Deck 5: Foreign Investment

Question 1

Euroclear is an international clearinghouse.

Answer 1

True

Question 2

Bearer securities are transferred simply by delivery of the certificate.

Answer 2

True

Question 3

Nondiscrimination guarantee is the assurance of a host state government that foreign investors will be able to take out of the state both the investment capital they brought in and the profits they earned.

Answer 3

False

Question 4

Choice-of-law clause promises foreign investors that the host government will not change its tax for a certain period of time.

Question 5

Free trade areas are made up of two or more states.

Question 6

Depriving a person or company of private property without compensation is called nationalization.

Question 7

Exempt securities typically include those issued by governmental bodies, by banks, and by not-for-profit corporations.

Question 8

Bearer securities are registered on the books of the issuer.

Question 9

In the United States, offerings of less than $1 million in a 12-month period are exempt from registration.

Question 10

Manufacturing activities are allowed in bonded warehouses.

Question 11

Once a foreign-owned enterprise is in full operation, it is usually subject to periodic monitoring.

Question 12

No tariffs or duties are paid in export processing zones.

Question 13

A bond is an equity security.

Question 14

Bonded warehouses are intended to be places for trade and business.

Question 15

A debt security represents an ownership interest in a business.

Question 16

The largest free zones are called free cities.

Question 17

The clearance and settlement procedure is uniform throughout the world.

Question 18

A certificated security can be transferred by negotiation.

Question 19

To facilitate foreign trading in shares, brokerage firms use depository receipts.

Question 20

An uncertificated security is one whose ownership is recorded only on the books of the issuer.

Question 21

A(n) ________ is a facility at a port of entry where shippers can store goods until they clear customs.

A) export processing zone
B) data warehouse
C) bonded warehouse
D) free retail zone

Question 22

Acquisition by a state of property previously held by private persons or companies, usually in exchange for some consideration is called ________.

A) expropriation
B) nationalization
C) privatization
D) municipalization

Question 23

If a company issues depository receipts, then the corresponding shares need to be sent abroad.

Question 24

A free zone located within or near a port city is called a(n) ________.

A) free trade zone
B) free retail zone
C) special economic zone
D) exclusive economic zone

Question 25

Which of the following is true of bonded warehouses?

A) They are operated by transportation firms.
B) They are intended to be places for trade and business.
C) They help shippers in avoiding tariffs and quotas.
D) They are owned by the government.

Question 26

________ are areas in international airports and harbors where travelers can buy goods free of local sales and excise taxes.

A) Free retail zones
B) Export processing zones
C) Bonded warehouses
D) Foreign priority sectors

Question 27

The parts of a state's economy that are not fully open to foreign investors are called ________.

A) exclusive economic zones
B) special economic zones
C) closed sectors
D) restricted sectors

Question 28

An insider is a person, such as a corporate officer, director, or majority shareholder, who has access to material nonpublic information about a company or the securities market.

Question 29

Depository receipts are non-negotiable instruments.

Question 30

The largest free zones are called ________.

A) free trade areas
B) free cities
C) free trade zones
D) subzones

Question 31

Which of the following terms refers to the assurance of a host government that foreign investors will be treated the same way as local investors?

A) nondiscrimination guarantee
B) repatriation guarantee
C) stabilization clause
D) appraisal right

Question 32

The parts of a state's economy in which foreigners are encouraged to invest are called ________.

A) exclusive economic zones
B) special economic zones
C) foreign priority sectors
D) restricted sectors

Question 33

________ are geographical areas wherein goods may be imported and exported free from customs tariffs and in which a variety of trade-related activities may be carried on.

A) Foreign priority sectors
B) Closed sectors
C) Free zones
D) Exclusive economic zones

Question 34

According to U.S. law, information is material when something is of significance to a reasonable person.

Question 35

A(n) ________ is a special-purpose free zone associated with, but physically apart from, a free trade zone, in which limited-purpose trading activities are carried on.

A) exclusive economic zone
B) closed sector
C) free trade area
D) subzone

Question 36

Depriving a person or company of private property without compensation is called ________.

A) expropriation
B) nationalization
C) privatization
D) municipalization

Question 37

Which of the following terms refers to the assurance of a host state government that foreign investors will be able to take out of the state both the investment capital they brought in and the profits they earned?

A) nondiscrimination guarantee
B) repatriation guarantee
C) stabilization clause
D) appraisal right

Question 38

Which of the following is true of closed sectors?

A) They limit the percentage of foreign investment.
B) They are not open to foreign investors.
C) They have the highest tax rates.
D) They are usually present in developing countries.

Question 39

Depository receipts are identical to the securities themselves.

