LGS 14, 15, 16, 17, 18
Under the JOBS Act, to qualify as an emerging growth company, an existing company must satisfy all of the following requirements EXCEPT? A. It must have less than $700 million in stock outstanding after an IPO. B. It must not have gone public more than five years ago. C. It must have less than $1.07 billion in annual revenue (to be indexed for inflation every five years). D. It must pledge due diligence in maintaining its status as a closely-held corporation. E. It must have issued no more than $1 billion in debt.
It must pledge due diligence in maintaining its status as a closely-held corporation.
Suppose Jaime, Madara, and Jose form IT Inc., a corporation, and each contributes $1,000,000 capital. The corporation borrows $1 million from State Bank. One year later, IT Inc. goes bankrupt and defaults on the $1 million loan owed to State Bank. At that time, IT Inc.'s only asset is $50,000 cash, which State Bank recovers. What are the financial implications for Jaime, Madara, and Jose have? A. Jaime, Madara, and Jose are each responsible for 1/3 of the loan owed to State Bank. B. Jaime, Madara, and Jose each lose their initial investment of$100,000. C. Each person, Jaime, Madara, and Jose, is individually responsible for the full balance of the loan. D. Jaime, Madara, and Jose each owe $100,000 to State Bank to pay part of the loan. E. Whoever signed the loan on behalf of the IT Inc. is responsible for the balance of the loan.
Jaime, Madara, and Jose each lose their initial investment of$100,000.
Which of the following is NOT a major provision of the Sarbanes-Oxley Act? A. CFO certification B. bar from acting as an officer C. bar from acting as a director D. "sliding-scale" cap on nominal damages E. reimbursement of incentive pay
"sliding-scale" cap on nominal damages
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. A. $25 million; six-month B. $10 million; one-year C. $5 million; one-year D. $50 million; six-month E. $1 million; one-year
$1 million; one-year
A(n) _____ is an unincorporated business entity that combines the most favorable attributes of general partnerships, limited partnerships, and corporations. A. S corporation B. C corporation C. limited liability limited partnership D. sole proprietorship E. LLC
LLC
Which of the following is an INCORRECT statement regarding limited liability companies (LLCs)? A. An LLC can only be created pursuant to the laws of the state in which the LLC is being organized. B. Limited liability company codes regulate the formation, operation and dissolution of LLCs. C. An LLC is a separate legal entity, distinct from its members. D. LLCs are creatures of federal statue. E. The owners of LLCs are usually called members.
LLCs are creatures of federal statue.
Which of the following is an INCORRECT statement regarding LLPs? A. An LLP is a voluntary relationship of two or more individuals to carry on as co-owners of a business for a return. B. LLPs are creatures of state law. C. LLPs are creatures of federal law. D. An LLP can only be created pursuant to the laws of the state in which the LLP is being structured. E. There must be an affirmative vote to obtain LLP status.
LLPs are creatures of federal law.
Which of the following is NOT true regarding short-swing profits and Section 16 of the Securities Exchange Act of 1934? A. Section 16 relieves insiders of liability for transactions that occur within 6 months before becoming an insider. B. The corporation may bring legal action to recover any profits. C. Section 16 defines officers to include only executives who perform policy-making functions. D. Insiders are liable for transactions that occur within 6 months of the last transaction engaged in while an insider. E. Lack of intent is a defense to liability under Section 16.
Lack of intent is a defense to liability under Section 16.
Regulation A+ offerings are divided into two tiers. Tier 1 permits an issuer to raise up to $_____ in a 12-month period. Tier 2 permits an issuer to raise up to $_____ in a 12-month period. A. 100 million; 100 million B. 20 million; 50 million C. 5 million; 10 million D. 100 thousand; 200 thousand E. 500 thousand; 1 million
20 million; 50 million
Which of the following is NOT true regarding initial public offerings? A. The sale of unregistered securities that should have been registered may result in criminal penalties. B. A company going public must detail in the registration statement how the proceeds from the offering will be used. C. Securities offered to the public must be registered with the SEC. D. A company going public does not need to submit a prospectus to the SEC. E. A prospectus is used by investors to evaluate the financial risk of the investment.
A company going public does not need to submit a prospectus to the SEC.
Which of the following is NOT true regarding Regulation A+ offerings? A. Regulatory approval usually takes 2-3 months. B. They are divided into two tiers. C. Less information is required when they file their registration statement. D. A Tier 1 issuer may provide unaudited financial statements. E. Purchasers may sell their shares without limitation.
Less information is required when they file their registration statement.
Which of the following is an INCORRECT statement regarding incorporation procedure? A. A corporation can be in incorporated in more than one state. B. Most corporations choose the state in which the corporation will be doing most of its business as the state for incorporation. C. Large corporations generally opt to incorporate in the state with the laws that are most favorable to thecorporation's internal operations. D. Delaware is considered a state with laws favorable to the internal operations of corporations. E. In choosing a state for incorporation, the incorporators must consider the corporation law of the states under consideration.
A corporation can be in incorporated in more than one state.
Which of the following statements about voluntary dissolution is NOT true? A. A corporation can be voluntarily dissolved if the board of directors recommends dissolution and a majority of shares entitled to vote (or a greater number, if required by the articles of incorporation or bylaws) votes for dissolution as well. B. A corporation is dissolved on the effective date of the articles of dissolution. C. A corporation cannot be voluntarily dissolved. D. If the corporation has not commenced business or issued any shares, it may be dissolved by a vote of the majority of the incorporators or initial directors. E. For a voluntary dissolution to beeffective, articles of dissolution must be filed with the secretary of state of the state of incorporation.
A corporation cannot be voluntarily dissolved.
Which of the following statements about voluntary dissolution is NOTtrue? A. A corporation is dissolved on the effective date of the articles of dissolution. B. If the corporation has not commenced business or issued anyshares, it may be dissolved by a vote of the majority of the incorporators or initial directors. C. For a voluntary dissolution to be effective, articles of dissolution must be filed with the secretary of state of the state of incorporation. D. A corporation cannot be voluntarily dissolved. E. A corporation can be voluntarily dissolved if the board of directors recommends dissolution and a majority of shares entitled to vote (or a greater number, if required by the articles of incorporation or bylaws) votes for dissolution as well.
A corporation cannot be voluntarily dissolved.
Which of the following is an INCORRECT statement regarding the corporation as a legal person? A. A corporation has the same identity as its shareholders. B. A corporation can sue in its own name. C. A corporation can enter into contracts. D. A corporation can hold title to property. E. A corporation can be found criminally liable for violations of law.
A corporation has the same identity as its shareholders.
Which of the following is an INCORRECT statement regarding corporate management? A. A corporation usually has a decentralized management. B. A corporation usually has a centralized management. C. The board of directors makes policy decisions concerning the operation of a corporation. D. Management of a corporation usually consists of a board of directors and officers of the corporation. E. The members of the board of directors are elected by the shareholders.
A corporation usually has a decentralized management.
Which of the following is a correct statement regarding a merger? A. A merger occurs when one corporation is absorbed into another corporation. B. The corporation that continues to exist is called the merged corporation. C. The shareholders of the merged corporation do not receive stock or securities of the surviving corporation. D. The corporation that ceases to exist is called the suspended corporation. E. The surviving corporation gains none of the rights, privileges,powers, duties, obligations, or liabilities of the merged corporation.
A merger occurs when one corporation is absorbed into another corporation.
____________ occurs when one party that owns trademarks, service marks, trade names, or other intellectual property contracts to allow another party to use its trademarks, service marks, trade names, or other intellectual property in the dissemination of goods, services, software, and digital information. A. A joint venture B. Negotiating C. Franchising D. Licensing E. A strategic alliance
Licensing
_____ are not personally liable for the debts and obligations of the limited partnership. A. Partnership shareholders B. Partnership employees C. A partnership's board of directors D. General partners E. Limited partners
Limited partners
Which of the following is an INCORRECT statement regardingmanager-managed LLCs? A. In a manager-managed LLC, the members and nonmembers who are designated managers control the management of the LLC. B. In a manager-managed LLC, each manager has equal rights in the management and conduct of the company's business. C. All actions concerning the LLC can be delegated to managers. D. In a manager-managed LLC, a manager must be appointed by a vote of a majority of the members. E. In a manager-managed LLC, the members who are not managers have no rights to manage the LLC unless otherwise provided in the operating agreement.
All actions concerning the LLC can be delegated to managers.
