BLAW 5400 Ch 39

Willful violations of the Securities Act of 1933 are subject to a fine of not more than __________ and/or imprisonment of not more than __________ or both.

$10,000, five years.

The rule that prohibits schemes and devices to defraud investors is Rule:

10b-5

Securities that are exempt from registration under the federal securities laws include:

All of these are exempt.

Recovery of damages under Rule 10b-5 requires proof of:

All of these are required for recovery of damages.

Solicitation includes any request:

All of these are solicitations.

For purposes of Section 16(b) of the 1934 Securities Exchange Act, which of the following are not "insiders"?

All of these may be considered insiders.

"Insider trading" rules pertain to:

All of these.

Registration under the 1933 Act calls for disclosure of which of the following?

All of these.

Section 11 of the Securities Act of 1933 imposes liability on:

All of these.

Section 14(e) of the Securities Act of 1934 makes it unlawful for any person to:

All of these.

The Securities Act of 1934 imposes sanctions for noncompliance with its disclosure and antifraud requirements. These sanctions include:

All of these.

Which of the following would ordinarily NOT be considered a security under the federal securities laws?

An investment in a nonprofit venture based on one's own entrepreneurial efforts.

Which of the following would NOT be exempt from registration under the 1933 Securities Act?

An offering of limited partnership tax shelters.

A registration statement becomes public immediately on filing with the SEC, but a prospectus only becomes public upon signature of the chief financial officer.

False

As amended in 2008, SEC Rule 144 imposes stricter requirements on securities resales of issuers subject to 1934 Act reporting requirements than on securities resales of non-reporting issuers.

False

As amended in 2008, SEC rules define a small business issuer as a noninvestment company with less than $10 million in public float.

False

Effective in 2010, the SEC adopted new requirements to improve the disclosure shareholders of public companies receive regarding compensation and corporate governance. These new rules require disclosure of any directorships held by each nominee at any time during the past seven years at any public company.

False

Emerging growth companies (EGCs) have strict disclosure requirements and limited permissible communications to avoid a repeat of the dot-com disaster of the late 1990's.

False

Every registration filed with the SEC is held in confidence until the business permits disclosure.

False

In 2006, the SEC abolished the requirement that a registration statement disclose compensation paid to senior executives and directors.

False

Marshall, an agent of the North Carolina Pinery Corporation, in offering a cash payment to an official of Mexico to convince the official to use his influence to assist Pinery in obtaining a contract in Mexico, may have violated the laws of Mexico, but not the laws of the United States.

False

Only civil liability may be imposed for violations of the Securities Act of 1933.

False

Registration of securities with the SEC guarantees to a potential investor the financial soundness of the business represented by the stock.

False

Rule 505, as promulgated by the SEC, provides a nonexclusive safe harbor for securing the intrastate exemption.

False

Securities sold under Regulation A must be registered if they are resold.

False

The 1933 Securities Act differs from the 1934 Act in that the former deals with trading in stock that has already been issued and the latter has to do with the issuance of securities.

False

The Dodd-Frank Act amends the 1933 and 1934 Acts to require knowledge as the mental state required for the SEC to bring aiding and abetting cases.

False

The SEC may not advance the effective date of a registration statement.

False

The Sarbanes-Oxley Act requires either the chief executive officer or the chief financial officer of a company issuing securities to certify information in the issuer's annual and quarterly reports.

False

The Securities Act of 1933 regulates tender offers and proxy solicitations.

False

The Securities Act of 1934 is also called the "Truth in Securities Act."

False

The antifraud provisions of the 1933 Act pertain to only registered securities.

False

The tender offer is open to select holders of the class of shares subject to the tender offer.

False

There are rigorously enforced restrictions regarding both number and qualification of investors who purchase securities under Regulation A.

False

The antifraud provisions of the 1934 Act would prohibit which of the following?

Lying about the value of the firm's assets to sell stock.

SEC Rule 10b5-2 adopts what theory of liability?

Misappropriation.

__________, promulgated by the SEC, provides a nonexclusive safe harbor for securing the intrastate exemption.

Rule 147.

Which of the following is NOT a purpose of federal securities regulation?

To ensure that only worthwhile securities are sold in interstate commerce.

"Restricted securities" are exempted from registration.

True

"Shelf registrations" allow delayed sales of stock.

True

A "private placement" involves no public offering and is exempt from registration.

True

A registration statement must be signed by the issuer, its CEO, CFO, CAO, and majority of its board of directors.

True

As amended in 1999 and 2017, SEC Rule 504 provides private, noninvestment company issuers with an exemption from registration for issues not exceeding $5 million within twelve months.

True

As mandated by the Dodd-Frank Act, the SEC issued a rule in 2015, effective for the first fiscal year beginning on or after January 1, 2017, requiring most public companies regularly to disclose the ratio of a CEO's compensation to the median compensation of the company's employees.

True

Bonds are included in the definition of the term "security."

True

EDGAR is the computer system established by the SEC to perform automated collection, validation, and dissemination of required reports.

True

Effective in 2000, a plain English term sheet is required in all tender offers and mergers.

