Deck 41: Corporations: Securities and Investor Protection

Question 1

In most situations,an issuer of securities usually files a written registration statement and a prospectus with the SEC.

Answer 1

True

Question 2

Any security offered or sold to a permanent resident of the single state where the issuer of the security resides and does business is exempt under the 1933 act.

Answer 2

True

Question 3

Securities may be sold during the prefiling period.

Answer 3

False

Question 4

If a violation of federal securities laws is serious enough to merit criminal prosecution,the Fraud Section of the Securities and Exchange Commission prosecutes the action.

Question 5

Which of the following is false regarding the Mexican Securities Market?

A)The Mexican Stock Exchange requires that dealers complete all transactions on a cash basis and settle them within a 48-hour period.
B)The Mexican Stock Exchange is a private sector corporation owned and operated by authorized brokerage dealers.
C)Existing laws permit non-Mexican entities to issue securities.
D)The National Security Commission CNV)regulates public offerings and securities trading.
E)Existing laws do not limit investments in securities outside Mexico by Mexican individuals or companies.

Question 6

Online advertising and securities transactions are subject to SEC regulations.

Question 7

Which of the following is true regarding examples of securities?

A)Warrants and stocks are securities,but debentures and bonds are not.
B)Stocks,warrants,and debentures are securities,but bonds are not.
C)Debentures,warrants,bonds,and stocks are all securities.
D)Stocks and bonds are securities,but debentures and warrants are not.
E)Stocks,warrants,and bonds are securities,but debentures are not.

Question 8

Which is the correct term for the practice of an owner of a particular stock telling other investors about the virtues of the stock,artificially increasing demand for the stock,and causing an increase in price,only to sell it for a quick profit?

A)Pumping and dumping
B)Increasing and decreasing
C)Marketing and selling
D)Inflating and deflating
E)Pushing and pulling

Question 9

are stocks and bonds issued by corporations to raise capital for corporate expansion.

A)Acknowledgements
B)Funding agreements
C)Securities
D)Stock and bond options
E)Investment options

Question 10

In Sweden,banks oversee the issuance of shares and bonds themselves.

Question 11

Government did not regulate securities prior to the Great Depression,and fraudulent transactions were common.

Question 12

In Securities and Exchange Commission v.Mutual Benefits Corp. ,the case in the text involving whether a viatical settlement investment is an investment contract under securities laws,how did the appellate court rule?

A)That a viatical settlement investment is not an investment contract because such contracts are void as against public policy.
B)That a viatical settlement investment is not an investment contract because no significant post-purchase activity takes place in such contracts,and the expectation of profits is not therefore based solely on the efforts of the promoter or a third party.
C)That a viatical settlement investment is an investment contract because no significant post-purchase activity took place,thereby establishing the dependence of profits on the presale activities of the promoter.
D)That a viatical settlement investment is not an investment contract because profit depends entirely upon the mortality of the insured.
E)That a viatical settlement investment is an investment contract in that investors were offered and sold an investment in a common enterprise in which they were promised profits that were dependent on the efforts of the promoters.

Question 13

Executive officers are not considered statutory insiders under the Securities Exchange Act of 1934.

Question 14

A person who violates the 1933 Securities Act can be fined but not sent to prison.

Question 15

The SEC issues opinions regarding the worth of securities.

Question 16

The average investor does not have to register securities when he or she wants to sell.

Question 17

The SEC may issue bounty payments to insider-trading whistle-blowers.

Question 18

Issuers are subject to either federal securities regulations or state securities laws,known as blue-sky laws,but not both.

Question 19

Laws that regulate interstate securities are called blue-sky laws.

Question 20

An investor is entitled to bring a civil suit to recover his or her losses if the investor purchased securities and suffered damages as a result of an issuer's false or misleading statement.

Question 21

Which of the following created SEC oversight over the Public Company Accounting Oversight Board to regulate public accounting firms?

A)The Sarbanes-Oxley Act of 2002
B)The National Securities Markets Improvement Act of 1996
C)The Securities Acts Amendments of 1990
D)The Market Reform Act of 1990
E)The Securities Enforcement Remedies and Penny Stock Reform Act of 1990

Question 22

Which of the following begins when the SEC declares the registration statement effective,and ends when the issuer sells all securities offered or withdraws them from sale?