What of the following is NOT true regarding state securities laws? A. All states have enacted securities laws except New York. B. They contain broad antifraud provisions. C. They provide exemptions from registration. D. These laws require registration of certain securities. E. They are sometimes referred to as "blue-sky" laws.
All states have enacted securities laws except New York.
Which of the following is an INCORRECT statement regarding a limited liability limited partnership (LLLP)? A. The Uniform Limited Partnership Act (2001) permits the creation of an LLLP. B. An LLLP is a type of general partnership. C. An LLLP must identify itself by using "L.L.L.P." or "LLLP" after the partnership name. D. An LLLP may be organized under state law by filing articles of limited liability limited partnership with the secretary of state's office. E. An existing limited partnership may convert to being an LLLP.
An LLLP is a type of general partnership
Which of the following is an INCORRECT statement regarding anLLLP? A. An LLLP requires at least two general partners and at least two limited partners. B. General partners of an LLLP do not have personal liability for the debts and obligations of the LLLP. C. Limited partners of an LLLP do not have personal liability for the debts and obligations of the LLLP. D. The debts of an LLLP are solely the responsibility of the partnership. E. A general partner can manage the affairs of an LLLP but not be personally responsible for the debts of the LLLP.
An LLLP requires at least two general partners and at least two limited partners.
____ shareholders' meetings are held to elect directors, choose an independent auditor, and take other actions. A. Quarterly B. Biannual C. Monthly D. Annual E. Weekly
Annual
Which of the following is an INCORRECT statement regarding shareholders' meetings? A. Annual shareholders' meetings must be held at the times fixed in the articles of organization. B. Any act that can be taken at ashareholders' meeting can be taken without a meeting if all the corporate shareholders sign a written consent approving the action. C. Special shareholders' meetings may be held to consider important emergency issues such as merger or consolidation of the corporation with one or more other corporations. D. Special shareholders' meetings may be called by the board of directors. E. Special shareholders' meetings may be called by the holders of at least 10 percent of the voting shares of the corporation.
Annual shareholders' meetings must be held at the times fixed in the articles of organization.
Marty Levine sees a house for sale and thinks his friend Linda Maxwell would want to buy it. Marty enters into a contract to purchase the house from the seller and signs the contract "Marty Levine, agent for Linda Maxwell." Which of the following is NOT true? A. On ratification of the contract, Linda Maxwell is obligated to purchase the house. B. If Linda does not accept the contract, she is not bound by it. C. Because Marty is not Linda Maxwell's agent, she is not bound to the contract. D. If Linda agrees to purchase the house, there is an agency by ratification. E. Because Marty is now Linda Maxwell's agent, she is bound to the contract.
Because Marty is now Linda Maxwell's agent, she is bound to the contract.
Assume that a car salesperson is employed to sell the principal's car. The principal tells the agent that the car was repaired after it was involved in a major accident. If the agent intentionally tells the buyer that the car was never involved in an accident, the agent has made an intentional misrepresentation. Which of the following statements istrue? A. Both the principal and the agent are liable for this misrepresentation. B. Neither the principal nor the agent is liable for this misrepresentation. C. Only the principal is liable for this misrepresentation. D. Only the agent is liable for this misrepresentation. E. The buyer must honor the contract.
Both the principal and the agent are liable for this misrepresentation.
A(n) _____ corporation is a corporation that does not qualify to or does not elect to be federally taxed as an S corporation. A. G B. V C. C D. T E. L
C
Which of the following is NOT true regarding the Securities Act of 1933? A. Persons may also be held liable if they are negligent in not discovering the fraud. B. It imposes civil liabilities on persons who intentionally defraud investors. C. Accountants may also be held liable for fraud committed by their clients. D. Corporate officers may not be held liable, only members of the board of directors can be sued. E. All defendants except the issuer may assert a due diligence defense.
Corporate officers may not be held liable, only members of the board of directors can be sued.
Which of the following is an INCORRECT statement regarding the corporation as a legal person? A. Corporations can be held civilly and criminally liable for violations of law. B. Corporations can enter into and enforce contracts. C. Corporations are not separate legal persons. D. Corporations can hold title to and transfer property. E. Corporations can sue or be sued in their own names.
Corporations are not separate legal persons.
Which of the following is an INCORRECT statement regarding the duration of acorporation's existence? A. Corporations exist in perpetuity unless a specific duration is stated in acorporation's articles of incorporation. B. The existence of a corporation may be voluntarily terminated by the shareholders. C. The bankruptcy of an officer of a corporation does not affect acorporation's existence. D. Corporations automatically expire twenty (20) years after the secretary of state's issuance of a certificate of incorporation unless the owners of the corporation expressly petition the secretary of state for a renewal of the corporate charter. E. The death of a shareholder does not affect a corporation's existence.
Corporations automatically expire twenty (20) years after the secretary of state's issuance of a certificate of incorporation unless the owners of the corporation expressly petition the secretary of state for a renewal of the corporate charter.
Which of the following is an INCORRECT statement regarding the creation of a sole proprietorship? A. Creating a sole proprietorship is easy. B. If no other form of business organization is chosen, the business is by default a sole proprietorship. C. Creation of a sole proprietorship utilizes the same procedure for the creation of a corporation. D. There are no formalities required for the creation of a sole proprietorship. E. No federal or state government approval is required for the creation of a sole proprietorship.
Creation of a sole proprietorship utilizes the same procedure for the creation of a corporation.
Which of the following is NOT true regarding crowdfunding? A. These offers are conducted through online portals. B. Crowdfunding offerings are not subject to the Securities Act of 1933. C. They may raise up to $1.07 million. D. They must file a form C. E. GoFundMe is an example of a crowdfunding portal.
Crowdfunding offerings are not subject to the Securities Act of 1933.
_____ formation occurs when: 1) a certificate of limited partnership is not properly filed; 2) there are defects in a certificate that is filed; or 3) some other statutory requirement for the creation of a limited partnership is not met. A. Quasi- B. Implied C. Constructive D. Symbolic E. Defective
Defective
_____ has the most advanced corporation law in the United States. A. Maryland B. Delaware C. New York D. Texas E. Rhode Island
Delaware
Which of the following is NOT an important question to answer in determining whether an agent's conduct occurred within the scope of his or her employment? A. Was the agent advancing the principal's purpose when the actoccurred? B. Was the act specifically requested or authorized by theprincipal? C. Did the act occur substantially within the location of the employment authorized by the employer? D. Did the act occur substantially within the time period of employment authorized by the principal? E. Did the agent possess the required professional licensure(s)
Did the agent possess the required professional licensure(s)
Which of the following is NOT true about offerings exempt fromregistration? A. The sale of securities not exceeding $1 million during a12-month period is exempt from registration. B. Exempt transactions that do not have to be registered with the SEC are subject to the antifraud provisions of the federal securities laws. C. Exempt transactions that do not have to be registered with the SEC are not subject to the antifraud provisions of the federal securities laws. D. 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. E. Securities sold pursuant to an exempt transaction do not have to be registered with the SEC.
Exempt transactions that do not have to be registered with the SEC are not subject to the antifraud provisions of the federal securities laws.
The _____ is the party who grants the franchise and license in a franchise agreement. A. third party beneficiary B. franchisee C. delegatee D. franchisor E. delegator
Franchisor
_____ are personally liable for the debts and obligations of the general partnership. A. A partnership's board of directors B. General partners C. Partnership shareholders D. Limited partners E. Partnership employees
General partners
Which of the following is an accurate statement regarding the liability of a principal for an independent contractor's torts? A. Generally, a principal is strictly liable for the torts of its independent contractors. B. Generally, a principal is liable for the torts of its independent contractors due to the inherent risks associated with running a business. C. Generally, a principal is liable for the torts of its independent contractors due to negligence theory. D. Generally, a principal is not liable for the torts of its independent contractors. E. Generally, a principal is liable for the torts of its independent contractors due to intentional tort theory.
Generally, a principal is not liable for the torts of its independent contractors.
Suppose Qixia hires Harold, a lawyer and an independent contractor, to represent her in a court case. While driving to the courthouse to represent Qixia at trial, Harold negligently causes an automobile accident in which Mildred is severely injured. Which of the following is an accurate statement regarding the liability of Qixia and/or Harold forMildred's injuries? A. Neither Qixia nor Harold is liable for Mildred's injuries, since the accident arose out of the course and scope of employment. B. Qixia is liable for Mildred's injuries since Harold was heremployee, but Harold is not liable. C. Qixia is liable for Mildred's injuries since Harold was her independent contractor, but Harold is not liable. D. Harold is liable for Mildred's injuries, but Qixia is not liable. E. Both Qixia and Harold are liable for Mildred's injuries.