Question 40

Which of the following is the oldest type of free zone?

A) free trade area
B) free perimeter
C) free city
D) special economic zone

Question 41

Which of the following is a characteristic of stabilization clauses?

A) They can be changed by the mutual agreement of the parties.
B) They can prevent a state from nationalizing a foreign investment.
C) They can prevent a state from expropriating a foreign investment.
D) They guarantee equality of treatment with regard to ownership rights, taxation, and, social matters.

Question 42

The ________ is a law enacted by the United States in 1968 that authorizes the Securities and Exchange Commission to issue rules regulating takeover bids.

A) National Banking Act
B) Militia Act
C) Williams Act
D) Sarbanes-Oxley Act

Question 43

A(n) ________ is a printed statement given to prospective securities investors setting out a full, true, and plain disclosure of all material facts relating to the securities and the issuer.

A) prospectus
B) article of incorporation
C) memorandum of association
D) charter

Question 44

A ________ is a person who has access to material nonpublic information about a company or the securities market and who discloses it to someone who acts on that information.

A) bona fide purchaser
B) whistle-blower
C) boundary spanner
D) tipper

Question 45

A ________ is a negotiable instrument issued by a bank that represents a foreign company's publicly traded securities and that, in turn, is traded on a local securities exchange.

A) bill of exchange
B) banknote
C) promissory note
D) depository receipt

Question 46

Which of the following statements is most likely to be true regarding the supervision of foreign investment?

A) The foreign investor whose application has been approved by the host state is usually subject to some time limit in which to start construction and/or begin operation.
B) Very few countries require investors to submit periodic reports during the start-up period.
C) Once a foreign-owned enterprise is in full operation, it is usually not subject to periodic monitoring.
D) Investment laws usually provide that any modification to an investment agreement, including an increase or decrease in the size or scope of a project, has to be approved by the home state.

Question 47

Which of the following is true regarding an uncertificated security?

A) A registered security is a type of an uncertificated security.
B) Its ownership is recorded only on the books of the issuer.
C) It is dealt in on securities exchanges.
D) Most developed countries prevent companies from using uncertificated certificates.

Question 48

________ promise foreign investors that the host government will not change its tax, foreign exchange, or other legal régime for a certain period of time, or that changes subsequent to the establishment of an enterprise will not affect that enterprise.

A) Nondiscrimination guarantees
B) Repatriation guarantees
C) Stabilization clauses
D) Appraisal rights

Question 49

What are the criteria for evaluating a foreign investment proposal?

Question 50

Describe the significance of foreign investment policies.

Question 51

A(n) ________ is someone who buys in good faith, pays value, and is unaware that the transferor is not the rightful owner.

A) tipper
B) bona fide purchaser
C) tippee
D) insider

Question 52

What are the different types of free zones?

Question 53

A(n) ________ is a contractual obligation of a company to repay the holder the amount of his or her original investment plus interest at a specified future date.

A) bond
B) equity
C) common stock
D) capital stock

Question 54

A ________ is a share in the ownership of a company that entitles its owner to rights in the company, including a proportionate part of the dividends and, upon liquidation, of the capital assets.

A) debenture
B) bond
C) stock
D) banknote

Question 55

Differentiate between closed sectors and restricted sectors.

Question 56

A(n) ________ is a person, such as a corporate officer, director, or majority shareholder, who has access to material nonpublic information about a company or the securities market.

A) bona fide purchaser
B) whistle-blower
C) insider
D) boundary spanner

Question 57

________ is a procedure by which a buyer turns over the purchase price and the seller turns over the securities in a securities transaction.

A) Expropriation
B) Insider trading
C) Clearance and settlement
D) Conformity assessment procedure

Question 58

Which of the following is true of a certificated security?

A) Its ownership is recorded only on the books of the issuer.
B) A bearer security is not a certificated security.
C) It cannot be transferred by negotiation.
D) It is dealt in on securities exchanges.

Question 59

In the context of the securities market, a(n) ________ is a person who acts for his or her personal account on information knowing that the information is not available to the public.

A) bona fide purchaser
B) tippee
C) whistle-blower
D) boundary spanner

Question 60

________ is the use of material nonpublic information about a company or the securities market to buy or sell securities for personal gain.

A) Insider trading
B) Safeguarding
C) Dumping
D) Expropriation

Question 61

What is a depository receipt?

Question 62

What is a bonded warehouse?

Question 63

Explain appraisal rights.

Question 64

Describe the significance of the Williams Act.

Question 65

Differentiate between nationalization and expropriation.

Question 66

Differentiate between a registered security and a bearer security.