Deck 21: Securities Regulation

Question 1

A corporate debt instrument usually specifies:

A)the length of the debt period
B)the debt repayment method and rate of interest
C)the amount of the debt
D)the length of the debt period and the debt repayment method and rate of interest
E)the length of the debt period and the debt repayment method and rate of interest and the amount of the debt

Answer 1

E

Question 2

Securities differ from other assets in that they:

A)are valuable in and of themselves
B)have a fixed value
C)are tangible assets
D)all of the other specific choices
E)none of the other choices

Answer 2

E

Question 3

A debt is a financial obligation a firm.It is:

A)an asset to the corporation
B)not subject to securities law,which focuses on equity instruments
C)financed by buying stocks back from the shareholders
D)all of the other specific choices
E)none of the other choices

Answer 3

E

Question 4

When bonds are sold,there is often a(n)____________of a certain amount.

A)capital value
B)issue
C)promise
D)agreement
E)debt registration

Question 5

Which of the following is NOT a reason why securities are important:

A)they are the financial backbone of the U.S.economy
B)business operations rely on securities for financing operations
C)they are the major form of investment for pension funds
D)all of the other specific choices are correct
E)none of the other specific choices are correct

Question 6

Securities financing is:

A)the raising of funds through the sale of company stock
B)the raising of funds through borrowing money from banks
C)the raising of money through trades of bonds
D)the raising of money through donations
E)the raising of money through purchasing bonds

Question 7

A debt is a financial obligation a firm.It is:

A)an asset to the corporation
B)often incurred by selling bonds
C)financed by buying stocks back from the shareholders
D)an asset to the corporation often incurred by selling bonds
E)none of the other choices

Question 8

A security can be which of the following:

A)money borrowed by a corporation
B)a stock traded on the New York Stock Exchange
C)an agreement between friends
D)both a and b are correct
E)a,b,and c are all correct

Question 9

Securities differ from other assets in that they:

A)are valuable in and of themselves
B)have a fixed value
C)have no intrinsic value in themselves
D)are tangible assets
E)all of the other choices

Question 10

The financial future of most people is tied to securities because:

A)securities are the major form of investment for pension funds
B)securities are a major source of scholarships
C)securities are the main method of getting out of bankruptcy
D)securities lower taxes for most Americans
E)none of the other choices are correct

Question 11

A corporate debt instrument usually specifies:

A)the length of the debt period
B)the debt repayment method and rate of interest
C)how many shares may be sold to investors
D)the length of the debt period and the debt repayment method and rate of interest
E)the length of the debt period and the debt repayment method and rate of interest and how many shares may be sold to investors

Question 12

Securities are important to businesses because:

A)securities are an important source of financing for operations
B)securities can lower export taxes
C)securities can lower import taxes
D)securities are crucial when dealing with unionized workers
E)none of the other choices are correct

Question 13

Bonds issued by a company to raise money:

A)mean that the company has incurred debt that is to be repaid to the holders of the bonds
B)can be traded on the securities market
C)are securities
D)both a and b are correct
E)a,b,and c are correct

Question 14

______________ is the raising of funds through the sale of company stock.

A)Debt financing
B)Debt incurrence
C)Charity fund raising
D)Treasury financing
E)none of the other choices are correct

Question 15

Securities are important because:

A)they are the financial backbone of the U.S.economy
B)business operations rely on securities for financing operations
C)they are the major form of investment for pension funds
D)all of the other specific choices are correct
E)none of the other specific choices are correct

Question 16

Securities financing is:

A)the raising of money through purchasing bonds
B)the raising of funds through borrowing money from banks
C)the raising of money through trades of bonds
D)the raising of money through donations
E)none of the other choices are correct

Question 17

A new or an existing company may be financed by:

A)debt only by law
B)U.S.Treasury bonds
C)equity only by law
D)debt and equity
E)debt and equity and U.S.Treasury bonds

Question 18

Corporate equity financing instruments generally specify:

A)the amount of the debt and length of the debt period
B)the debt repayment method and rate of interest
C)the amount of bonds that may be sold to investors
D)all of the other specific choices
E)none of the other choices

Question 19

______________ is the raising of funds through the sale of company stock.

A)Debt financing
B)Debt incurrence
C)Securities financing
D)Equity financing
E)Stock fund raising

Question 20

Which of the following is NOT specified in a debt instrument issued by a corporation:

A)amount of the debt
B)length of debt period
C)debt repayment method
D)rate of interest charged to the sum borrowed
E)all of the other specific choices are specified

Question 21

The first state to have securities regulation was:

A)Illinois
B)Ohio
C)California
D)Texas
E)none of the other choices are correct

Question 22

The first regulation of securities in the U.S.was the:

A)Uniform Securities Act
B)Clayton Act
C)Federal Trade Commission Act
D)Interstate Commerce Act
E)none of the other choices

Question 23

Equity financing differs from security financing in that,with equity financing,a company:

A)must pay at least 1.5% interest on all investments
B)must pay back at least half a shareholder's investment
C)has complete liability to repay shareholders the amount they have invested
D)must repay all investments,but has no specific time limit for doing so
E)none of the other choices are correct

Question 24

The first regulation of securities in the U.S.was the:

A)Uniform Securities Act
B)Kansas blue sky law
C)Securities Exchange Act
D)Interstate Commerce Act
E)none of the other choices

Question 25

The _____________ requires that investors be given material information about new securities and it prevents misrepresentation in the sale of securities.

A)Security Stability Act of 1933
B)Securities Exchange Act of 1934
C)Financial Security Act of 1935
D)Security Representation Act of 1933
E)none of the other choices are correct

Question 26

A share of stock:

A)is a share in the future profits (if any)of a company
B)must be guaranteed a minimum rate of return by the issuer
C)may be redeemed for purchase price
D)is a share in the future profits (if any)of a company and may be redeemed for purchase price
E)all of the other specific choices

Question 27

Which of the following is NOT true about the Securities and Exchange Commission:

A)the agency is charged with the responsibility for the enforcement and administration of the federal securities laws
B)the agency is bi-partisan
C)the agency is independent
D)the agency has five members appointed by the President for five-year terms
E)all the other choices are true of the Securities and Exchange Commission

Question 28

The federal agency that has the most to do with regulation of the securities markets is the:

A)Securities Division,Department of Justice
B)Federal Reserve Board
C)Federal Securities Commission
D)Interstate Securities Commission
E)none of the other choices

Question 29

The first state to have securities regulation was:

A)Illinois
B)Ohio
C)California
D)Kansas
E)Texas

Question 30

Equity financing differs from security financing in that,with equity financing,a company:

A)has no liability to repay shareholders the amount they have invested
B)must pay back at least half a shareholder's investment
C)has complete liability to repay shareholders the amount they have invested
D)must repay all investments,but has no specific time limit for doing so
E)must pay at least 1.5% interest on all investments

Question 31

The ___________ regulates trading in existing securities and imposes disclosure requirements on corporations that have issued publicly held securities.

A)Security Stability Act of 1933
B)Securities Exchange Act of 1934
C)Financial Security Act of 1935
D)Security Representation Act of 1933
E)none of the other choices are correct

Question 32

A share of stock represents the right to:

A)receive cash from the issuing company equal to the market value of the stock
B)an equal share of the assets of a firm
C)participate in active management decisions of a firm
D)a share of future profits of a firm
E)a fixed rate of return each year

Question 33

The federal agency that has the most to do with regulation of the securities markets is the:

A)Securities and Exchange Commission
B)Federal Reserve Board
C)Federal Securities Commission
D)Interstate Securities Commission
E)Department of Justice

Question 34

The ___________ regulates trading in existing securities and imposes disclosure requirements on corporations that have issued publicly held securities.

A)Security Stability Act of 1933
B)Securities Act of 1933
C)Financial Security Act of 1935
D)Security Representation Act of 1933
E)none of the other choices are correct

Question 35

The _____________ requires that investors be given material information about new securities and it prevents misrepresentation in the sale of securities.