Harold is liable for Mildred's injuries, but Qixia is not liable.
Courts apply the _____ test to determine whether an arrangement is an investment contract and therefore a security. A. absolute liability B. Hawley C. Howey D. Dewey E. strict liability
Howey
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. A. Hartley B. Howey C. Landrum D. Hawley E. Smoot
Howey
The owners of LLCs are usually called _____. A. agents B. limited partners C. members D. managers E. principals
Members
Bank of America subsidiaries __________ were also implicated in this case for _________. a JPMorgan Chase and Merrill Lynch; buy-and-sell agreement violations b Merrill Lynch and Ernst & Young; corporate negligence c Wells Fargo and Countrywide; a pierce of the corporate veil d Ernst & Young and Arthur Andersen; breach of fiduciary duties e Merrill Lynch and Countrywide; financial fraud
Merrill Lynch and Countrywide; financial fraud
Which of the following is an INCORRECT statement regarding mutualfunds? A. Mutual funds sell shares to the public. B. Mutual funds make investments in stocks and bonds for the long term. C. Mutual funds are not sold to the public. D. Mutual funds must be registered with the SEC. E. Mutual funds are restricted from investing in risky investments.
Mutual funds are not sold to the public.
Which of the following is INCORRECT in regard to exempt securities? A. Exempt securities have certain characteristics that federal laws and the SEC have ruled do not require SEC oversight when issued. B. Securities issued by any government in the United States are exempt. C. Securities issued in a corporate reorganization in which one security is exchanged for another security are exempt. D. If the security is transferred more than five times it loses its exemption. E. Once a security is exempt, it is exempt forever.
If the security is transferred more than five times it loses its exemption.
Which of the following is an INCORRECT statement regarding a fully disclosed agency? A. A fully disclosed principal is liable on a contract with the third party. B. In a fully disclosed agency, the agent's signature must clearly indicate that he or she is acting as an agent for a specifically identified principal. C. In a fully disclosed agency, the third party typically relied on the principal's credit and reputation when the contract was made. D. In a fully disclosed agency, the agent is not liable on the contract with the third party. E. In a fully disclosed agency, the contract is between the agent and the third party.
In a fully disclosed agency, the contract is between the agent and the third party.
Which of the following is an INCORRECT statement regarding agency authority to bind an LLC to contracts? A. In a member-managed LLC, all members have agency authority to bind the LLC to contracts. B. An LLC is bound to contracts that members have properly entered into on its behalf in the ordinary course of business. C. In a manager-managed LLC, the managers have authority to bind the LLC to contracts. D. In a manager-managed LLC, non-manager members can bind the LLC to contracts. E. An LLC is bound to contracts that managers have properly entered into on its behalf in the ordinary course of business.
In a manger-managed LLC, non-manager members can bind the LLC to contracts.
Nathan opens a clothing store called "The Clothing Store" and operates it as a sole proprietorship. Nathan files the proper statement and publishes the necessary notice of the use of the trade name. Nathan contributes $25,000 of his personal funds to the business and borrows$100,000 from a bank in the name of the business. After severalmonths, Nathan closes the business because it is unsuccessful. At the time it is closed, the business has no assets, owes the bank $100,000, and owes other debts of $25,000. Which of the following is a correct statement regarding Nathan's personal risk exposure for his unsuccessful business? A. Nathan is entitled to recover his $25,000 capital contribution, and he is not responsible for the $100,000 debt owed to the bank and the $25,000 owed to others, since those debts were undertaken for the benefit of the business. B. Nathan loses his $25,000 capital contribution, and he is responsible for the $100,000 debt owed to the bank and the$25,000 debt owed to others. C. Nathan loses his $25,000 capital contribution, and he is responsible for the $25,000 debt owed to others, but not the$100,000 debt owed to the bank since that debt was undertaken for the benefit of the business. D. Nathan loses his $25,000 capital contribution, but he is not responsible for the $100,000 debt owed to the bank and the$25,000 owed to others, since those debts were undertaken for the benefit of the business. E. Nathan loses his $25,000 capital contribution, and he is responsible for the $100,000 debt owed to the bank, but not the $25,000 debt owed to others.
Nathan loses his $25,000 capital contribution, and he is responsible for the $100,000 debt owed to the bank and the $25,000 owed to others.
Which of the following is NOT true about Section 10(b) of the Securities Exchange Act of 1934? A. All transfers of securities, whether made on a stock exchange, in the over-the-counter market, in a private sale, or in connection with a merger, are subject to this rule. B. Section 10(b) of the Securities Exchange Act of 1934 is one of the most important sections in the entire 1934 Act. C. Rule 10b-5 is not restricted to purchases and sales of securities of reporting companies. D. Section 10(b) prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC. E. Negligent conduct is punishable under Section 10(b).
Negligent conduct is punishable under Section 10(b).
Suppose American Hover Car Company, a U.S. corporation incorporated under the laws of Delaware, forms a subsidiary corporation called Experimental Vehicle Corporation, an Indian corporation formed under the laws of India, to develop and test hover cars in India. American Hover Car Company is the parent corporation, and Experimental Vehicle Corporation is the subsidiary corporation. If an employee of Experimental Vehicle Corporation negligently injures an Indian citizen while on a test drive, what is the liability? A. It depends on if Experimental Vehicle Corporation or American Hover Car Company owned the vehicle. B. Neither Experimental Vehicle Corporation and American Hover Car Company in the United States are liable. C. Only American Hover Car Company in the United States is not liable. D. Both Experimental Vehicle Corporation and American Hover Car Company in the United States are liable. E. Only Experimental Vehicle Corporation is liable.
Only Experimental Vehicle Corporation is liable.
Which of the following is NOT true about Section 11 of the Securities Act of 1933? A. Civil liability under Section 11 is imposed on those who (1) defraud investors intentionally or (2) are negligent in not discovering the fraud. B. Plaintiffs may recover monetary damages when a registration statement on its effective date misstates or omits a material fact. C. The issuer, certain corporate officers (e.g., chief executiveofficer, chief financial officer, chief accounting officer), directors, signers of the registration statement, underwriters, and experts(e.g., accountants who certify financial statements and lawyers who issue legal opinions that are included in a registrationstatement) may be liable. D. Only the accountants and signers of the registration statements may be held liable under Section 11. E. Private parties who have been injured by certain registration statement violations by an issuer or others may bring a civil action against the violator under Section 11 of the Securities Act of 1933.
Only the accountants and signers of the registration statements may be held liable under Section 11.
A party who employs another person to act on his or her behalf is called a(n) _____. A. delegatee B. agent C. principal D. assignee E. independent contractor
Principal
Which of the following is an INCORRECT statement regarding a "frolic and detour?" A. Agents are always personally liable for their tortious conduct during a frolic and detour. B. Negligence actions stemming from frolic and detour are examined on a case-by-case basis. C. An agent might choose to run a personal errand while on assignment for the principal. This is commonly referred to as a frolic and detour. D. Principals are generally liable if an agent's frolic and detour is substantial. E. A frolic and detour is a situation in which an agent does something during the course of his or her employment to further his or her own interest rather than the principal's.
Principals are generally liable if an agent's frolic and detour is substantial.
Before transacting business in a foreign state, a foreign limited partnership must file an application for registration with that state's _____. A. secretary of labor B. secretary of state C. legislature D. secretary of commerce E. governor
Secretary of State
Which of the following is true about Section 10(b) of the Securities Exchange Act of 1934? A. Only securities sold on a stock exchange are subject to Rule10b-5. B. Rule 10b-5 is restricted to purchases and sales of securities of reporting companies. C. Negligent conduct is punishable under Section 10(b). D. Section 10(b) of the Securities Exchange Act of 1934 is the most ineffective section of the 1934 Act. E. Section 10(b) prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC.
Section 10(b) prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC.
