BLaw Chap 42

Mars Mission Inc. is a regulated publicly held corporation. Under the Securities Act of 1934, Mars is required to contribute to the operations of national stock exchanges. disclose information about its organization and financial situation. engage in market surveillance to deter undesirable practices. all of the choices.

disclose information about its organization and financial situation.

Ewan, the chief executive officer of Furniture Inc., intentionally understates the amount of the firm's debts in information provided to investors as part of an issue of stock. Gary buys the stock and suffers a loss. Ewan may be subject to government prosecution and a private investor's suit. negative publicity but no criminal prosecution or civil suit. only government prosecution. only a private investor's suit.

government prosecution and a private investor's suit.

Eli, an officer for Food Stores Inc., buys 10,000 shares of its stock. One week later, the company announces that it will merge with a competitor, Grocery Mart Corporation, and the price of Food Stores' stock increases. One month later, Eli sells his shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Eli would not be liable if, after buying the stock, he had waited less than fourteen days to sell it. more than six months to sell it. ninety days to sell it. two months to sell it.

more than six months to sell it.

The goal of securities regulation is to contribute to the operations of national security exchanges. prohibit deceptive and manipulative practices in the securities markets. prescribe ways and means for investors to fairly break the rules. none of the choices.

prohibit deceptive and manipulative practices in the securities markets.

Debt Equity Inc., and its officers, directors, and employees, buy and sell securities based on financial research and analysis. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving corporate insiders, such as officers, directors, and employees. misappropriation of material, nonpublic information. short-swing profits. tippers and tippees.

short-swing profits.

Spectrum Paints Inc. is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, the firm is subject to the direct corporate governance requirements of any other public company with which the firm exchanges shares. any state in which the firm does business. the federal government. the state in which the firm incorporated.

the federal government.

Space Flight Inc. files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. The firm is charged with violating the Securities Act of 1933. Its best defense is the investors were not aware of the misrepresentations. the issuer reasonably believed the misstatements were true. the offering was made available to the general public. the untrue statements were not material.

the untrue statements were not material.

Home Stuff Corporation is poised to issue securities that, under the Securities Act of 1933, are exempt. This means that the securities can be sold only after being registered. on the basis of nonpublic information. within any six-month period by certain insiders. without being registered

without being registered

Dez is the chief financial officer of Elements Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Dez must personally certify that the statements are accurate. delegate the responsibility for preparing the statements. deliver the statements to the appropriate SEC officer. prepare the statements.

certify that the statements are accurate.

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries Inc. has assets of more than $50 million and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to Fresh Fruit and Gourmand Pastries. Fresh Fruit only. Gourmand Pastries only. neither Fresh Fruit nor Gourmand Pastries.

Gourmand Pastries only.

As part of a stock offering for Design Media Corporation, the firm's accountant Eve intentionally misrepresents material facts in the prospectus. Fred buys the stock unaware of the misrepresentation and suffers a loss. Eve may be subject to none of the choices. job termination but no other sanctions, penalties, or liability. a fine, imprisonment, and damages. professional censure but no criminal sanctions or civil liability.

a fine, imprisonment, and damages.

Household Products Corporation wants to make an offering of securities to the public. The offering is not exempt from registration under the Securities Act of 1933. Before the firm sells its securities, it must provide investors with a forward-looking financial forecast. an investment contract. a prospectus. a statement that the securities for sale are worth the price.

a prospectus.

Meat Packers Inc. offers its securities for sale only in a single state. The law in this state is like the law in most states. Thus, the company's offer is subject to the state's securities statutes, which are likely to include antifraud provisions. registration provisions. disclosure requirements. all of the choices.

all of the choices.

Corporate Financial Inc., and its officers, directors, employees, and shareholders, buy and sell securities on behalf of themselves and their clients. SEC Rule 10b-5 applies to the purchase or sale of a security by the corporation only. a security involving a corporate insider only. a security involving short-swing profits only. any security.

any security.

