Exam 37: Investor Protection, Insider Trading, Corp Governance

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

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

Catalina promises high returns to Darby and other investors, who then agree to trust their funds to Catalina. She uses these funds to pay previous investors. This is

When Looking Glass Corporation wishes to issue certain securities, it must provide sufficient in?for?mation for Alice, and other unsophisticated investors, to evaluate the fi?nancial risk involved. Specifically, the law imposes liability for making a false statement or omission that is "material." What sort of information would Alice consider material?

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

Nouveau Riche Corporation's officers, directors, and sharehold?ers buy and sell securities. SEC Rule 10b-5 applies to

Fact Pattern 37-1 Fresh Cream, Inc., wants to make an initial public offering of securi?ties. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933. -Refer to Fact Pattern 37-1. Fresh decides to sell its new securities via the Internet. This offering

Generally, stock offerings that involve a small dollar amount are ex?empt from the registration requirement.

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

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

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

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

Fact Pattern 37-3 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 Ex?change Act of 1934, Geoff is most likely

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

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

Madison is the chief executive officer of Nitro Medico, Inc., which is required to file certain financial reports with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Madison must

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

Buying or selling securities on the basis of nonpublic information is illegal only if the profit from the transaction is unreasonable.

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

Fact Pattern 37-1 Fresh Cream, Inc., wants to make an initial public offering of securi?ties. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933. -Refer to Fact Pattern 37-1. If Fresh is exempt from the federal registration requirement, Fresh is