The _____ is a federal statute that regulates primarily the issuance of securities by corporations, limited partnerships, and associations. A. Securities Act of 1929 B. Securities Act of 1933 C. Securities Exchange Act of 1937 D. Securities Exchange Act of 1929 E. Securities Act of 1943
Securities Act of 1933
The _____ provides an _____ offering exemption that permits local businesses to obtain from local investors capital to be used in the local economy without the need to register with the Securities and Exchange Commission (SEC). A. Securities Act of 1933; intrastate B. Securities Exchange Act of 1934; intrastate C. Securities Exchange Act of 1934; international D. Securities Exchange Act of 1934; interstate E. Securities Act of 1933; interstate
Securities Act of 1933; intrastate
The _____ is a federal administrative agency that is empowered to administer federal securities law. A. Uniform Commerce Commission (UCC) B. Federal Trade Commission (FTC) C. Uniform Securities Commission (USC) D. Securities Regulatory Commission (SRC) E. Securities and Exchange Commission (SEC)
Securities and Exchange Commission (SEC)
Which of the following is NOT true about the Securities Act of 1933? A. The primary purpose of the 1933 Act is to require full and honest disclosure of information to investors at the time of the issuance of the securities. B. The 1933 Act applies to the original issue of securities, including initial public offerings (IPOs) by new public companies and the sales of new securities by existing companies. C. The Securities Act of 1933 is a federal statute that regulates primarily the issuance of securities by companies and other businesses. D. Securities that are issued online are not covered by the 1933 Act. E. The 1933 Act prohibits fraud during the sale of issued securities.
Securities that are issued online are not covered by the 1933 Act.
Which of the following is an INCORRECT statement regarding formation of a general partnership? A. A general partnership may be formed with little or no formality. B. A person cannot be forced to accept another person as a partner. C. All partners must agree to the participation of each co-partner. D. A person cannot be forced to be a partner. E. Stock of the partnership, representing ownership, must be publicly traded on a well-known stock exchange (for example,NASDAQ).
Stock of the partnership, representing ownership, must be publicly traded on a well-known stock exchange (for example, NASDAQ)
Which of the following is NOT true about the Securities Exchange Act of1934? A. The 1934 Act applies to the original issue of securities, including initial public offerings (IPOs) by new public companies and the sales of new securities by existing companies. B. Securities that are sold online and on electronic stock exchanges are regulated by the 1934 Act. C. This act has been applied to prohibit insider trading and other frauds in the purchase and sale of securities in the aftermarkets, such as trading on securities exchanges and other purchases and sales of securities. D. The 1934 Act requires continuous reporting—annual reports, quarterly reports, and other reports—to investors and the Securities and Exchange Commission (SEC). E. The Securities Exchange Act of 1934 is a federal statute designed primarily to prevent fraud in the subsequent trading of securities.
The 1934 Act applies to the original issue of securities, including initial public offerings (IPOs) by new public companies and the sales of new securities by existing companies.
Which of the following is NOT true about SEC actions under the Securities Exchange Act of 1934? A. The SEC may not require defendants to disgorge illegally gained profits. B. The SEC may investigate suspected violations of the Securities Exchange Act of 1934 C. 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. D. The SEC may seek injunctions in U.S. district court against respondents. E. The SEC may enter into consent decrees with defendants.
The SEC may not require defendants to disgorge illegally gained profits.
Which of the following is an INCORRECT statement regarding the Uniform Partnership Act (UPA)? A. The goal of the UPA was to establish consistent partnership law that was uniform throughout the United States. B. The UPA is a model act that codifies general partnership law. C. A Revised Uniform Partnership Act (RUPA) has been issued by the National Conference of Commissioners on Uniform State Laws. D. The UPA has been adopted in whole or in part by a minority of states. E. The RUPA and UPA covers most problems that arise in theformation, operation, and dissolution of general partnerships.
The UPA has been adopted in whole or in part by a minority of states.
An owner of a farm employs a real estate agent to sell the farm for $1 million. The agent thereafter learns that oil has been discovered on theproperty, a discovery that makes the land worth $5 million. Which of the following is true? A. The owner of the farm must sell the land for $1 million. B. The agency terminates because of impossibility of performance. C. The agency terminates by operation of law. D. The agency does not terminate because it would be a wrongful termination. E. The agency may be terminated because of this change in circumstances.
The agency may be terminated because of this change in circumstances.
Which of the following is an INCORRECT statement regarding the duty of care of directors and officers of a corporation? A. To meet the duty of care, directors and officer must discharge their duties in a manner they reasonably believe to be in the best interests of the corporation. B. The duty of care requires corporate directors and officers to use care and diligence when acting on behalf of the corporation. C. To meet the duty of care, directors and officer must discharge their duties in good faith. D. The duty of care is not a fiduciary duty. E. To meet the duty of care, directors and officer must discharge their duties with the care that an ordinary prudent person in a like position would use under similar circumstances.
The duty of care is not a fiduciary duty.
The U.S. government may file suit against those who violate the guidelines of the Securities Act of 1933. The actions the U.S. government may take including all of the following EXCEPT: A. The government may issue a consent decree whereby a defendant agrees not to violate securities laws moving forward but makes it mandatory for the defendant to confess to having violated securities laws previously. B. The government may issue a consent decree whereby a defendant agrees not to violate securities laws moving forward but does not confess to having violated securities laws previously. C. The government may obtain and injunctions. D. The government my requests the defendant give up profits earned by this illegal activity. E. The government may request the court to grant ancillary relief.
The government may issue a consent decree whereby a defendant agrees not to violate securities laws moving forward but makes it mandatory for the defendant to confess to having violated securities laws previously.
Which of the following is NOT true regarding Regulation A+ offerings? A. Purchasers of Regulation A+ securities may sell their shares without limitation. B. 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. C. 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. D. If sufficient interest exists, the company would probably proceed with the offering, but if sufficient interest did not exist in themarketplace, the company would probably not make the offering. E. The issuer does not need to file an offering circular.
The issuer does not need to file an offering circular
Which of the following is NOT true about crowdfunding offerings? A. The issuer of the crowdfunding offering must disclose the name of the funding portal through which the securities will be sold. B. The issuer of the crowdfunding offering must disclose five years of financial information. C. The issuer of the crowdfunding offering must disclose the use of proceeds and the risk associated with the investment. D. The issuer of the crowdfunding offering must disclose the name, address, legal status of the business, and its website. E. The issuer of the crowdfunding offering must disclose the type ofsecurity, price of the security, and number of securities offered
The issuer of the crowdfunding offering must disclose five years of financial information.
Which of the following is an INCORRECT statement regarding the name of a general partnership? A. A general partnership can operate under the names of any one or more of the partners. B. A general partnership can operate under a fictitious business name. C. The name selected for the partnership cannot be similar to the name used by any existing business entity. D. The name selected by the partnership can indicate that it is a corporation. E. A general partnership must file a fictitious business name statement—d.b.a. (doing business as)—with the appropriate government agency to operate under a trade name.
The name selected by the partnership can indicate that it is a corporation.
Question content area top Part 1 An LLP's operating agreement may include a continuation agreement that involves a buyout of a withdrawing partner's interest in the LLP and can be in the form of all of the following EXCEPT: A. The partners can agree the payment to the withdrawing partner will be made immediately upon withdrawal. B. The partners can agree the payment to the withdrawing partner will be made by installments. C. The partners can agree to go bankrupt. D. The partners can agree on the price of the buyout. E. The partners can agree when the LLP ends.
The partners can agree to go bankrupt
Which of the following is an INCORRECT statement regarding corporate voting requirements? A. The RMBCA permits corporations to grant more than one vote per share to some classes of stock and less than one vote per share to other classes of stock. B. The record date may not be more than 70 days before the shareholders' meeting. C. The record date is set forth in thecorporation's articles of organization. D. At least one class of shares of stock of a corporation must have voting rights. E. Only shareholders who own stock as of a set date may vote at ashareholders' meeting.
The record date is set forth in the corporation's articles of organization.
Which of the following is NOT true about corporate officers? A. The same individual may NOT simultaneously hold more than one office in the corporation. B. The duties of each officer are specified in the bylaws of the corporation. C. The bylaws or the board of directors can authorize duly appointed officers the power to appoint assistant officers. D. The same individual may simultaneously hold more than one office in the corporation. E. Officers have the express authority granted to them, as well as implied authority and apparent authority, to bind a corporation to contracts.
The same individual may NOT simultaneously hold more than one office in the corporation.
Which of the following is NOT an advantage of a sole proprietorship? A. The sole proprietorship "veil" shields the sole proprietor from personal liability for business debts. B. The owner has the right to make all management decisions concerning the business, including those involving hiring and firing employees. C. A sole proprietorship can be easily transferred or sold if and when the owner desires to do so; no other approval is necessary. D. The sole proprietor owns all of the business and has the right to receive all of the business's profits. E. Forming a sole proprietorship is easy and does not cost a lot.