A)The approved period
B)The posteffective period
C)The sell period
D)The investment period
E)The acknowledgement period

Question 23

permit qualified issuers to register securities that they will sell on a delayed or continuous basis in the future.

A)Continuous registrations
B)Delayed registrations
C)Acknowledged filings
D)Shelf registrations
E)Approved registrations

Question 24

Which of the following regulates how companies issue securities?

A)The Securities Exchange Act of 1934
B)The Oversight Act of 1935
C)The Securities Act of 1933
D)The Stock and Bond Act of 1930
E)The Depression Act of 1932

Question 25

How many individuals head the Securities and Exchange Commission?

A)20
B)5
C)25
D)10
E)50

Question 26

A[n] ________ prospectus is a prospectus with a warning written in red print at the top of the page warning investors that the registration has been filed with the SEC but has not yet been approved.

A)Advertising
B)Red-line
C)Bait
D)Red-herring
E)Red-fish

Question 27

Which of the following is true regarding exempt transactions?

A)Resales of securities and intrastate issues are exempt transactions,but limited offers are not.
B)Limited offers,intrastate issues,and resales of securities are all exempt transactions.
C)Limited offers are exempt transactions,but intrastate issues and resales of securities are not.
D)Limited offers and resales of securities are exempt transactions,but intrastate issues are not.
E)Intrastate issues and limited offers are exempt transactions,but resales of securities are not.

Question 28

Once an issuer files a registration statement and prospectus,the ________ period begins.

A)Advertising
B)Waiting
C)Approval
D)Post-filing
E)Prospectus

Question 29

How are the heads of the Securities and Exchange Commission chosen?

A)They are appointed by a majority vote of the Senate.
B)They are appointed by a majority vote of the House of Representatives.
C)They are appointed by the president.
D)They are appointed by a two-thirds vote of the Senate.
E)Each state has one appointee appointed by the governor of each state.

Question 30

________ are investment banking firms that purchase securities from the issuing corporation with the intent of selling them to brokerage houses,which then sell them to the public.

A)Offerors
B)Issuers
C)Unaccredited purchasers
D)Underwriters
E)Accredited purchasers

Question 31

Which of the following permits the SEC to exempt persons,securities,and transactions from securities regulations?

A)The Securities Acts Amendments of 1990
B)The Market Reform Act of 1990
C)The Sarbanes-Oxley Act of 2002
D)The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
E)The National Securities Markets Improvement Act of 1996

Question 32

________ is the period that begins when an issuer starts to think about issuing securities and ends when the issuer files the registration statement and prospectus with the SEC.

A)The required filing period
B)The initial filing period
C)The waiting period
D)The beginning filing period
E)The prefiling period

Question 33

Which of the following is true regarding federal acts regulating securities transactions?

A)The Securities Act of 1933 is a federal act regulating securities transactions,but the Securities Exchange Act of 1934 and the Anti-Fraud Securities Act of 2001 are not.
B)The Securities Act of 1933,the Securities Exchange Act of 1934,and the Anti-Fraud Securities Act of 2001 are all federal acts regulating securities transactions.
C)The Anti-Fraud Securities Act of 2001 and the Securities Act of 1933 are federal acts regulating securities transactions,but the Securities Exchange Act of 1934 is not.
D)The Anti-Fraud Securities Act of 2001 and the Securities Exchange Act of 1934 are federal acts regulating securities transactions,but the Securities Act of 1933 is not.
E)The Securities Exchange Act of 1934 and the Securities Act of 1933 are federal acts regulating securities transactions,but the Anti-Fraud Securities Act of 2001 is not.

Question 34

What is the term length for the head members of the Securities and Exchange Commission?

A)3 years
B)2 years
C)1 year
D)Eighteen months
E)5 years

Question 35

Profits made from the sale of company stock by a statutory insider within any six-month period are called _.

A)Short-term profits
B)Tippee payments
C)Insider profits
D)Bounty payments
E)Short-swing profits

Question 36

Which of the following oversees the purchase and sale of securities?