True

In 1992, the SEC issued new rules establishing an integrated registration and reporting system for small business issuers.

True

In a unanimous 2018 decision, the U.S. Supreme Court held that under the Securities Litigation Uniform Standards Act of 1998, (1) state courts have jurisdiction over class actions alleging violations of only the 1933 Act and (2) defendants are not permitted to remove such actions from state court to federal court.

True

Insiders would violate the short-swing profits rule (16b) of the 1934 Act by buying stock on January 1 and selling on May 1.

True

Most states require the registration of securities and regulate brokers and dealers.

True

Shelf registrations allow issuers to register securities that are to be offered and sold on a delayed or continuous basis in the future, but the provision allowing it does not apply to all companies.

True

The 1934 Act rules governing proxy solicitations would require a proxy statement describing the material facts relating to items to be voted upon.

True

The Securities Act of 1933 identifies a number of securities exemptions that are, in effect, transaction exemptions.

True

The Securities Act of 1934 imposes significant disclosure requirements upon reporting companies.

True

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 granted the SEC the power to impose administrative, civil penalties up to the current inflation-adjusted amount of $725,000.

True

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 granted the SEC the power to issue cease and desist orders and to impose civil penalties.

True

The Securities and Exchange Commission (SEC) is an independent, quasi-judicial agency consisting of five commissioners.

True

The due diligence defense generally requires the defendant to show that he had reasonable grounds to believe and did believe that there were no untrue statements or material omissions.

True

The issuer of a registration statement has strict liability for its accuracy.

True

The registration requirement of the 1934 Act pertains to the entire class of securities rather than to a specific offering.

True

Under the Dodd-Frank Act, the SEC must issue rules requiring issuers to disclose in annual proxy statements the reasons the issuer has chosen to combine or separate the positions of CEO and chairman of the board of directors.

True

With few exceptions, an issuer must file preliminary proxy statements and forms with the SEC at least 10 days before they are sent to investors.

True

Which of the following is not one of the situations in which the 1934 Securities Exchange Act requires disclosure during a "tender offer"?

When a company makes a tender offer for any voting stock in another company.

Marge wishes to raise some money to begin mass producing her prize-winning jellies and jams. She offers her neighbors a portion of her profits if they will put up $2,000 each towards her endeavor. Is their investment a "security"?

Yes, since Marge will do all the work.

Under the 1934 Act, willful violations may result in:

a fine of up to $25 million for a corporation.

The 1934 Securities Exchange Act requires registration of:

all regulated publicly held companies.

SEC regulations concerning fraud in securities transactions apply to:

all securities transactions involving interstate commerce.

All of the following are types of illegal insider trading EXCEPT:

an officer or director who makes a direct profit on an investment just after the public announcement of a major development related to that investment.

The use of the Internet or other means to raise money—typically in small amounts—from a large number of contributors to support a specific venture is called:

crowdfunding.

Under the Securities Exchange Act of 1934 and the Williams Act, a tender offer:

disclosure is informational to ensure that investors may make an informed decision.

A defense to an action based on material omissions and untrue statements contained in a registration statement is:

due diligence.

The 1933 Act imposes liability for material misstatements and omissions in a registration statement on

experts and underwriters as well as directors, officers, and issuers.

A solicitation of proxies from holders of stock:

is comprehensively regulated by the SEC.

The civil penalty for a person who trades on inside information:

is payable into the U.S. Treasury.

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 granted the SEC power to:

issue cease-and-desist orders.

The Reform Act's safe harbor under the 1933 Act eliminates civil liability based on an untrue statement or omission if a forward-looking statement is:

made without actual knowledge that it was false or misleading.

The provisions of Section 17(a) of the 1933 Act:

make it unlawful in the offer or sale of any securities to obtain property by any statement that omits a material fact without which the information is misleading.

If a company has assets of over $10 million but trades its stock over the counter, it is nevertheless required to comply with the 1934 Act if it has:

one class of stock with 500 or more shareholders.

Rule 10b-5 applies to any:

person who buys or sells any security.

The Securities Act of 1933 has two basic objectives, one of which is to:

prohibit misrepresentation, deceit, and other fraudulent acts and unfair practices in the sale of securities generally, whether or not they are required to be registered.

A registration statement generally includes all of the following EXCEPT a:

projection of future growth potential.

A signed writing by a shareholder authorizing a named person to vote his stock at a specified meeting of shareholders is a(n):

proxy.

Section 16(b) of the 1934 Act differs from Rule 10b-5 in that the latter:

requires material inside information.

The Sarbanes-Oxley Act:

requires that issuers of securities disclose in plain English to the public on a rapid and current basis such additional information concerning material changes in the financial condition or operations of the issuer as the SEC determines is necessary or useful.

All of the following are exempt from registration under the 1933 Act except:

securities issued by for-profit medical facilities.

Prohibited bribery can result in fines and imprisonment under the antibribery provision of :

the Foreign Corrupt Practices Act.

If Terry makes a tender offer to the owners of Pizza Village's registered stock, he must file a statement with the SEC if he:

will, after the acquisition, own 5% of one class of Pizza Village stock.