The sole proprietorship "veil" shields the sole proprietor from personal liability for business debts.
Which of the following is an INCORRECT statement regarding an international subsidiary corporation? A. A subsidiary corporation is a separate legal entity. B. The parent corporation usually owns all or the majority of the subsidiary corporation. C. A multinational corporation can conduct business in another country by using an international subsidiary corporation. D. The subsidiary corporation is organized under the laws of the home country. E. There is a liability shield between the parent corporation and its international subsidiary corporation.
The subsidiary corporation is organized under the laws of the home country.
Which of the following is true regarding state securities laws? A. They contain narrow antifraud provisions. B. They are sometimes referred to as "blue-ocean" laws. C. They provide no exemptions from registration. D. These laws require registration of certain securities. E. All 50 states have enacted securities laws.
These laws require registration of certain securities.
Which of the following is NOT true regarding WKSIs? A. They must file a new prospectus every time they have a new public offering. B. They are allowed to use multiple offerings over a three-year period. C. They are granted substantial flexibility not provided to other issuers. D. These companies file with the SEC through what's called a shelf registration. E. They must have issued $1 billion of securities in the previous 3 years or had $700 million of outstanding equity owned by nonaffiliate investors.
They must file a new prospectus every time they have a new public offering.
Which of the following is NOT true regarding small company offerings? A. They do not need to register federally with the SEC. B. They must file a registration statement, prospectus, and a question-and-answer form. C. Most offerings are sold directly to the public by the issuer. D. They may only raise $1 million or less. E. These offerings are less expensive and do not require the services of a securities lawyer.
They must file a registration statement, prospectus, and a question-and-answer form.
Which of the following is NOT true regarding emerging growthcompanies? A. They must have less than $1.07 billion in revenue. B. They are exempt from many of the requirements imposed on traditional IPOs. C. They must not have issued more than $1 billion in debt. D. They must submit a confidential draft registration statement with the SEC. E. They must have less than $700 million in stock outstanding.
They must submit a confidential draft registration statement with the SEC.
The _____ is a model act that provides comprehensive and uniform laws for the formation, operation, and dissolution of LLCs. A. Uniform Commercial Code B. RUPA C. Uniform Corporations Code D. ULLCA E. UPA
ULLCA (uniform limited liability company act)
Which of the following is an INCORRECT statement regarding the taxation ofLLCs? A. Under the Internal Revenue Code, for federal income tax purposes, an LLC is taxed as a corporation unless it elects to be taxed as a partnership. B. An LLC is not taxed at the entity level. C. An LLC's income or losses flow through to the members' individual income tax returns. D. The process of flow-through taxation applies to LLCs. E. Most LLCs accept the default status of being taxed as a partnership instead of electing to be taxed as a corporation
Under the Internal Revenue Code, for federal income tax purposes, an LLC is taxed as a corporation unless it elects to be taxed as a partnership.
According to the video, the ______________ reached a $16.6 billion settlement with Bank of America. The ______________ was enacted to reduce the type of activities with which the Bank of America was charged. a Federal Reserve Bureau; negligence common law b Federal Trade Commission; duty of loyalty c Consumer Financial Protection Bureau; duty of care d United States Department of Justice; Sarbanes-Oxley Act e Interstate Commerce Commission; business judgment rule
United States Department of Justice; Sarbanes-Oxley Act
A sole proprietor has _____ personal liability. A. secondary B. limited C. qualified D. conditional E. unlimited
Unlimited
Most corporations have a minimum of all of the following officers EXCEPT _________. A. a treasurer B. a cabinet C. a secretary D. one or more vice presidents E. a president
a cabinet
Which of the following is NOT a security? A. common stock B. preferred stock C. a debenture D. a check E. a warrant
a check
_______________ is an arrangement in which two or more business entities combine their resources to pursue a single project or transaction A. A strategic alliance B. Licensing C. Negotiating D. A joint venture E. Franchising
a joint venture
Which of the following is NOT a security? A. a debenture B. common stock C. a warrant D. an investment contract E. a promissory note
a promissory note
____________ is an arrangement between two or more companies whereby they agree to ally themselves and work together to accomplish a designated objective. A. Negotiating B. A strategic alliance C. Licensing D. Franchising E. A joint venture
a strategic alliance
Which of the following is NOT an example of a common security? A. a warranty B. a debenture C. preferred stock D. a warrant E. a bond
a warranty
A party who agrees to act on behalf of another is called a(n) _____. A. delegator B. assignor C. agent D. incidental beneficiary E. principal
agent
Which of the following issuers qualifies as a "well-known seasoned investor (WKSI)"? A. an issuer who has issued $100 million of securities in the previous three years B. an issuer who has issued $1 billion of securities in the previous three years C. an issuer who has issued $500 million of securities in the previous five years D. an issuer who has issued $1 billion of securities in the previous ten years E. an issuer who has issued $500 million of securities in the previous three years
an issuer who has issued $1 billion of securities in the previous three years
In a(n) _____ franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor. A. temporal B. chain-style C. area D. distributorship E. processing plant
area
A limited partnership agreement is also called the _____. A. articles of organization B. certificate of organization C. articles of limited partnership D. certificate of statutory compliance E. articles of incorporation
articles of limited partnership
The number of shares provided for in the articles of incorporation is called____________ shares. A. outstanding B. issued C. authorized D. cumulative E. preferred
authorized
Which of the following is NOT an example of a breach of a director's or officer's duty of care? A. a director's or an officer's failure to properly supervise a subordinate who causes a loss to the corporation through embezzlement and such B. a director's or an officer's failure to attend board meetings on a regular basis C. a director's or an officer's failure to make a reasonable investigation of a corporate matter D. a director's or an officer's failure to realize a profit for the corporation in any given calendar or fiscal year E. a director's or an officer's failure to keep adequately informed about corporate affairs
a director's or an officer's failure to realize a profit for the corporation in any given calendar or fiscal year
Suppose Georgia Pacific, Inc. interviews Albert Iorio for a sales representative position. Iorio, accompanied by Jane Franklin, the national sales manager, visits retail stores located in the open sales territory. While visiting one store, Franklin tells the store manager, "I wish I had more sales reps like Albert." Nevertheless, Iorio is not hired. If Iorio later enters into contracts with the store on behalf of Georgia Pacific and Franklin has not controverted the impression of Iorio that she left with the store manager, the company will ______. A. not be bound to the contract, since Iorio did not have express agency B. be bound to the contract, based on Iorio's express agency C. be bound to the contract, based on Iorio's apparent agency D. not be bound to the contract, since Iorio did not have apparent agency E. be bound to the contract, based on Iorio's implied agency
be bound to the contract, based on Iorio's apparent agency
According to the video, why did the Department of Justice pursue litigation against Bank of America? a because Bank of America proposed a merger with Wells Fargo that would likely violate antitrust law b because Bank of America directors were violating their duties of loyalty c because Bank of America was selling "toxic" mortgage securities backed by inadequately secured loans and violating mortgage fraud and consumer protection laws d because Bank of America officers were violating their duties of care e because Bank of America was charging usurious interest rates
because Bank of America was selling "toxic" mortgage securities backed by inadequately secured loans and violating mortgage fraud and consumer protection laws
According to the _____ rule, directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment. A. substantial performance B. parol evidence C. frustration of purpose D. business judgment E. commercial impracticability
business judgment
After conducting considerable research andinvestigation, the directors of a major automobile company decide to produce large and expensive sport-utility vehicles (SUVs). Three years later, when the SUVs are introduced to the public for sale, few of them are sold because of the public's interest in buying smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. In this case, the directors are protected by the _____ rule. A. frustration of purpose B. commercial impracticability C. parol evidence D. temporary impossibility E. business judgment
business judgment
Suppose that after conducting considerable research and investigation, the directors of a major automobile company decide to produce large and expensive sport-utility vehicles (SUVs). Three years later, when the SUVs are introduced to the public for sale, few of them are sold because of the public's interest in buying smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. Because this was an honest mistake of judgment on the part of corporate management, their judgment is shielded by the _____ rule. A. frustration of purpose B. business judgment C. substantial performance D. sovereign immunity E. commercial impracticability
business judgment
As a general rule, members of an LLC are not personally liable to third persons for the debts, obligations, and liabilities of an LLC beyond their _____. A. bank account deposits B. net worth C. capital contribution D. annual income E. securities holdings