A)The Securities Exchange Act of 1934
B)The Stock and Bond Act of 1930
C)The Depression Act of 1932
D)The Securities Act of 1933
E)The Oversight Act of 1935

Question 37

The Securities and Exchange Commission was created by which of the following acts?

A)The Oversight Act of 1935
B)The Securities Act of 1933
C)The Securities Exchange Act of 1934
D)The Stock and Bond Act of 1930
E)The Exchange Commission Act of 1932

Question 38

Which of the following permits the SEC to seek punishment of violators of foreign securities laws?

A)The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
B)The Securities Acts Amendments of 1990
C)The National Securities Markets Improvement Act of 1996
D)The Market Reform Act of 1990
E)The Sarbanes-Oxley Act of 2002

Question 39

Which of the following allows the SEC to suspend securities trading if prices vary excessively in a short time period?

A)The Sarbanes-Oxley Act of 2002
B)The Market Reform Act of 1990
C)The Securities Acts Amendments of 1990
D)The National Securities Markets Improvement Act of 1996
E)The Securities Enforcement Remedies and Penny Stock Reform Act of 1990

Question 40

is a brief ad that may be published by an issuer during the waiting period.

A)A special offering
B)An advertisement
C)An unsolicited offering
D)A tombstone advertisement
E)An approved offering

Question 41

Which of the following is true regarding Isaiah's plan to rely on the due diligence defense?

A)He will be able to do so only if he can establish that the purchasers would have had reasonable grounds to question the prospectus had they reviewed it with due diligence.
B)He will be able to do so if he can establish that the purchasers would have had reasonable grounds to question either the registration statement or the prospectus had they reviewed them with due diligence.
C)He will not be able to use that defense unless he can establish that he reviewed the registration statement and the prospectus,and had reasonable grounds to believe that the registration statement was accurate with no omission of material facts.
D)He will not be able to rely on that defense because he is an issuer.
E)He will be able to do so only if he can establish that the purchasers would have had reasonable grounds to question the registration statement had they reviewed it with due diligence.

Question 42

Fraud associated with the purchase or sale of all securities is prohibited by which of the following?

A)Rule 2c)-5
B)Section 32c)
C)Rule 10b-5
D)Rule 5c)-2
E)Section 15b)

Question 43

Which of the following is not considered an accredited investor?

A)Any natural person who has a net worth of at least $500,000.
B)Any natural person whose annual income has been at least $200,000 for the two previous years and expects to make at least $200,000 in the current year.
C)Colleges and universities.
D)Insiders of the issuers,such as executive officers or directors.
E)Any corporation or partnership with total assets in excess of $5 million.

Question 44

Which of the following is true regarding who may be considered an insider under the Securities Exchange Act of 1934?

A)Only directors are considered insiders
B)Only employees are considered insiders
C)Only directors,officers,and majority shareholders are considered insiders
D)Directors,officers,and anyone who receives private information regarding the trading of securities may be considered insiders
E)Any shareholder is considered an insider along with all directors and all employees

Question 45

Which of the following is not an example of material information under Section 10b)and Rule 10b-5?

A)Any change in the financial status of the company.
B)A new product,process,or discovery.
C)A change in dividends.
D)A change in the status of litigation against the company.
E)A contract for the sale of corporate assets or for the purchase of assets.

Question 46

Which of the following did Congress pass in an effort to prevent exploitation of small investors?

A)The Securities Act Amendments of 1990
B)The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
C)The National Securities Market Improvement Act of 1996
D)The Investment Company Act of 1940
E)The Market Reform Act of 1990

Question 47

Which of the following is a reason Congress passed the Private Securities Litigation Reform Act of 1995?

A)To provide protection to accredited investors who trade on insider information.
B)To provide protection to insiders who trade on forecasts of earnings.
C)To provide protection to companies who issue forecasts of earnings.
D)To provide stronger penalties against companies who issue forecasts of earnings that turn out to be wrong.
E)To provide stronger penalties against insiders who trade on forecasts of earnings.

Question 48

State securities laws can also be referred to by which of the following terms?