Reno, an engineer for Shale Corporation, learns that the firm will increase the dividend it pays to shareholders. Reno buys 10,000 shares of company stock. When the dividend is announced to the public and the price of the stock increases, he sells the shares for a profit. He would not be liable for insider trading if the information about the dividend was material when he sold the stock. available to the public after he bought the stock. available to the public before he bought the stock. forward-looking when he bought the stock.

available to the public before he bought the stock.

Bev is the chief executive officer of Chef Cafés Inc., which is required to file certain financial reports with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Bev must certify that the reports are complete and accurate. designate a corporate official to assume liability for inaccuracies. do nothing. read the reports and be prepared to answer questions about them.

certify that the reports are complete and accurate.

Components Assembly Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that the company must file a registration statement with the SEC. issue the securities through an online registration site. refrain from issuing the securities to unregistered investors. register the securities with a national securities exchange.

file a registration statement with the SEC.

Furnaces & Filters Inc. is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that the firm's financial results are accurate and timely, its senior officers must set up and maintain internal "disclosure controls and procedures." external "release and reveal timetables." personal "peruse and review liability policies." public "information and discussion forums."

internal "disclosure controls and procedures."

Cam, an accountant for Discount Inc., learns that the company's soon-to-be-announced quarterly sales figures exceed analysts' expectations. Cam tells Ed, who tells Frye, who buys 100 shares of the company's stock. Frye knows that Ed got the information from Cam. When Discount publicly announces the figures, Frye sells the stock for a profit. Under the Securities Exchange Act of 1934, Ed is most likely liable for insider trading. not liable because Ed did not prevent others from profiting. not liable because Ed did not misappropriate any information. not liable because Ed does not work for Discount.

liable for insider trading.

Luan, a programmer for Monetized Nation Inc., a business modeling service, learns of undisclosed company plans to distribute a new app. Luan reveals the company plans to a friend, Ono, who buys 5,000 shares of the firm's stock. Under the Securities Exchange Act of 1934, Ono is most likely liable for insider trading. not liable because Ono did not prevent others from profiting. not liable because Ono did not solicit information from Luan. not liable because Ono does not work for the firm.

liable for insider trading.

Ross, a sales executive with Steel Mill Inc., learns of undisclosed company plans to produce a new type of steel. Ross tells Tim, who tells Uri, who buys 100 shares of Steel Mill stock. Uri knows that Tim got the information from Ross. When the firm publicly announces its new product, Uri sells the stock for a profit. Under the Securities Exchange Act of 1934, Uri is most likely liable for insider trading. not liable because Uri is only a tippee, not a tipper. not liable because Uri is too far removed from the initial disclosure. not liable because Uri traded on the basis of a material fact.

liable for insider trading.

Chris, a coder for Drones Inc., learns of undisclosed company plans to market a new, smart drone. Chris buys 10,000 shares of the firm's stock. If Chris is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of the stock was a forward-looking forecast. not material. not yet public. not yet true.

not yet public.

United Delivery Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, United Delivery is required to buy or sell its securities only on a national security exchange. register its securities transactions unless they qualify for an exemption. invest its own managerial or entrepreneurial efforts. issue instruments representing corporate ownership or debt.

register its securities transactions unless they qualify for an exemption.

Orbital Flights Inc. is required to register its securities under Section 12 of the Securities Exchange Act of 1934. This means that, with respect to Orbital, Section 16(b) of the act covers the declaration of dividends by Orbital's board of directors. the later re-registration of Orbital's securities. the short-swing activities of Orbital's insiders. the solicitation of proxies from Orbital's shareholders

the short-swing activities of Orbital's insiders.

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates the declaration of dividends by the firm's board of directors. the later re-registration of the firm's securities. the short-swing activities of the firm's insiders. the solicitation of proxies from the firm's shareholders.

the solicitation of proxies from the firm's shareholders.