capital contribution
In a limited partnership, limited partners are not personally liable for partnership debts beyond their _____. A. capital contributions B. personal net worth C. state's tort reform cap on damages D. liquid assets E. state's contract liability reform cap on damages
capital contributions
If the U.S. Department of Justice allegations are true, Bank of America directors and officers might have violated which of the following duties? a self-dealing b care c ursurpation of corporate opportunity d obedience e loyalty
care
In a(n) _____ franchise, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory. A. processing plant B. temporal C. distributorship D. chain-style E. area
chain-style
Delaware has a special court—the court of _____—that hears and decides business cases. A. commerce B. entrepreneurship C. business claims D. merchants E. chancery
chancery
The articles of incorporation are also referred to as the corporate _____. A. charter B. accord C. novation D. probate E. contract
charter
Under the _____ rule, a principal is generally _____ for injuries caused by its agents and employees while they are on their way to or from work. A. worker's compensation; liable B. frolic and detour; liable C. tort reform; liable D. coming and going; not liable E. coming and going; liable
coming and going, not liable
Siri, who is driving her automobile, is injured when another driver negligently causes an automobile accident. Siri hires a lawyer to represent her on a 35 percent contingency-fee basis. If the lawyer wins the case for Siri or settles the case with Siri's approval, he will earn 35 percent of whatever is collected from the defendant. If the lawyer does not win or settle the lawsuit, he gets paid nothing. The agent can recover this amount from the principal because of the duty to _______. A. indemnify B. compensate C. perform D. cooperate E. reimburse
compensate
_____ are the most dominant form of business organization in the UnitedStates, generating more than 85 percent of the country's gross business receipts. A. General partnerships B. Sole proprietorships C. Limited liability limited partnerships D. Limited partnerships E. Corporations
corporations
_____ voting is a system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates. A. Noncumulative B. Derivative C. Proxy D. Straight E. Cumulative
cumulative
Which of the following is NOT a major responsibility of the Securities and Exchange Commission (SEC)? A. regulating the activities of securities brokers and advisors B. adopting rules and regulations that further the purpose of the federal securities statutes C. bringing a civil action to recover monetary damages from violators of securities laws D. investigating alleged securities violations and bringing enforcement actions against suspected violators E. determining the par value of publicly-traded securities
determining the par value of publicly-traded securities
According to the UPA, the _____ of a general partnership is when the"general partnership receives notice from a general partner of their express will to withdraw as a partner." A. expropriation B. winding up C. expatriation D. dissolution E. winding down
dissolution
In a(n) _____ franchise, the franchisor manufactures a product and licenses a retail dealer to distribute a product to the public. A. distributorship B. processing plant C. temporal D. area E. chain-style
distributorship
An agent enters an authorized contract with a third party on themprincipal's behalf, the principal fails to perform on the contract, and the third party recovers a judgment against the agent. The agent can recover this amount from the principal because of the ___________. A. duty to perform B. duty to indemnify C. duty to reimburse D. duty to cooperate E. duty to compensate
duty to indemnify
Which of the following is NOT a duty of the agent? A. duty to indemnify B. duty to notify C. duty to account D. duty of accountability E. duty to perform
duty to indemnify
Which of the following is NOT a duty of the principal? A. duty to compensate B. duty to perform C. duty to reimburse D. duty to cooperate E. duty to indemnify
duty to preform
The JOBS Act creates a new class of public company and a new category of issuer under federal securities laws called the _____ company. A. emerging growth B. IPO stoplight C. seasoned investment D. initial public E. tenured
emerging growth
Principals often employ outsiders—that is, persons and businesses that are not _____—to perform certain tasks on their behalf. These persons and businesses are called _____. A. independent contractors; incidental beneficiaries B. employees; independent contractors C. third party beneficiaries; incidental beneficiaries D. independent contractors; employees E. incidental beneficiaries; third party beneficiaries
employees; indecent contractors
An apparent agency is also known as an agency by _____. A. estoppel B. ratification C. first refusal D. rebuttal E. last resort
estoppel
Apparent agency, or agency by _____, arises when a principal creates the appearance of an agency that in actuality does not exist. A. execution B. rebuttal C. estoppel D. accord and satisfaction E. ratification
estoppel
A share _____ is a situation in which one corporation acquires all the shares of anothercorporation, and both corporations retain their separate legal existence. A. derivation B. exchange C. collaboration D. bailment E. subrogation
exchange
Which of the following is the most common form of agency? A. express B. implied C. symbolic D. equitable E. quasi-
express
The Restatement (Second) of Agency defines agency as a(n) _____ relationship "which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act." A. independent contractor B. intended beneficiary C. fiduciary D. third-party beneficiary E. employment
fiduciary
What crime committed by the Bank of America resulted in the largest settlement between the government and a private corporation in United States history? a duty of care fraud b negligence c financial fraud d breach of duty of loyalty e failure to follow the business judgment rule
financial fraud
General partners do not pay federal income taxes. Instead, the income and losses of partnership have to be reported on the individualpartners' personal income tax returns. This is called _____. A. double taxation B. flow-through taxation C. de facto corporate taxation D. taxation without representation E. add-on taxation
flow-through taxation
An LLP is liable in all of the following situations EXCEPT __________. A. for loss or injury caused to a person as a result of a wrongful act of a partner acting in the ordinary course of business of the partnership or with authority of the partnership B. for a penalty incurred as a result of omission of a partner acting in the ordinary course of business of the partnership or with authority of the partnership C. for loss or injury caused to a person as a result of a partner exercising due care in the ordinary course of business of the partnership or with authority of the partnership D. for a penalty incurred as a result of a wrongful act of a partner acting in the ordinary course of business of the partnership or with authority of the partnership E. for loss or injury caused to a person as a result of actionable conduct of a partner acting in the ordinary course of business of the partnership or with authority of the partnership
for loss or injury caused to person as result of a partner exercising due care in the ordinary course of business of the partnership or with authority of the partnership.
Which of the following is NOT an advantage to franchising? A. Consumers are assured of uniform product quality. B. The franchisor can reach lucrative new markets. C. The franchisee has access to the franchisor's knowledge while running an independent business. D. For the franchisee, there are no start-up expenses. E. The franchisee has access to the franchisor's resources while running an independent business.
for the franchisee, there are no start-up expenses.
The _____ is the party who is granted the franchise and license in a franchise agreement. A. franchisor B. franchisee C. delegatee D. delegator E. incidental beneficiary
franchisee
A limited partnership has two types of partners: _____. A. general and ordinary B. limited and special C. primary and secondary D. conditional and unconditional E. general and limited
general and limited
A general medical practitioner in a rural area would be held to the standard of a reasonable __________________. A brain surgeon would be held to the standard of a reasonable ________________. A. general practitioner; brain surgeon B. general practitioner in rural areas; person C. general practitioner in rural areas; brain surgeon D. general practitioner in rural areas; brain surgeon in rural areas E. person; general practitioner
general practitioner in rural areas; brain surgeon
An issuer may be a new company that is selling securities to the public for the first time. This is referred to as _____. A. going public B. testing the market C. going rogue D. testing the waters E. the unveiling
going public
In many situations, a principal and an agent do not expressly create an agency. Instead, the agency is inferred from the conduct of the parties. This type of agency is referred to as a(n) _____ agency. A. implied B. general C. durable D. reserved E. express
implied
Suppose a homeowner employs a real estate broker to sell his house. A water pipe breaks and begins to leak water into the house. If the homeowner cannot be contacted, the real estate broker has _____ authority to hire a plumber to repair the pipe to stop the water leak. A. express B. implied C. symbolic D. equitable E. quasi-
implied
Sonia, who owns a piece of vacant real estate, hires Matthew, a licensed real estate broker, to list the property for sale. Leonard, an adjacent property owner to Sonia's property, tells Matthew that a chemical plant has polluted his property and probably Sonia's property. Sonia does not know this fact, and Matthew does not tell Sonia this information. Sonia sells the property to Macy. It is later discovered that the property Macy bought from Sonia is polluted. In this Example, the information that Matthew was told about the possible pollution of the property is imputed to Sonia. Sonia will be held liable to Macy because of the legal rule of ___________ A. duty to perform. B. duty of accountability. C. imputed knowledge. D. duty to account. E. duty to indemnify.
imputed knowledge.