A)Green-grass laws
B)Orange-sky laws
C)Blue-sky laws
D)Pink-sky laws
E)Brown-ground laws

Question 49

Which of the following limits shareholders' ability to bring class action suits against nationally traded companies?

A)The Sarbanes-Oxley Act of 2002
B)The National Securities Markets Improvement Act of 1996
C)The Securities Litigation Uniform Standards Act of 1998
D)The Market Reform Act of 1990
E)The Class Prohibition Act of 1997

Question 50

Which of the following is the term for the document referenced by Marc to be provided to the SEC that will be used as an advertising tool to potential investors who can rely on it to decide whether they should buy securities?

A)An advertising statement
B)A securities advertisement
C)A prospectus
D)An inventory
E)A proposed income statement

Question 51

Which of the following prohibits the use of manipulative devices to bypass SEC rules under the 1934 act?

A)Rule 25)
B)Section 5
C)Section 10b)
D)Section 15a)
E)Rule 2

Question 52

Which of the following,if any,is a securities regulation term that would describe Annaliese as an investor?

A)Sophisticated
B)Accredited
C)Superior
D)Approved
E)There is no specific term to describe Annaliese,as she is considered the same as any other investor.

Question 53

[In Trouble] Isaiah,an issuer of stock,may be in trouble.He sold stock in a new health club venture before the effective date of registration.He did so because he was in financial trouble due to other projects.Isaiah thought that the health club venture would be such a success that he would never get caught.Unfortunately,he was wrong.The health club venture has significant problems,and investors are looking for some way to hold Isaiah responsible.Another problem Isaiah has is that he inflated information regarding the prospects of the health club in the prospectus.Rafal,a new lawyer,told Isaiah that as far as he knew,Isaiah could be fined for violations under the Securities Act of 1933,but he could not be sent to prison.Isaiah told Rafal that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture.Isaiah says that he plans to rely on the due diligence defense.Isaiah also asks Rafal if he is aware of any other defenses.Isaiah says that once before he was held liable for a violation of the Securities Act of 1933,and he does not want to be in trouble again.
Is Rafal correct in that the SEC would have no authority to send Isaiah to prison?

A)Rafal is incorrect because the SEC criminally prosecutes some violators although the action would only be a misdemeanor.
B)Rafal is correct because there are no criminal penalties for violating the 1933 act.
C)Rafal is incorrect because the SEC criminally prosecutes some violators,and a violation of the act is considered a felony.
D)Rafal is correct in that the SEC itself would not send Isaiah to prison,but the SEC could recommend criminal action to the Department of Justice resulting in imprisonment for up to five years for a violation.
E)Rafal is correct in that the SEC itself would not send Isaiah to prison,but the SEC could recommend criminal action to the Federal Bureau of Investigation resulting in imprisonment for up to ten years for a violation.

Question 54

Which is the correct term for a person who controls,is controlled by,or is in common control with the issuer?

A)An associate
B)A tipper
C)An affiliate
D)A partner
E)A holder

Question 55

[Coffee Shops] Marley wants to open a chain of coffee shops but needs some investors.Her friend Marc tells her that she should be sure that she satisfies the requirements of the SEC.Marc tells her that she has to provide information to the SEC involving a description of the securities,an explanation of how proceeds will be used,information regarding the management of the company and other matters.He tells her that she also has to provide a document to the SEC that will be provided as an advertising tool to potential investors who can rely on it to decide whether they should buy the securities.Marley says that she does not want to do that.She explains to Marc that insofar as the coffee shop venture is concerned,she does not want to advertise,and she only wants to offer securities to a limited number of wealthy friends.Particularly,she has her friend Annaliese in mind,who has a net worth of at least $3 million.
Which of the following is the term for the document referenced by Marc which contains information provided to the SEC including a description of the securities,an explanation of how proceeds will be used,information regarding the management of the company and other matters?

A)Marc was wrong,and there is no such document.
B)A reference statement.
C)A confirmation statement.
D)A registration statement.
E)An acknowledgement statement.

Question 56

Which of the following is not a requirement for the application of the exemption involving intrastate issues?

