Exam 31: Investor Protection, Insider Trading, Corp Gov

Bild-It-Rite Corporation is a public company that is preparing to issue securities that do not qualify for an exemption from registration. This means that Bild-It-Rite must

Squeaky Clean Corporation wants to make an offering of securities to the public. This offering is not exempt from registration under the Securities Act of 1933. Before Squeaky sells its securities, it must provide investors with

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

GR8 Stuf Company 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. GR8 Stuf is charged with violating the Securities Act of 1933. GR8 Stuf's best defense is

Willful violations of the Securities Act of 1933 may be subject to civil liability, but not criminal prosecution.

In May 2013, National Biotech Corporation generally advertises that it will make a $4 million offering of stock in June. National makes the offering as advertised and, ten days after the first sale, notifies the Securities and Exchange Commission (SEC). All buyers of the stock are given material information about the company, its business, and the stock. Before the end of the year, the offering is completely sold out. The buyers include forty unaccredited investors and fifty accredited investors. National does not register the offering. The SEC files a suit against National, seeking civil sanctions on the ground that this offering was not exempt from registration. National argues that the applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that because of this exemption, any resale of the stock is also exempt. Who is correct?

SEC Rule 10b-5 applies to almost all cases involving the trading of securities.

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

SEC Rule 10b-5 prohibits the commission of fraud in connection with the purchase or sale of any security.

Securities of nonprofit, educational, and charitable organizations are not exempt from the registration requirement of the 1933 Securities Act.

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

To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock in other companies, and plans to register an initial public offering under the Securities Act of 1933. SEC Rule l0b-5 covers

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

To raise $12 million to expand operations, Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. Star plans to notify the SEC of sales. Under the Securities Act of 1933, this issue may qualify as an "exempt" transaction

Generally, federal securities law are patterned after states' antifraud laws.

A major problem facing the Securities and Exchange Commission is how to enforce the antifraud provisions of the securities laws in the online environment.

Della, an officer for Energy Petrol Corporation (EPC), buys 100 shares of EPC stock. One week later, EPC announces that it will merge with a competitor, Fuel Oil Company, and the price of EPC stock increases. One month later, Della sells her shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Della would not be liable if, after buying the stock, she had waited

A registration statement must include a financial statement certified by an independent public accounting firm.

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 31-2. 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

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