Principals often employee outsiders—that is, persons and businesses that are not employees—to perform certain tasks on their behalf. These persons and businesses are called _____. A. dependent contractors B. independent contractors C. quasi-employees D. temporary employees E. virtual employees
independent contractors
Longhorn Corporation has its annual audit done by its outside certified public accountants (CPAs), Young & Old, CPAs. Priscilla is one of the CPAs who conduct the audit. The audit discloses that the LonghornCorporation's profits have doubled since last year, and Priscilla rightfully discloses this fact to Martha, the chief financial officer (CFO) of Longhorn Corporation. If Priscilla and Martha purchase stock prior to the time the company announces its earning, this would be ________. A. short-swing profits B. a violation of Section 16(b) of the 1934 Act C. a violation of SEC Rule 147 D. tipper-tippee trading E. insider trading
insider trading
When a company employee or company advisor uses material nonpublic information to make a profit by trading in the securities of the company, this is known as _____. A. embezzlement B. a Ponzi scheme C. a pyramid scheme D. insider trading E. racketeering
insider trading
_____ trading occurs when a company employee or company advisor uses material _____ information to make a profit by trading in the securities of the company. A. Fair; nonpublic B. Fair; confidential C. Insider; public D. Insider; nonpublic E. Fair; inside
insider; nonpublic
A limited partnership is a(n) _____ because the _____ partner expects to make money based on the effort of the _____ partners. A. license; general; limited B. pyramid scheme; general; limited C. license; limited; general D. investment contract; general; limited E. investment contract; limited; general
investment contract; limited; general
A business or party selling securities to the public is called a(n) _____. A. organizer B. general partner C. incorporator D. limited partner E. issuer
issuer
Which of the following is NOT a transaction approved by the board of directors that requires a shareholder vote? A. issuing new shares of stock B. merger C. amending the articles of incorporation D. sale of substantially all of the corporation's assets outside the course of ordinary business operations E. voluntary dissolution of the corporation
issuing new shares of stock
Under the Uniform Partnership Act, general partners have _____ liability for torts and breaches of trust committed by a partner or an employee of the general partnership while acting on partnership business. A. joint and several B. individual, but not collective C. joint, but not several D. neither joint nor several E. collective, but not individual
joint and several
Under the Uniform Partnership Act, general partners are _____ liable for the business of the limited partnership even if the partner did not join in the commission of the act. A. jointly, but not severally B. jointly and severally C. neither jointly nor severally D. collectively, but not individually E. individually, but not collectively
jointly and severally
The term respondeat superior literally means "_____," and is based on the legal theory of vicarious liability, which is liability _____. A. let the master answer; based on ordinary negligence B. let the master answer; based on gross negligence C. answer to the higher authority; based on recklessness D. answer to the higher authority; based on intent E. let the master answer; without fault
let the master answer; without fault
Members of an LLC have _____ liability for the debts, obligations, and liabilities of an LLC. A. primary B. limited C. strict D. unqualified E. absolute
limited
Shareholders of a corporation generally have_____ liability for the debts and obligations of the corporation. A. absolute B. strict C. personal D. unlimited E. limited
limited
Which of the following is NOT a major legal form in which to conduct abusiness? A. general partnership B. limited partnership C. limited sole proprietorship D. limited liability partnership E. sole proprietorship
limited sole proprietorship
The duty of _____ is a duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders. A. loyalty B. absolution C. subordination D. recompense E. obedience
loyalty
An LLC can be either a(n) _____-managed LLC or a(n) _____-managed LLC. A. board; executive B. shareholder; stakeholder C. union; management D. employee; manager E. member; manager
member; manager
Cumulative voting gives a _____ shareholder a better opportunity to elect someone to the board of directors. A. majority B. common C. minority D. proxy E. preferred
minority
Under the _____ test, if the agent's motivation for committing an intentional tort is to promote the _____ business, the principal is liable for any injury caused by the tort. A. motivation; agent's B. captivation; principal's C. motivation; principal's D. motivation; third party's E. captivation; agent's
motivation; principal's
Under the standard for the _________________, an employer—the______________—is not liable if an employee, who is motivated by jealousy, injures someone during work hours on the premises who dated the employee's boyfriend. In this standard, theemployee's personal motivation is important to the standard. A. work-related test; principal B. intentional misrepresentation theory; principal C. motivation test; principal D. work-related test; agent E. motivation test; agent
motivation test; principal
Intentional torts include all but which of the following? A. negligence B. false imprisonment C. assault D. battery E. intentional infliction of emotional distress
negligence
The doctrine of _____ rests on the principle that if someone expects to derive certain benefits from acting through others, that person should also bear the liability for injuries caused to third persons by the negligent conduct of an agent who is acting within his or her scope of employment. A. strict liability B. negligence C. assumption of the risk D. absolute liability E. contributory negligence
negligence
The straight voting method is also referred to as _____ voting. A. derivative B. noncumulative C. conditional D. cumulative E. proxy
noncumulative
Managers of LLCs are _____ liable for the debts, obligations, and liabilities of the LLC they manage. A. strictly B. conditionally C. absolutely D. primarily E. not personally
not personally
A(n) _____ is an agreement entered into among members that governs the affairs and business of the LLC and the relations among members, managers, and the LLC. A. article of incorporation B. accord and satisfaction C. article of organization D. novation E. operating agreement
operating agreement
After a share exchange, one corporation (the _____ corporation) owns all the shares of the other corporation (the _____ corporation). A. delegator; delegatee B. agent; principal C. subsidiary; parent D. principal; agent E. parent; subsidiary
parent; subsidiary
In a(n) _____ agency, a contracting third party knows that the agent is acting for a principal but does not know the identity of the principal. A. statutory B. partially disclosed C. undisclosed D. fully disclosed E. common law
partially disclosed
A principal, Nigel Jones, and an agent, Marcia McKee, agree that the agent will represent the principal to purchase a business and that the agent will disclose the existence of the agency and identity of the principal to third parties. The agent finds a suitable business and contracts to purchase the business on behalf of the principal, but the agent mistakenly signs the contract "Marcia McKee, agent." This isa(n) _____ agency that occurs because of _____. A. partially disclosed; mistake B. partially disclosed; fraud C. fully disclosed; mistake D. undisclosed; mistake E. fully disclosed; fraud
partially disclosed; mistake
The doctrine of _____ is often used by unpaid creditors who are trying to collect from shareholders a debt owed by the corporation. A. waving the corporate wand B. frustration of purpose C. promissory estoppel D. commercial impracticability E. piercing the corporate veil
piercing the corporate veil
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. A. preliminary prospectus; registration statement B. articles of incorporation; certificate of incorporation C. registration statement; articles of incorporation D. articles of organization; certificate of incorporation E. preliminary prospectus; certificate of incorporation
preliminary prospectus; registration statement
The party who employs an independent contractor is called a(n) _____. A. employer B. principal C. agent D. assignee E. trustor
principal
Jordan is a lawyer who has her own law firm and specializes in real estate law. Dylan, a real estate developer, hires Jordan to represent him in the purchase of land. Dylan is the_______, and Jordan is the_________________. A. agent; independent contractor B. principal; employee C. principal; independent contractor D. principal; subagent E. agent; employee
principal; independent contractor
In a(n) _____ franchise, the franchisor provides a secret formula, or the like, to the franchisee. The franchisee then manufactures the product at its own location and distributes it to retail dealers. A. processing plant B. area C. distributorship D. temporal E. chain-style
processing plant
A(n) _____ is a person who organizes and starts a corporation, negotiates and enters into contracts in advance of its formation, and finds the initial investors to finance the corporation. A. promoter B. administrator C. executor D. trustee E. attorney-in-fact
promoter
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. A. provide exemptions from registration; larger; Uniform Securities Act B. provide exemptions from registration; smaller; Stop Trading on Congressional Knowledge Act C. provide exemptions from registration; smaller; Uniform Securities Act D. provide no exemptions from registration; larger; Uniform Securities Act E. provide no exemptions from registration; smaller; Uniform Securities Act
provide exemptions from registration; smaller; Uniform Securities Act
A(n) _____ is a written document signed by a shareholder that authorizes another person to vote the shareholder's shares. A. proclamation B. financial power of attorney C. allonge D. novation E. proxy
proxy
An agency can be legally terminated in all EXCEPT which of the following ways? A. the mutual assent of the parties B. the occurrence of a stated event C. ratification of the contract by the principal D. if a stated time has elapsed E. if a specific purpose is achieved
ratification of the contract by the principal
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________. A. recover the $4,000 profit because the trades occurred within 6 months of each other B. recover the $8,000 profit because the trades occurred within 6 months of each other C. may not recover the profit because Jackie is not an insider D. may not recover the profit because Jackie has a defense E. may not recover the profit because the trades occurred within 6 months of each other
