Exam 19: Governance and Regulation: Securities Law

Betty Furnish owns a consignment furniture business that she wishes to expand to several other cities. She does need capital to be able to do so and needs to raise $1 million. Betty says she cannot afford a full SEC registration. Can you offer Betty some suggestions for raising the capital?

Under Sarbanes-Oxley, audit partners in charge of accounts must be rotated every 10 years.

The intrastate registration exemption requires that 100 percent of the issuer's assets be located in its resident state.

A hostile takeover is one supported by management.

Which of the following can be done before the registration statement is effective?

Short-swing profits are acceptable if there was no inside information.

Section 16 applies:

Directors A and B of a large, publicly traded company filed advance reports of their plans to sell stock. Such advanced filed plans allow directors and officers to sell shares without having to worry about whether they have inside information at the time of the sale. The dates for their sales are locked in for one year. Directors A and B have, however, encouraged the CEO to announce a boost in sales and revenues prior to the quarterly financial statement release because such an announcement would allow the information to go public and thereby allow them to sell their shares, according to their prior-approved plan, at a much higher price. Which of the following is correct?

An accredited investor includes any corporation.

In Stoneridge, Charter Communications engaged in which of the following activities?

The SEC conducts a merit review of its filed registrations.

A company filing Williams Act materials is not required to file proxy materials.

Lund was the CEO of Verit Co. Lund was contacted by Horowitz, the CEO and Chairman of the Board of P & F. Horowitz told Lund of an opportunity P & F had to buy into a Las Vegas casino. Lund immediately purchased 10,000 shares of P & F. Three days after Lund's purchase, P & F announced its intentions to enter into a joint venture for a Las Vegas casino. Lund was then able to sell his shares for considerable profit. Discuss the propriety of Lund's actions under the 1934 Act.

A merger is the combination of two firms into one of the old firms.

Under Sarbanes-Oxley, a company must file an 8-K if it has waived its code of ethics for a financial reporting officer.

Rule 506 carries a 35-purchaser maximum (excluding accredited investors).

Only directors can be held liable for a Section 11 violation.

Accounting firms must register annually with PCAOB if they want to audit publicly traded companies.

Regulation D offerings:

J. Rooney is Chairman of Rooney, Pace Group, Inc. and has decided to acquire stock in Pantry Pride. Rooney is able to purchase 7 percent of the stock in October 1984. Is Rooney subject to any SEC requirements? Discuss.