A)Securities Act of 1933
B)Securities Exchange Act of 1934
C)Financial Security Act of 1935
D)Security Representation Act of 1933
E)Security Stability Act of 1933

Question 36

A share of stock represents the right to:

A)receive cash from the issuing company equal to the market value of the stock
B)an equal share of the assets of a firm
C)participate in active management decisions of a firm
D)a fixed rate of return each year
E)none of the other choices

Question 37

The Securities Act of 1933 regulates:

A)private offerings of securities
B)public offerings of securities when they are first sold
C)corporations with more than $100,000 in securities
D)banks
E)none of the other choices are correct

Question 38

Kansas enacted the first securities statute in:

A)1900
B)1911
C)1950
D)1955
E)1957

Question 39

The most important federal statutes regulating securities were enacted in:

A)the early 1920s
B)the early 1930s
C)the early 1960s
D)the early 1970s
E)the early 1950s

Question 40

A share of stock:

A)may be redeemed by the owner for other company assets
B)must be guaranteed a minimum rate of return by the issuer
C)may be redeemed for purchase price
D)all of the other specific choices
E)none of the other choices

Question 41

Securities offerings on the Internet are:

A)prohibited by the SEC unless secondary to a regular offering
B)permitted by the Capital Markets Efficiency Act but are not common
C)permitted by the Capital Markets Efficiency Act,which preempts normal regulatory rules
D)not subject to any controls because they evade the rules of the securities acts
E)none of the other choices

Question 42

Which of the following would be unlikely to be on the Securities and Exchange Commission staff:

A)an attorney
B)an accountant
C)a financial analyst
D)both a and c are unlikely to be on the SEC staff
E)a,b and c are all likely to be on the SEC staff

Question 43

The elements of a security,as the Supreme Court ruled in the SEC v.Howey case include:

A)an investment of money
B)an investment in a common enterprise
C)the expectation that profits from an investment will be generated by the efforts of others
D)an investment of money in a common enterprise
E)an investment of money in a common enterprise with the expectation that profits will be generated by the efforts of others

Question 44

Which of the following is not considered a security under the 1933 Securities Act:

A)a certificate of interest in a profit-sharing agreement
B)a transferable share
C)an investment contract
D)a certificate of deposit for a security
E)all of the other choices are considered securities under the 1933 Act

Question 45

Which of the following is NOT true about the Securities and Exchange Commission:

A)the agency is charged with the responsibility for the enforcement and administration of the federal securities laws
B)the agency is bi-partisan
C)the agency is not independent
D)the agency has five members appointed by the President for five-year terms
E)all the other choices are true of the Securities and Exchange Commission

Question 46

What is not an element in the Supreme Court's SEC v.Howey definition of securities:

A)an investment of money
B)in a common enterprise
C)with an expectation of profits
D)enterprise is managed by others
E)all of the other choices are part of the definition

Question 47

Which class of securities is (are)exempt from the federal securities laws?

A)issues by governments
B)issues by corporations with assets under $1 million
C)issues by corporations with over $1 billion in assets
D)all of the other specific choices
E)none of the other choices

Question 48

In SEC v.Howey,the Supreme Court:

A)defined a security as an investment of money in an enterprise with the expectations of profits earned by the efforts of the investor
B)was concerned with penalizing a case of fraud of investors in a large stock scam;it resulted in federal securities legislation being passed
C)held all "for profit" investments to be subject to securities regulation
D)held the sale of plots of land on a development to be a security
E)none of the other choices

Question 49

Which of the following is NOT true about the Securities and Exchange Commission:

A)the agency is charged with the responsibility for the enforcement and administration of the federal securities laws
B)the agency is not bi-partisan
C)the agency is independent
D)the agency has five members appointed by the President for five-year terms
E)all the other choices are true of the Securities and Exchange Commission

Question 50

In SEC v.Howey,the Supreme Court:

A)defined a security as an investment of money in a common enterprise with the expectations of profits being earned by the efforts of the investor
B)was concerned with penalizing a case of fraud of investors in a large stock scam;it resulted in federal securities legislation being passed
C)defined a security as an investment of money in a common enterprise with the expectation of profits being earned by the efforts of other persons
D)held the sale of plots of land in a development to be a security
E)none of the other choices

Question 51

The elements of a security,as the Supreme Court ruled in the SEC v.Howey case include:

A)an investment of money
B)an investment in a common enterprise
C)a role in managerial control
D)an investment of money in a common enterprise
E)an investment of money in a common enterprise with a role in managerial control

Question 52

Having an undivided interest in a company means that:

A)shareholders may divide up company property among themselves at any time
B)shareholders may demand a company's product equal to their investment
C)shareholders may not divide company property amongst themselves unless they liquidate the company
D)shareholders may only sell their shares if they sell all of them at once
E)none of the other choices are correct

Question 53

What is not an element in the Supreme Court's SEC v.Howey definition of securities:

A)an investment of money
B)in a common enterprise
C)where profits are earned
D)enterprise is managed by others
E)all of the other choices are part of the definition

Question 54

Scott invests money in fixing up his house,an endeavor that he expects will generate
Profits because he will be able to rent it out as a bed and breakfast run by his sister.This is not a security subject to federal regulation because:

A)Scott cannot actually make money from a bed and breakfast
B)Scott's investment is in his own property and not in a common enterprise
C)there are fewer than five people involved in the business endeavor
D)Scott's investment is in a common enterprise,since his sister is involved
E)none of the other choices are correct

Question 55

Which of the following is NOT true about the Securities and Exchange Commission:

A)the agency is charged with the responsibility for the enforcement and administration of the federal securities laws
B)the agency is bi-partisan
C)the agency is independent
D)the agency has three members appointed by Congress for three-year terms
E)all the other choices are true of the Securities and Exchange Commission

Question 56

If you own a security in a company,such as common stock in IBM,you have:

A)an undivided interest in the company
B)a security subject to federal regulation
C)the right to sell the security back to IBM in exchange for other assets
D)an undivided interest in the company and a security subject to federal regulation
E)an undivided interest in the company and a security subject to federal regulation and the right to sell the security back to IBM in exchange for other assets

Question 57

Which of the following is not considered a security under the 1933 Securities Act:

A)a treasury stock
B)a bond
C)an a collateral-trust certificate
D)a certificate of deposit for a security
E)all of the other choices are considered securities under the 1933 Act

Question 58

The 1946 case Securities and Exchange Commission v.Howey,the Supreme Court established a test to determine when an investment is a security for the purposes of federal regulation.The test has:

A)four basic elements
B)convoluted and difficult to understand terms
C)no practical applications
D)one basic element
E)two basic elements

Question 59

The definition of securities subject to federal regulation is:

A)common and preferred stocks only
B)defined in the 1940 Trust Indenture Act
C)any financial instrument reviewed by the SEC
D)any "investment of money"
E)none of the other choices

Question 60

If you own a security in a company,such as common stock in IBM,you have:

A)an undivided interest in the company
B)the right to sell the security back to IBM for cash
C)the right to sell the security back to IBM in exchange for cash or other assets
D)an undivided interest in the company and the right to sell the security back to IBM for cash
E)an undivided interest in the company and the right to sell the security back to IBM in exchange for cash or other assets

Question 61

Which of the following securities would NOT be exempt from regulation:

A)debts issued by the federal government
B)debts issued by a state government
C)debts guaranteed by a state government
D)debts issued by a local government
E)all of the other specific choices are exempt from regulation

Question 62

Which of the following is NOT included in a prospectus:

A)the security issuer's finances and business
B)the purpose of the offering
C)the plans for the funds collected
D)the risks involved in the business venture
E)all of the other specific choices would be included in a prospectus

Question 63

The term "red herring" that is used for a prospectus before it is approved by the SEC comes from:

