Exam 42: B: Securities Law Corporate Governance

The Securities and Exchange Commission interprets federal securities laws,but does not investigate violations.

Selling securities after the effective date of the registration statement results in liability.

New Discoveries Corporation,and its officers,directors,and share?holders,buy and sell securities.Section 10(b)of the Securities Ex?change Act of 1934 applies to

Fact Pattern 42-2A 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,each of whom buy 100 shares.They knows 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 42-2A.Under the Securities Ex?change Act of 1934,Fay is most likely

The definition of security in the Securities Act of 1933 does not include instruments and interests commonly known as securities.

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

State corporation statues set up the legal framework for corporate governance.

State securities laws apply mainly to intrastate transactions.

Before filing the registration statement,an issuer cannot sell or offer to sell the securities.

Celfone Corporation is required to file a registration statement with the Securities and Exchange Commission.This statement must contain

Players Video Game Centers,Inc. ,wants to issue stock of $1 million in a single offer?ing.Players must provide all investors with material in?forma?tion about itself,its business,and its securities if

Fact Pattern 42-2A 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,each of whom buy 100 shares.They knows 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 42-2A.If Dhani is liable under the Securities Ex?change Act of 1934,it will be because the infor?mation on which he based his purchase of Eureka stock was

"Forward-looking" financial forecasts are protected against liability for securities fraud.

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

In May,National Biotech Corporation generally advertises that it will make a $4 million offering of stock in June.National makes the offer?ing as advertised and,ten days after the first sale,notifies the Securities and Exchange Commission (SEC).All buyers of the stock are given mate?rial 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 reg?istration.National argues that the applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that because of this exemp?tion,any resale of the stock is also exempt.Who is correct?

Standard Corporation is a public company whose shares are traded in public securities markets.Standard's officers want to set up and main?tain a system of "good corporate governance." What is "corporate govern?ance"? What is its practical significance? What,at a minimum,should a "good" system of corporate governance include?

For a defendant to be convicted in a criminal prosecution under the securities laws,there can be no reasonable doubt that the defendant knew he or she was acting wrongfully.

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

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

Accredited investors include banks,but not investment companies.