Exam 42: Securities Law Corporate Governance

A well-known seasoned issuer cannot file a registration statement until after it announces a new offering.

The key to liability under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether information omitted or misrepresented in connection with the purchase or sale of a security is material.

Household Products Corporation wants to make an offering of securities to the pub?lic. This offering is not exempt from registration under the Se?curities Act of 1933. Before Household Products sells its securities, it must provide in?vestors with

Under the Sarbanes-Oxley Act of 2002, chief financial officers must certify the accuracy of information in corporate financial statements and reports that are filed with the Securities and Exchange Commission.

Cattle Ranch Company offers its stock for sale only in a single state. The law in Cattle Ranch's state is like the law in most states. Cattle Ranch's offer is sub?ject to state securities statutes that include

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 mil?lion and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to

Fact Pattern 42-1B (Questions B12-B13 apply) 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 tells Geoff. Both Fay and Geoff buy 100 shares. Geoff knows that Fay got her informa?tion from Dhani. When Eureka! publicly an?nounces its new laptop, Dhani, Fay, and Geoff sell their stock for a profit. -Refer to Fact Pattern 42-1B. Under the Securities Ex?change Act of 1934, Geoff is most likely

Liability can be imposed on those who are negligent in not discovering fraud in connection with a registration statement or prospectus.

In the context of Section 16(b) of the Securities Exchange Act of 1934, insiders include officers, directors, and large stockholders of Section 12 corporations.

Space Trips Inc. files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. Space Trips is charged with violating the Securities Act of 1933. Space Trips's best defense is

The Securities and Exchange Commission does not regulate the content of proxy statements.

The Securities and Exchange Commission cannot exempt persons, securities, and transactions from the requirements of the securities laws.

Riverwalk Restaurants Corporation is a noninvestment company that wants to is?sue stock of $3 million in a twelve-month period. Riverwalk, with less than $20 mil?lion in annual sales, qualifies as a small business issuer. Before Riverwalk sells the stock, it must provide investors with

OnSpec, Inc., and its officers, directors, and share?holders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving

The Securities Exchange Act of 1934 applies to companies that have assets in excess of $5 million and five hundred or more employees.

As part of a stock offering for Designer Studio Corporation, the firm's accountant Evelyn intention?ally misrepresents material facts in the pro?spectus. Flores buys the stock unaware of the misrepresentation and suf?fers a loss. Evelyn may be subject to

Guitar Factory Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by

Ridley is an officer of Sun Watts, Inc. Ridley knows that a Sun Watts engi?neer recently developed a new, inexpensive method for collecting, storing, and converting solar power into fuel. Ridley takes advantage of this information to buy Sun Watts stock from Taylor and, after the discovery is announced, to sell the stock to Ulrich at a profit. Taylor claims that this is a violation of federal law. Is Taylor correct? If so, what federal law has Ridley violated, and what are its possible penalties?

Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 apply just to corporate "insiders."

Fleet Delivery Corporation is a public company with a market capitalization of less than $75 million. Fleet is poised to issue securities in a transaction that, under the Securities Act of 1933, is "exempt." This enables Fleet to