Law Final

study of right and wrong behavior; whether an action is fair, right or just.

Ethics

The two or more firms were competitors before the merger

Horizontal Merger

A share of stock: a. is a share in the future profits (if any) of a company b. must be guaranteed a minimum rate of return by the issuer c. may be redeemed for purchase price d. is a share in the future profits (if any) of a company and may be redeemed for purchase price

a. is a share in the future profits (if any) of a company

Insider trading is: a. the buying or selling of stock by persons who have access to information, not yet revealed to the public, that affects the value of the stock b. only the buying of stock by persons who have access to information, not yet revealed to the public, that affects the value of the stock c. only the selling of stock by persons who have access to information, not yet revealed to the public, that affects the value of the stock d. stock trades inside a one-year time period by directors e. none of the other choices

a. the buying or selling of stock by persons who have access to information, not yet revealed to the public, that affects the value of the stock

The federal agency that has the most to do with regulation of the securities markets is the: a. Department of Justice b. Securities and Exchange Commission c. Federal Reserve Board d. Federal Securities Commission

b. Securities and Exchange Commission

The idea behind the disclosure provisions contained in federal securities law is that: a. investors will not collect information about securities unless the government makes the information available b. investors need sufficient and accurate information on material facts concerning securities they might buy c. securities are generally overvalued in the absence of such information d. the sellers of stock will rarely disclose financial data without the disclosure requirement

b. investors need sufficient and accurate information on material facts concerning securities they might buy

A new or an existing company may be financed by: a. equity b. U.S. Treasury bonds c. debt and equity and U.S. Treasury bonds d. debt and equity

d. debt and equity

Suppose there has been securities fraud in the preparation of materials sent to investors, who then lose money. Potentially, which of the following MAY be liable? a. directors of the company b. accountants, lawyers and other professionals who helped prepare the material c. directors of the company and high-level officers of the company d. directors of the company and high-level officers of the company and accountants, lawyers and other professionals who helped prepare the material

d. directors of the company and high-level officers of the company and accountants, lawyers and other professionals who helped prepare the material

o Is a share in the future profits (if any) of a company

• A Share of Stock:

o Investors need sufficient and accurate information on material facts concerning securities they might buy

• Disclosure Provisions contained in federal securities law is that:

o Investment of money in a common enterprise o Investment of money-investor gives another o Investment with expectation of profit o Investment generalized by efforts of persons other than the investors-investor has no direct control

• Elements of a Security as ruled by SEC v. Howey (Howey Test) include:

o Prohibits discrimination based on: Race, sex, color, religion, origin, marital status, receipt of public benefits

• Equal Credit Opportunity Act

o Cannot call you after you get a Lawyer

• Fair Debt Collection Act

Permission by a stockholder to someone else to vote their shares a certain way.

Proxy

o Legal approach by competition authorities or the courts where an attempt is made to evaluate the pro-competitive features of a restrictive business practice against its anticompetitive effects in order to decide whether or not the practice should be prohibited.

Rule of Reason

-designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed -Encourages shopping around for credit -Must disclose cost of credit in dollars and interest rate

Truth-in-Lending Act

Utilitarianism • An action is ethical based on whether it produces the greatest good for the greatest number of people upon which it has an effect Corporate Social Responsibility • Idea that those who manage corporations should be accountable to society for their actions

Two Main Ideas

Which Federal Law regulates the initial offerings of Securities? a. Security Regulation Act b. Regulation S-K c. Securities Act of 1933 d. The Boring Act

c. Securities Act of 1933

o Promote goals that society considers worthwhile and take positive steps towards solving problems

Corporate Social Responsilbility

o One firms involved in a merger has been facing bankruptcy or circumstances that threaten the firm. Firm must show: Not likely to survive without merger No other buyers, or this one will least affect competition Tried and failed at all other ways to save firm

Failing Firm Defense

o Private parties can bring civil actions under the act o Usually similar to FTC cases, but can also get damages

Lanham Act

When two or more firms come together to form a new form

Merger

o Normally considered as mere compliance with the law

Moral Minimum

o A merger that increases concentration to high levels can be defended by showing that the firm's customers are sophisticated and powerful buyers

Power Buyer Defense

A proxy is best described as: a. an elaborate audited report b. a registration statement c. permission by a stockholder to someone else to vote their shares a certain way d. permission for a stockholder to file a proposal with the board at the annual meeting e. none of the other choices

c. permission by a stockholder to someone else to vote their shares a certain way

You are on the subway in New York when you overhear two people you do not know talking about an upcoming merger, news not yet public. They seem to know their stuff. If you buy stock based on this information, and profit when the information turns out true, you have: a. engaged in insider trading that is probably illegal b. not engaged in insider trading because once you overheard the information it was public c. profited, but are an outsider and so your actions are probably not illegal d. violated the Insider Trading Sanctions Act and could face criminal charges

c. profited, but are an outsider and so your actions are probably not illegal

Under SEC rules, a "publicly held company" is a company: a. with financial assets belonging only to public institutions b. with all its securities held by public, not private, investors c. that has issued securities that are publicly traded d. that only sold its securities initially to public, as opposed to private, investors

c. that has issued securities that are publicly traded

Which of the following laws regulates the buying and selling of traded securities? a. The Taft-Hartley Act b. The 1933 Securities Act c. the 1934 Securities and Exchange Act d. the Federal Trade Commission Act e. none of these

c. the 1934 Securities and Exchange Act

In Securities, which is a condensed version of the longer registration statement? a. Brief b. Short Statement c. Finance Statement d. Prospectus

d. Prospectus

Most securities are issued by well-known seasoned issuers who have the right to: a. file registration statements the day they announce a new offering b. use a free-writing prospectus that is continuously updated on a website c. Never have to file a registration statement d. a and b

d. a and b

The elements of a security, as the Supreme Court ruled in the SEC v. Howey (Howey Test) case include: a. an investment of money only b. an investment of money with a role in managerial control c. an investment of any kind d. an investment of money in a common enterprise

d. an investment of money in a common enterprise

Securities provide __________ for business operations. a. paper b. headaches c. people d. capitol

d. capitol

o Enforce Antitrust Law o Protects against "unfair and deceptive acts or practices in or affecting commerce"

• Federal Trade Commission (FTC):

o The buying or selling of stock by persons who have access to information, not yet revealed to the public, that affects the value of the stock

• Insider Trading

o File registration statements the day they announce a new offering o Use a free-writing prospectus that is continuously updated on a website

• Most securities are issued by well-known seasoned issuers who have the right to:

o Regulates the initial offerings of Securities

• Securities Act of 1933

o Has the most do to with regulation of the securities market

• Securities and Exchange Commission (SEC)

o Umbrella policy means an additional insurance coverage for losses that exceed the basic or usual limits of liability provided by an underlying policy

• Umbrella Law

o Deception Misrepresentation or omission of information Likely to mislead reasonable consumer Deception is material • Have to go to court cases or what guidelines? o Unfairness Usually tagged onto deception charge Causes substantial harm to consumers Consumers cannot reasonably avoid injury Injury is harmful in its net effect • If they are scientific what program?

• Unfair and Deceptive Acts