

A) True 
 B)False

Question 17

"Forward-looking" financial forecasts are prohibited under SEC Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 18

Dee,an accountant,does not work for Emergent Company,but wrongfully obtains inside information concerning Emergent.Based on the information,Dee buys and sells Emergent stock for personal gain.The Securities and Exchange Commission prosecutes Dee,arguing that she is liable because she stole information rightfully belonging to another.This argument is

Accepted Answer

A) the blue-sky theory. 
B) the misappropriation theory. 
C) the red-herring theory. 
D) the tipper/tippee theory. 
A) the blue-sky theory. 
B) the misappropriation theory. 
C) the red-herring theory. 
D) the tipper/tippee theory.

Question 19

North American Properties,Inc.,and its officers,directors,and shareholders,buy and sell securities.Section 16(b)of the Securities Exchange Act of 1934 covers

Accepted Answer

A) all purchases and sales of securities. 
B) only purchases and sales of securities involving misappropriation. 
C) only purchases and sales of securities involving short-swing profits. 
D) only purchases and sales of securities involving tippers and tippees. 
A) all purchases and sales of securities. 
B) only purchases and sales of securities involving misappropriation. 
C) only purchases and sales of securities involving short-swing profits. 
D) only purchases and sales of securities involving tippers and tippees.

Question 20

A free-writing prospectus may be used before the Securities and Exchange Commission completes its review of a related registration statement.

Accepted Answer

A) True 
 B)False

Exam 37: Investor Protection,insider Trading, Corp Gov

RingTone Corporation is a public company whose securities are traded among investors.Under the Securities Act of 1933,a security is

Against a charge of a violation of the Securities Act of 1933,only an issuer of stock can assert the due diligence defense.

A corporation whose security does not qualify for an exemption can avoid the cost and complexity associated with registration.

Securities of charitable organizations are exempt from the registration requirement of the 1933 Securities Act.

Cotton Products Corporation is a public company whose shares are traded in the public securities markets.The Securities Act of 1933 requires Cotton to disclose financial and other significant information concerning its securities in order to

Securities that are exempt from the registration requirement can generally be sold and resold without being registered.

Readmore Bookstore Corporation files a registration statement with the Securities and Exchange Commission and provides a prospectus describing the securities to investors.These items are intended to provide sufficient information so that the financial risks involved can be evaluated by

The Securities Exchange Act of 1934 provides for continuous,periodic disclosures by publicly held corporations.

Frothy Beverage Corporation is a public company whose shares are traded in the public securities markets.Under the Securities Act of 1933,Frothy is required to

Generally,stock offerings that involve a small dollar amount are not exempt from the registration requirement.

Private parties cannot sue violators of the Securities Act of 1933.

Before filing a registration statement,an issuer must attempt to sell,or at least offer to sell,the securities.

"Forward-looking" financial forecasts are prohibited under SEC Rule 10b-5.

North American Properties,Inc.,and its officers,directors,and shareholders,buy and sell securities.Section 16(b)of the Securities Exchange Act of 1934 covers

A free-writing prospectus may be used before the Securities and Exchange Commission completes its review of a related registration statement.

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