Interactives Chapter 16 (LEB)

____ laws are common name for state securities statutes that are based on the Uniform Securities Act.

Blue-sky

Carla is an accountant for WillCo, a hypothetical company. In the course of her employment, she discovers that WillCo's application for a patent has been approved. Before the news is announced publicly, she calls her neighbor Sam and tells her about the patent and to buy as much WillCo stock as possible. The two agree to split any profit. After the patent news is announced, WillCo's stock prices doubles. Which of the following is true?

Carla and Sam both violated rule 110(b)(5)

Which of the following is an example of a debt instrument?

Debenture

Which instruments provide the investor with a return based on profitability of the company? I. Preferred stock II. Common stock III.Profit stock IV. Performance stock

I AND II

Which of the following are considered debt instruments? I. Bonds II. Common stock III. Preferred stock IV. Promissory notes

I and IV

The Securities Act of 1934 (the '34 Act) requires disclosures related to: I. Issuance of securities. II. Financial performance of the company. III. Corporate governance procedures. IV. Initial public offerings.

I. and III.

Which of the following are NOT considered equity instruments? I. Bonds. II. Common stock. III. Preferred stock. IV. Promissory notes.

I. and IV.

The '34 Act regulates the relationship between existing shareholders and the corporation by requiring disclosures related to: I. Issuance of securities. II. Financial performance of the company. III. Any changes since the last report that increase or decrease risk. IV. Exemption status.

II. and III.

The Securities Act of 1934 (the '34 Act) requires public companies to make certain periodic disclosure reports related to: I. Issuance of securities. II. Financial performance of the company. III. Corporate governance procedures. IV. Initial public offerings.

II. and III.

Which instruments do not provide the investor with a return based on profitability of the company? I. Preferred Stock II. Common Stock III. Bonds. IV. Debentures

III. and IV.

What is used when a company is issuing securities to the public market for the first time?

IPO

Oliver is an accountant for WillCo (a hypothetical company). In the course of his employment, he discovers that WillCo's application for a patent has been approved. Before the news is announced publicly, he calls his neighbor Carlos and tells him about the patent and to buy as much WillCo stock as possible. The two agree to split any profit. After the patent news is announced, WillCo's stock price doubles, but Carlos's purchase was too late, and he didn't make a profit. Which of the following is true?

Oliver and Carlos both violated rule 10(b)(5)

The ___ is an independent administrative agency charged with regulating issuance and trading of securities.

Securities and Exchange Commission

The ___ is an independent body that is responsible for federal securities regulation, adjudication, and administration.

Securities and Exchange Commission

What independent administrative agency is charged with oversight of issuing and trading of securities?

Securities and Exchange Commission

If a corporation fails, preferred stockholders are ___ of common stockholders when trying to recover their losses.

ahead

State securities laws are commonly known as ___ laws.

blue-sky

The Uniform Securities Act is the model for state-level securities laws. These statutes are commonly known as _______ laws.

blue-sky

For corporations that wish to raise capital through a long-term debt instrument, _____ are one such instrument.

bonds

Which of the following are considered equity instruments?

common stock and preferred stock

For a variety of reasons, such as economic and legal, most businesses offer their securities on a(n) ___ basis.

exempt

Most businesses offer their nonpublic securities offerings on a(n) ___ basis as provided for in the '33 Act.

exempt

Under the '33 Act, certain smaller offerings are ___ from registration.

exempt

A Company goes "public" through the use of a(n) _____, when it sells its voting common shares for the first time to outside investors.

initial public offering

A company issuing securities to the public market for the first time does so through a(n) _____.

initial public offering

In the ____ market, issuers raise capital by selling securities in public markets or in private placements.

primary

Securities transactions occur in two settings. One is the original and reissuance of securities by a business to raise capital also known as the ___________ market.

primary

The Private Securities Litigation Reform Act (PSLRA) of 1995 provides a(n) ____ from shareholder lawsuits alleging that overly optimistic forecasts made by a company's executives were misrepresentations.

safe habor

So long as the principals acted in good faith and disclosed all relevant material, the company is provided a(n) ___ from litigation based on overly optimistic forecasts by a company's executives via the Private Securities Litigation Reform Act of (PSLRA) of 1995.

safe harbor

The Private Securities Litigation Reform Act (PSLRA) of 1995 made it more difficult to pursue litigation based solely on overly optimistic forecasts by a company's executives by providing a(n) ____.

safe harbor

One of the two types of security transactions is purchase and sale of securities between investors. This is known as the ____ market.

secondary

Corporations raise capital by issuing _______ to investors wanting to earn a fixed rate of return.

shares

For investors wanting to earn a fixed rated of return rather than a return based on profitability, companies may raise capital by issuing ____.

shares

Although both common stockholders are preferred stockholders share in the profits, common stockholders are ______ to preferred stockholders.

subordinate

Although common stockholders share in the profits, they are ____ to all creditors if the company fails.

subordinate