A)Issuers must plan to use at least 80 percent of the profits within the state.
B)Issuers must do at least 80 percent of their business within the state.
C)Issuers must conduct at least 80 percent of advertising in the state.
D)Issuers must have at least 80 percent of their assets within the state.
E)Issuers must have their main offices in the state.

Question 57

Which of the following is true regarding the case opener,the case in which Martha Stewart was charged with insider trading after selling stock in a company based on information that her stockbroker gave her that the CEO of the company and his daughter had just sold all of their company stock?

A)She was not convicted of insider trading,but she went to prison for convictions relating to statements made to SEC investigators.
B)Charges were dismissed after she agreed to repurchase all shares of stock.
C)She was not convicted of insider trading and sentenced to prison.
D)She pled guilty to lesser offenses on all counts,paid a large fine,and all charges were dismissed.
E)After a jury trial she was found innocent of insider trading and did not go to prison for anything.

Question 58

Which of the following references profit made by a statutory insider from the purchase and sale of their own company stock within a six-month period?

A)Insider profits
B)Short-term profits
C)Contempt profits
D)Short-swing profits
E)Insider profiting profits

Question 59

Assuming requirements are satisfied,which of the following,if any,may allow Marley to avoid registration with the SEC if she proceeds with her plan to offer securities only to friends without advertisement?

A)The private placement exemption
B)The limited exemption
C)The accredited exemption
D)The unadvertised exemption
E)There is no such exemption to registration requirements

Question 60

Which of the following is true regarding Isaiah's sale of securities before the effective date of registration?

A)He will be able to avoid liability if he can establish that the investors who purchased stock early were aware that the securities were sold before the effective date of registration.
B)It is not a violation of the securities laws.
C)He will be able to avoid liability if he can establish that the sales before the effective date did not directly result in any losses to investors.
D)He will almost certainly be liable because the 1933 act provides no defenses for that violation.
E)He will be able to avoid liability if he can establish the due diligence defense.

Question 61

[RockOut Investors] Kassie,the president of RockOut,Inc. ,intends to line up celebrities in the music industry to invest in her recording company.Kassie has targeted 70 individuals to whom RockOut will make the private offer,although she knows not all of them are millionaires.Kassie is thrilled when her attorney tells her she does not have to register with the SEC and she does not have to waste her time providing financial information,in fact,the SEC does not ever have to be involved because it is a private offering.Kassie's attorney also suggests spreading the word about the securities in an effort to obtain more investors.
Is Kassie's attorney correct that she does not have to register with the SEC?

A)Yes,but only if she has no more than 55 unaccredited investors.
B)Yes,but only if she has no more than 65 unaccredited investors.
C)Yes,the private placement exemption allows firms to issue an unlimited number of securities to an unlimited number of accredited investors.
D)Yes,but only if she has no more than 35 unaccredited investors.
E)Yes,the private placement exemption allows firms to issue an unlimited number of securities to an unlimited number of investors.

Question 62

Should Kassie take her attorney's suggestion to spread the word about the securities so she can obtain more investors?

A)Yes,as long as she does not exceed thirty-five unaccredited investors.
B)No,issuers who make private offerings cannot advertise the securities to the general public.
C)Yes,as long as she does not exceed thirty-five total investors.
D)Yes,as long as she does not exceed thirty-five accredited investors.
E)Yes,the private placement exemption,allows firms to issue an unlimited number of securities to an unlimited number of accredited investors.

Question 63

Considering Aurelia provided information about the asset sale to Johan,which of the following terms best describes Aurelia's role?

A)Tippee
B)Tipper
C)Provider
D)Providee
E)There is no descriptive term for Aurelia because she did nothing wrong.

Question 64

Considering Johan provided information about the asset purchase to Charlie,which of the following terms best describes Johan's role?

A)Providee
B)Tippee
C)Tipper
D)Provider
E)There is no descriptive term for Johan because he did nothing wrong.

Question 65

Is Kassie's attorney correct that she does not have to provide financial information contained in the registration statement because the proposed offering is a private placement offering?

