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Exam 41: Corporations: Securities and Investor Protection

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Question 21

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

A) 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.
B) 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.
C) 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.
D) 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.
E) 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.

F) A) and D)
G) C) and D)

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Question 22

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Which of the following terms means that qualified issuers can register securities that they will sell "off the shelf" on a delayed or continuous basis in the future?

A) Shelf delayed securities
B) Registrations off the shelf
C) Determined registrations
D) Shelf registrations
E) Delayed Filings

F) A) and D)
G) A) and C)

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Question 23

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________ 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.

[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. -DotCom, Inc., told an investor that it had hired an investment firm to take the company public. However, DotCom had not in fact hired an investment firm and instead went bankrupt a year after the investor's purchase of significant shares. When the investor sues, DotCom claims that its prospectus includes the cautionary statements required by law, and thus cannot be held liable under the safe harbor provision of the Private Securities Litigation Reform Act. Would DotCom likely be held liable for the investor's loss?

Describe what a registration statement filed with the SEC generally contains.

When does a waiting period begin?

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

Securities and Exchange Commission members serve ________.

Which of the following is true regarding examples of securities?

To prevent exploitation of ________, Congress passed the Investment Company Act of 1940.

A person who violates the 1933 Securities Act can be fined and sent to prison for up to 5 years.

For which of the following is Aurelia liable?

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

A security includes all but which of the following?

[Wrongful Discharge] Monique worked as an administrative assistant for B&B Corporation. According to paragraph 16 of B&B's employee handbook's progressive discipline policy, an employee whose performance is unsatisfactory may be discharged if no improvement is shown within thirty days after receiving a written warning. Monique was having difficulty learning the software program required for her job. On July 1, she met with her supervisor, who told her that her performance needed improvement and gave her a written warning which referenced paragraph 16 of the employee handbook. Monique stayed up late each night trying to learn the new program. She was away from her job for one week for jury duty. On her return to work from jury duty on July 20, Monique was terminated for poor performance. Monique called B&B's Human Resources Department, but was told she has no case for wrongful discharge because she was an employee-at-will and can be terminated at any time for any reason. -In Sweden, banks oversee the issuance of shares and bonds themselves.

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

List the four major responsibilities of the SEC as set forth in the text.

[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. -Under the Private Securities Litigation Reform Act of 1995, publicly held issuers of publicly held securities cannot be held liable when actual corporate earnings fall short of forecasted earnings as long as ________.

[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. -The concept of ________ is based on the misappropriation theory of tort law.

[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 provide financial information contained in the registration statement because the proposed offering is a private placement offering?