Question 1

Only outsiders who would ordinarily be deemed fiduciaries of the corporations in whose stock they trade can be liable for insider trading.

Accepted Answer

A) True 
 B)False  False

Question 2

The key to liability under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether undisclosed inside information is material.

Accepted Answer

A) True 
 B)False  True

Question 3

Generally,states have antifraud patterned after federal securities law.

Accepted Answer

A) True 
 B)False  True

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  Fresh Seasonal Fruit and Gourmand Pastries. 
B)  Fresh Seasonal Fruit only. 
C)  Gourmand Pastries only. 
D)  neither Fresh Seasonal Fruit nor Gourmand Pastries. 
A)  Fresh Seasonal Fruit and Gourmand Pastries. 
B)  Fresh Seasonal Fruit only. 
C)  Gourmand Pastries only. 
D)  neither Fresh Seasonal Fruit nor Gourmand Pastries.

Question 7

New Discoveries Corporation,and its officers,directors,and shareholders,buy and sell securities.Section 10(b)of the Securities Exchange Act of 1934 applies to

Accepted Answer

A)  only the purchase or sale of a security involving misappropriation. 
B)  only the purchase or sale of a security involving short-swing profits. 
C)  only the purchase or sale of a security involving a tipper and tippee. 
D)  the purchase or sale of any security. 
A)  only the purchase or sale of a security involving misappropriation. 
B)  only the purchase or sale of a security involving short-swing profits. 
C)  only the purchase or sale of a security involving a tipper and tippee. 
D)  the purchase or sale of any security.

Question 8

Corporate governance can be defined as the relationship between a corporation and its shareholders.

Accepted Answer

A) True 
 B)False

Question 9

Fact Pattern 31-2
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 31-3.Under the Securities Exchange Act of 1934,Fay is most likely

Accepted Answer

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

Question 10

Most securities can be resold without registration.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Section 10(b)of the Securities Exchange Act of 1934 covers only corporate officers and directors.

Accepted Answer

A) True 
 B)False

Question 13

Private parties cannot sue violators of Section 10(b)and Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

Sales of securities must occur within twenty days of registration.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

Begin Anew Enterprise,Inc.,completes its registration process and issues a free-writing prospectus.This tells prospective investors

Accepted Answer

A)  about investing freely. 
B)  how to write their own prospectus. 
C)  that they can "freely write their own ticket" to buy Begin's securities. 
D)  that they may obtain the prospectus at the SEC's Web site. 
A)  about investing freely. 
B)  how to write their own prospectus. 
C)  that they can "freely write their own ticket" to buy Begin's securities. 
D)  that they may obtain the prospectus at the SEC's Web site.

Question 19

A corporation can recapture any profits realized by an insider on any purchase or sale of the firm's stock within any twelve-month period.

Accepted Answer

A) True 
 B)False

Question 20

SEC Rule 10b-5 applies in relatively few cases involving the trading of securities.

Accepted Answer

A) True 
 B)False

Exam 31: Investor Protection, insider Trading, Corp Gov

Only outsiders who would ordinarily be deemed fiduciaries of the corporations in whose stock they trade can be liable for insider trading.

The key to liability under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether undisclosed inside information is material.

Generally,states have antifraud patterned after federal securities law.

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.

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

New Discoveries Corporation,and its officers,directors,and shareholders,buy and sell securities.Section 10(b)of the Securities Exchange Act of 1934 applies to

Corporate governance can be defined as the relationship between a corporation and its shareholders.

Most securities can be resold without registration.

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

Section 10(b)of the Securities Exchange Act of 1934 covers only corporate officers and directors.

Private parties cannot sue violators of Section 10(b)and Rule 10b-5.

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

Sales of securities must occur within twenty days of registration.

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

Begin Anew Enterprise,Inc.,completes its registration process and issues a free-writing prospectus.This tells prospective investors

A corporation can recapture any profits realized by an insider on any purchase or sale of the firm's stock within any twelve-month period.

SEC Rule 10b-5 applies in relatively few cases involving the trading of securities.

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