A)If Kassie offers securities to any unaccredited investor,then she must provide all investors with the basic information that would be contained in a registration statement.
B)If Kassie offers securities to any unaccredited investor,then she must provide the unaccredited investors with the basic information that would be contained in a registration statement.
C)She does not have to disclose any information because it is a private offering.
D)If Kassie offers securities to any investor,then she must provide all investors with the basic information that would be contained in a registration statement.
E)All issuers must,at a minimum,disclose the information that would have been in a registration statement.

Question 66

For which of the following is Aurelia liable?

A)Her profits only plus a 10% penalty.
B)Her own profits only.
C)Her profits,the profits of Johan,and also the profits of Charlie.
D)Her profits and those of Johan only.
E)Nothing because she acted legally.

Question 67

Which of the following statements is false about securities and securities regulation?

A)The government heavily regulates securities.
B)Securities regulation is relatively new.
C)Without securities regulations,corporations could easily commit fraud by issuing securities and refusing to repay them.
D)Congress passed securities laws after the stock market crash in 1929.
E)A security has intrinsic value.

Question 68

Which of the following statements is not a responsibility of the SEC?

A)Regulation of the activities of brokers,dealers,and advisers.
B)Adoption of rules to regulate securities transactions.
C)Enforcement of securities laws.
D)Criminal prosecution of alleged violations.
E)Regulation of trades on securities exchanges.

Question 69

If a company has consistently satisfied registration requirements,do they receive any benefit for future registrations?

A)Yes,the registration requirements are waived for any company that has satisfied the requirements in the past.
B)No,the SEC does not monitor past registrations.
C)No,they are subject to the same strict requirements.
D)Yes,the filing fees are waived.
E)Yes,the registration requirements are more relaxed.

Question 70

If Valley Vineyard is not required to register with the SEC,how much capital can it raise?

A)Valley Vineyard can raise up to five million dollars.
B)Valley Vineyard can raise up to one million dollars.
C)Valley Vineyard can raise up to five million dollars the first year,and then it is unlimited.
D)There is no limit.
E)Valley Vineyard can raise up to ten million.

Question 71

Considering Johan received the information from Aurelia and acted upon it by purchasing stock,which of the following terms best describes Johan's role?

A)Providee
B)Provider
C)Tipper
D)Tippee
E)There is no descriptive term for Johan because he did nothing wrong

Question 72

Was Alessia's press release prior to the filing of her registration document and prospectus permissible?

A)Yes,an long as it was not an express offer to sell securities.
B)Yes,as long as the information was truthful.
C)Yes,as long as the information included the names of the underwriters.
D)No,because it did not go to all prospective shareholders.
E)No,an issuer cannot offer to sell securities during the prefiling period.

Question 73

[Cosmetic Securities] Alessia,the President of Quik Cosmetics,wanted to take her company public.She begins meeting with underwriters and sends out a press release mentioning the potential issuance of securities.She then files a registration document and prospectus.In her registration document,she described the securities,how the money from the sale of the securities will be used,described her business and property,and included information about a pending lawsuit in the process of being settled.
What information is missing from Quik Cosmetics' registration statement?

A)Information about the management of the company and financial statements certified by an independent public accountant.
B)Financial statements certified by an independent public accountant.
C)Information about the management of the company and financial statements certified by the board of directors.
D)Information about the management of the company.
E)No information is missing.

Question 74

[Presidential Profits] Aurelia was president of a publicly traded tractor company,Tough Tractors.Aurelia became aware that stock in her company would likely increase significantly in value because her company had a contract to purchase the assets of Rough Tractors.The boards of both companies wanted the information kept confidential until the purchase was complete and a news release was made.Before the news was made public,Aurelia immediately purchased a significant number of shares in Tough Tractors.Aurelia also told her friend Johan about the contract to purchase assets although she told him to keep it quiet because it had not been made public yet.Nevertheless,unable to keep a secret,Johan told his brother,Charlie.Johan and Charlie purchased a number of shares of stock in Tough Tractors prior to any public announcement of the sale.After the public announcement was made and the purchase of assets went through,Aurelia,Charlie,and Johan all sold their shares in Tough Tractors and made a nice profit.
By purchasing the shares after she found out about the merger,in which of the following prohibited practices,if any,was Aurelia engaged?