A)the traditional red ink and reddish paper used in writing a prospectus
B)ancient Roman law traditions
C)a reference to being "in the red"
D)no one knows
E)the red paper used when the Securities Act of 1933 was enacted

Question 64

The registration requirement of the Securities Act of 1933 applies to:

A)charitable or religious organizations' securities
B)securities issued by mutual funds
C)insurance policies
D)all of the other specific choices
E)none of the other choices

Question 65

Before the final version of a prospectus is approved by the SEC,the document is called a(n):

A)shadow prospectus
B)preliminary prospectus
C)initial prospectus
D)ghost document
E)none of the other choices are correct

Question 66

The securities registration process requires all the following information to be provided to prospective investors except:

A)the security issuer's finances
B)the background of the promoters
C)plans for the funds collected from the sale
D)financial statements by certified public accountants
E)all of the other choices are required

Question 67

Which class of securities is (are)exempt from the federal securities laws?

A)issues by companies with ten-year profit records
B)issues by corporations with assets under $1 million
C)issues by corporations with over $1 billion in assets
D)all of the other specific choices
E)none of the other choices

Question 68

A(n)_____________ is a document providing the legal offering of the sale of a security.

A)prospectus
B)registration statement
C)issue
D)Howey document
E)sale form

Question 69

Before the final version of a prospectus is approved by the SEC,the document is called a(n):

A)red herring
B)preliminary prospectus
C)initial prospectus
D)ghost document
E)shadow prospectus

Question 70

The idea behind the disclosure provisions contained in federal securities law is that:

A)investors will not collect information about securities unless the government makes the information available
B)investors need sufficient and accurate information on material facts concerning securities they might buy
C)securities are generally overvalued in the absence of such information
D)the sellers of stock will rarely disclose financial data without the disclosure requirement
E)all of the other choices

Question 71

A securities registration statement consists of:

A)information about risks involved in a business venture
B)a prospectus
C)8-K reports
D)information about risks involved in a business venture and a prospectus
E)information about risks involved in a business venture and a prospectus and 8-K reports

Question 72

The idea behind the disclosure provisions contained in federal securities law is that:

A)investors will not collect information about securities unless the government makes the information available
B)the sellers of stock will not disclose financial data without the disclosure requirement
C)securities are generally overvalued in the absence of such information
D)all of the other specific choices
E)none of the other choices

Question 73

The truth-in-securities law refers to:

A)the Securities Act of 1933
B)the Securities Exchange Act of 1934
C)the Howey Act of 1933
D)the Fraudulent Securities Act of 1934
E)the Securities Exchange Commission Act of 1934

Question 74

A red herring:

A)is also known as an 8-K report
B)is also called a prospectus
C)represents an offer to sell a security
D)is a preliminary version of a prospectus
E)none of the other choices

Question 75

All the relevant information that an investor would want to know about a company
Before investing in it is known as:

A)real information
B)investment information
C)material information
D)informed information
E)security information

Question 76

Which of the following securities would NOT be exempt from regulation:

A)debts issued by the federal government
B)debts issued by a corporation with assets of more than $1 billion
C)debts guaranteed by a state government
D)debts issued by a local government
E)all of the other specific choices are exempt from regulation

Question 77

The registration requirement of the Securities Act of 1933 applies to:

A)charitable or religious organizations' securities
B)government bonds
C)insurance policies
D)all of the other specific choices
E)none of the other choices

Question 78

Which of the following securities would be exempt from regulation:

A)debts issued by the federal government
B)debts issued by a state government
C)debts guaranteed by a state government
D)debts issued by a local government
E)all of the other specific choices are correct

Question 79

A(n)_____________ is a document providing the legal offering of the sale of a security.

A)sale form
B)Security and Exchange document
C)issue
D)Howey document
E)none of the other choices are correct

Question 80

Which of the following are exempt from the Securities Exchange Act of 1933:

A)securities issued by banks
B)securities issued by religious and other charitable organizations
C)insurance policies
D)securities issued by religious and other charitable organizations and insurance policies
E)securities issued by banks and securities issued by religious and other charitable organizations and insurance policies