BLaw 2 - Ch. 41 Quiz
Which of the following is NOT true about offerings exempt from registration?
Exempt transactions that do not have to be registered with the SEC are not subject to the antifraud provisions of the federal securities laws. True: - The issuer of exempt securities must provide investors with adequate information, such as annual reports, quarterly reports, proxy statements, financial statements, and so on, even though a registration statement is not required. - Securities sold pursuant to an exempt transaction do not have to be registered with the SEC. - The sale of securities not exceeding $1 million during a 12-month period is exempt from registration. - Exempt transactions that do not have to be registered with the SEC are subject to the antifraud provisions of the federal securities laws.
Under the _____ test, an arrangement is considered an investment contract if there is an investment of money by an investor in a common enterprise and the investor expects to make profits based on the sole or substantial efforts of the promoter or others.
Howey
Which of the following is NOT true regarding Regulation A+ offerings?
Most Regulation A+ offerings are done through online equity crowdfunding platforms such as SeedInvest and StartEngine, which handle the logistics of the offering and accept investments online. True: - Prior to conducting a Regulation A+ offering, or even submitting Regulation A+ offering materials to the SEC, the proposed issuer can test the waters to see whether there is sufficient interest to proceed with a Regulation A+ offering. - Purchasers of Regulation A+ securities may sell their shares without limitation. - The issuer does not need to file an offering circular. - If sufficient interest exists, the company would probably proceed with the offering, but if sufficient interest did not exist in the marketplace, the company would probably not make the offering.
Which of the following is an INCORRECT statement regarding mutual funds?
Mutual funds are not sold to the public. Correct: - Mutual funds are restricted from investing in risky investments. - Mutual funds make investments in stocks and bonds for the long term. - Mutual funds sell shares to the public. - Mutual funds must be registered with the SEC.
Which of the following is an example of an e-security exchange?
NASDAQ
The _____ is a federal statute that regulates primarily the issuance of securities by corporations, limited partnerships, and associations.
Securities Act of 1933
The _____ is a federal administrative agency that is empowered to administer federal securities law.
Securities and Exchange Commission (SEC)
Which of the following is NOT true about SEC actions under the Securities Exchange Act of 1934?
The SEC may not require defendants to disgorge illegally gained profits. True: - The Insider Trading Sanctions Act permits the SEC to obtain a civil penalty of up to three times the illegal profits gained or losses avoided through insider trading. - The SEC may enter into consent decrees with defendants. - The SEC may seek injunctions in U.S. district court against respondents. - The SEC may investigate suspected violations of the Securities Exchange Act of 1934.
Private parties who have been injured by certain securities violations may bring a civil action against the violator under Section 12 of the Securities Act of 1933. What remedies are available?
They may rescind the purchase or sue for damages.
Which of the following is NOT an example of a statutorily defined security?
a bond Statutorily defined security: - a deposit receipt for foreign securities - a pre-organization subscription agreement - an interest in gas rights - an interest in oil rights
Which of the following is NOT a security?
a check Is a security: - a debenture - a bond - common stock - preferred stock
Which of the following is NOT a security?
a promissory note Is a security: - a warrant - common stock - a debenture - an investment contract
Which of the following is NOT an example of a common security?
a warranty Common securities: - preferred stock - a bond - a warrant - a debenture
Which of the following issuers qualifies as a "well-known seasoned investor (WKSI)"?
an issuer who has issued at least $700 million of outstanding equity securities owned by non-affiliate investors
Which of the following issuers qualifies as a "well-known seasoned investor (WKSI)"?
an issuer who has issued $1 billion of securities in the previous three years
Which of the following is NOT a major responsibility of the Securities and Exchange Commission (SEC)?
determining the par value of publicly-traded securities Major Responsibilities: - bringing a civil action to recover monetary damages from violators of securities laws - investigating alleged securities violations and bringing enforcement actions against suspected violators - adopting regulations that further the purpose of the federal securities statutes - regulating the activities of securities brokers and advisors
The JOBS Act creates a new class of public company and a new category of issuer under federal securities laws called the _____ company.
emerging growth
An issuer may be a new company that is selling securities to the public for the first time. This is referred to as _____.
going public
The _____ is/are a written disclosure document that must be submitted to the SEC along with the _____ and given to prospective purchasers of the securities.
preliminary prospectus; registration statement
Most states have enacted securities laws. State securities laws generally require the registration of certain securities, _____________________, and contain broad antifraud provisions. State securities laws are usually applied when _______________ companies are issuing securities within that state. The _________________ has been adopted by many states, which coordinates state securities laws with federal securities laws.
provide exemptions from registration; smaller; Uniform Securities Act
Jackie is the president of a corporation and a statutory insider. On February 1, she purchases 2,000 shares of her employer's stock at $10 per share. On June 1, she sells the stock for $14 per share. Under Section 16 of the Securities Exchange Act of 1934, the corporation may ________.
recover the $8,000 profit because the trades occurred within 6 months of each other
Securities that are exempt from registration with the SEC include all EXCEPT which of the following?
securities that can be classified as either common stock or preferred stock Includes: - securities issued by non-profit issuers, such as religious institutions, charitable institutions, and colleges and universities - securities issued by any government in the United States - short-term notes and drafts that have a maturity date that does not exceed nine months - securities of financial institutions that are regulated by the appropriate banking authorities
A registration statement must include all EXCEPT which of the following?
the articles of organization of the issuing company Must Include: - how the proceeds from the offering will be used - the compensation of the registrant's management - the stock options and benefits of the registrant's management - pending litigation
A registration statement must include all EXCEPT which of the following?
the mission statement and vision statement of the issuing company Must Include: - the securities being offered for sale the registrant's business - the management of the registrant - how the proceeds from the offering will be used
A registration statement must include all EXCEPT which of the following?
the name and address of the registered agent of the issuing company Must Include: - any special risk factors - how the proceeds from the offering will be used - the degree of competition in the industry - government regulation
A whistleblower bounty program allows a person who provides information that leads to a successful SEC action in which more than _____ is recovered to receive _____.
$1 million; 10 to 30 percent of the money collected
The SEC has adopted the Small Company Offering Registration (SCOR) for companies proposing to raise _____ or less in any _____ period from a public offering of securities.
$1 million; one-year
The JOBS Act amends Regulation _____ to permit non-reporting companies to sell up to _____ of securities to the public during a _____ period.
A; $50 million; one-year
_____ trading occurs when a company employee or company advisor uses material _____ information to make a profit by trading in the securities of the company.
Insider; nonpublic
Which of the following is NOT true regarding crowdfunding?
Non-U.S. companies can use crowdfunding in the U.S. True: - Crowdfunding is used by entrepreneurs and small businesses to raise small amounts of capital by selling securities to public investors using online portals. - The JOBS Act created a new funding mechanism called crowdfunding. - Crowdfunding is used by companies that do not want to meet the requirements and expense of issuing securities pursuant to a registered offering. - Crowdfunding offerings are subject to the Securities Act of 1933.
A person who discloses material nonpublic information to another person is called a(n) _____, while a person who receives such information is known as a(n) _____.
tipper; tippee