A)Officer profiting
B)Presidential trading
C)Outlaw trading
D)Insider trading
E)She did not engage in any prohibited practices because as president,she had the legal right to profit from the upcoming sale.

Question 75

For which of the following is Charlie liable?

A)His own profits and also the profits of Johan.
B)Only his own profits and those of Aurelia.
C)Only his own profits and then only if it can be shown that he knew or should have known that the material information was not public.
D)His own profits regardless of whether he knew he was trading in information that had not been made public.
E)His own profits and also the profits of both Johan and Aurelia.

Question 76

[Vineyard Development] A community group in Montana wanted to revitalize the area and held a meeting urging residents to invest in local businesses.After the meeting,Mai and Trent,who own Valley Vineyard,decide to expand by adding a spa and first-class restaurant to the property to attract tourists.They plan to raise capital for the vineyard development by issuing securities to local investors.All of Valley Vineyard's property and assets are in Montana and their wine sales are about 85% to stores,consumers,or distributors within the state.Once the spa and restaurant are running,they would like to use their profits to open a small wine-bar in Florida.
Are the Valley Vineyard securities exempt from registration with the SEC?

A)Yes.
B)Yes,but only if the securities are offered or only sold to permanent residents of Montana.
C)No,because they want to use their profits outside Montana.
D)No,because they plan to open a business in Florida.
E)Yes,but only if the securities are offered or only sold to permanent residents of Montana and they plan to use at least 80% of the profits within Montana.

Question 77

Were Alessia's negotiations with underwriters permissible?

A)Yes,but only if the negotiations occurred within the sixty days prior to filing the registration document.
B)Yes,but only if the negotiations occurred within the thirty days prior to filing the registration document.
C)Yes,but only if the negotiations occurred after filing the registration document.Yes,but
D)No,an issuer cannot negotiate with underwriters prior to the filing of the registration document.
E)Yes.

Question 78

Which of the following,if any,may be defenses for Isaiah?

A)Except for the violation of selling securities before the effective registration date,Isaiah could raise the defense that a plaintiff was aware of the omission or false statement when the security was purchased;but no defense is available based on the theory that omitted or false statements were immaterial to the sale of the security.
B)No defenses are available to Isaiah because he had already been held liable to the SEC once.
C)For any alleged violations,Isaiah could raise the defense that a plaintiff was aware of the omission or false statement when the security was purchased;but no defense is available based on the theory that omitted or false statements were immaterial to the sale of the security.
D)Except for the violation of selling securities before the effective registration date,Isaiah could raise the defenses that a plaintiff was aware of the omission or false statement when the security was purchased,and that any omitted or false statement was immaterial to the sale of the security.
E)For any alleged violations Isaiah could raise the defenses that a plaintiff was aware of the omission or false statement when the security was purchased,and that any omitted or false statement was immaterial to the sale of the security.

Question 79

Is Kassie's attorney correct that the SEC does not have to be involved because this is a private placement situation?

A)No,under the private placement exemption,while issuers do not have to register securities with the SEC,issuers must notify the SEC of any sales made under the exemption.
B)No,under the private placement exemption,issuers must register securities with the SEC and notify the SEC of any sales made under the exemption.
C)Yes,under the private placement exemption,issuers do not have to register securities with the SEC.
D)Yes,under the private placement exemption,issuers are permitted,but not required,to notify the SEC of any sales made under the exemption.
E)No,under the private placement exemption,issuers must either register securities with the SEC or notify the SEC of any sales made under the exemption.

Question 80

The Board of Directors of Faith Church,Inc.wants to issue securities to raise funds.Its attorney tells the Board that it does not need to file a registration document with the SEC.Is the attorney correct?

A)Yes,even though the securities themselves are not exempt,the transaction is exempt.
B)Yes,because securities can only be issued by a corporation.
C)No,securities issued by governmental bodies are exempt,securities issued by non-profit organizations are not.
D)No,because the transaction is not exempt.
E)Yes,because the securities are exempt because the issuer is a non-profit organization.