recover the $8,000 profit because the trades occurred within 6 months of each other
If someone is suing a corporation, the complaint and summons is typically served on the corporation's _____. A. chief financial officer B. chief operations officer C. registered agent D. secretary of state E. chief executive officer
registered agent
The goals of the Sarbanes-Oxley Act (SOX) of 2002 include all EXCEPT which of the following? A. instill confidence in investors that management will run public companies in the best interests of all constituents B. replace independent corporate audits with internal audits C. eliminate conflicts of interest D. instill confidence in the public that management will run public companies in the best interests of all constituents E. improve corporate governance rules
replace independent corporate audits with internal audits
The board of directors authorizes actions to be taken on behalf of the corporation by adopting _____ at board of directors' meetings. A. minutes B. declarations C. proclamations D. shareholders E. resolutions
resolutions
Which of the following is NOT a characteristic of a corporation? A. free transferability of shares B. separate legal entity C. same identity as owner(s) D. perpetual existence E. centralized management
same identity as owner
The dissolution of a limited liability company arises by all of the following EXCEPT __________. A. an event stated in the operating agreement B. satisfying all the claims against the partnership C. a court issued order for dissolution D. the consensus of the number or percentage of members defined in the operating agreement E. a regulation change that makes it unlawful to carry on the business of the LLC
satisfying all the claim against the partnership
Securities that are exempt from registration with the SEC include all EXCEPT which of the following? A. securities issued by non-profit issuers, such as religiousinstitutions, charitable institutions, and colleges and universities B. securities that can be classified as either common stock or preferred stock C. short-term notes and drafts that have a maturity date that does not exceed nine months D. securities issued by any government in the United States E. securities of financial institutions that are regulated by the appropriate banking authorities
securities that can be classified as either common stock or preferred stock
Which of the following is NOT a major provision of the Sarbanes-Oxley Act? A. prohibition on personal loans B. penalties for tampering with evidence C. CEO certification D. reimbursement of bonuses E. shareholder liability
shareholder liability
Owners of corporations are called _____. A. limited partners B. shareholders C. board members D. partners E. associates
shareholders
With a(n) _____ power of attorney, a principal confers powers on an agent to act in specified matters on the principal's behalf. A. unconditional B. ratified C. broad D. special E. general
special
Because of their size and presence in the market, well-known seasoned investors (WKSIs) are granted substantial flexibility of communication not provided to other issuers. In addition to a____________________, a WKSI can release factual-information, __________________information, electronic communications, and free-writing prospectuses___________________ significant restrictions during the entire offering period. A. statutory prospectus; forward-looking; with B. statutory prospectus; backward-looking; without C. statutory prospectus; forward-looking; without D. Form U-7; forward-looking; without E. Form S-1; forward-looking; without
statutory prospectus; forward-looking; without
Unless otherwise required by a corporation's articles of incorporation or by corporate law, voting for the election of directors is by the_____ voting method. A. cumulative B. derivative C. representative D. straight E. proxy
straight
Which of the following is NOT a duty a principal owes to an agent? A. reimbursement B. subrogation C. cooperation D. compensation E. indemnification
subrogation
The articles of incorporation or the bylaws of a corporation can require a greater than majority of the shares to constitute a quorum of the vote of the shareholders. This is called a _____ voting requirement. A. supramajority B. consensus C. cumulative D. straight E. noncumulative
supramajority
Each of the following securities would be exempt from registration with the SEC EXCEPT? A. short-term notes with a six-month maturity date B. municipal bonds C. securities issued by a church D. technology firm securities issued within eight years of thecompany's first patent E. insurance company annuities
technology firm securities issued within eight years of thecompany's first patent
Which of the following is NOT a basic form of franchises? A. distributorship B. area C. processing plant D. chain-style E. temporal
temporal
A _____ offer is an offer that an acquirer makes directly to a target corporation's shareholders in an effort to acquire the target corporation. A. conditional B. counter C. firm D. revocable E. tender
tender
Suppose a principal hires a lawyer to represent her in a lawsuit until the lawsuit is resolved. If the principal and the lawyer voluntarily agree to terminate the relationship prior to the resolution of the case by trial or settlement, the agency is _____. A. terminated by operation of law B. terminated by an act of the parties C. terminated by an unusual change in circumstances D. terminated by impossibility of performance E. not terminated, since the lawsuit remains unresolved
terminated by an act of the parties
Suppose a principal employs an agent to trap alligators. If a law is passed that makes trapping alligators illegal, the agency contract_____. A. terminates due to an act of the parties B. is still enforceable, since the act of trapping alligators was legal when the principal and agent entered into the agency contract C. terminates due to operation of law D. terminates due to impossibility of performance E. terminates due to an unusual change in circumstances
terminates due to impossibility of performance
A registration statement must include all EXCEPT which of the following? A. pending litigation B. the stock options and benefits of the registrant's management C. the compensation of the registrant's management D. the articles of organization of the issuing company E. how the proceeds from the offering will be used
the articles of organization of the issuing company
Which of the following is NOT a criterion to qualify as a general partnership under the UPA? A. for profit B. carrying on a business C. an association of two or more persons D. as co-owners E. the issuance of publicly-traded stock
the issuance of publicly-traded stock
Which of the following circumstances can lead to termination of an agency by impossibility of performance? A. after the contract is formed, it becomes more difficult for the principal to perform his or her agency-related duties B. after the contract is formed, it becomes more expensive for the agent to perform his or her agency-related duties C. after the contract is formed, it becomes more difficult for the agent to perform his or her agency-related duties D. after the contract is formed, it becomes more expensive for the principal to perform his or her agency-related duties E. the loss or destruction of the subject matter of the agency
the loss or destruction of the subject matter of the agency
A registration statement must include all EXCEPT which of the following? A. the securities being offered for sale B. the management of the registrant C. how the proceeds from the offering will be used D. the mission statement and vision statement of the issuing company E. the registrant's business
the mission statement and vision statement of the issuing company
According to the RMBCA, the articles of incorporation must include which of the following? A. the limitation or regulation of the powers of the corporation B. regulations of the affairs of the corporation C. the purpose or purposes for which the corporation is organized D. the period of duration of the corporation E. the name and address of each incorporator
the name and address of each incorporator
A registration statement must include all EXCEPT which of the following? A. how the proceeds from the offering will be used B. government regulation C. the degree of competition in the industry D. any special risk factors E. the name and address of the registered agent of the issuing company
the name and address of the registered agent of the issuing company
The limited liability of shareholders means that ________. A. they have personal liability for the corporation's debts B. they cannot lose their investment in the corporation C. they have personal liability for the corporation's obligations D. they are liable only to the extent of their capital contributions E. their liability is limited to their ownership percentage in the corporation
they are liable only to the extent of their capital contributions
Whose actions create an apparent agency? A. the principal's B. the incidental beneficiary's C. the third-party beneficiary's D. the agent's E. the intermediary's
the principal's
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) _____. A. delegator; delegatee B. assignor; assignee C. tipper; tippee D. obligee; intended beneficiary E. obligee; incidental beneficiary
tipper; tippee
A multinational corporation is also known asa(n) _____ corporation. A. interstate B. supranational C. quasi- D. intrastate E. transnational
transnational
Which of the following is NOT a type of officer authority? A. apparent B. implied C. those given in the bylaws D. express E. ultra vires
ultra vires
In a(n) _____ agency, a contracting third party does not know of either the existence of the agency or the principal's identity. A. constructive B. common law C. symbolic D. statutory E. undisclosed
undisclosed
The board of directors has authority over all of the following EXCEPT _________. A. supervision of the corporation B. control of the corporation C. formulating policy decisions that affect the management D. voting rights E. operation of the corporation
voting rights
The process of _____ consists of the liquidation (sale) of general partnership assets and the distribution of the proceeds to satisfy claims against the partnership. A. winding up B. winding down C. expropriation D. expatriation E. dissolution
winding up
The process of _____ consists of the liquidation (sale) of limited partnership assets and the distribution of the proceeds to satisfy claims against the partnership. A. expatriation B. winding down C. dissolution D. winding up E. expropriation
winding up
Under the _____ test, if an agent commits an intentional tort within awork-related time or space—for example, during working hours or on the principal's premises—the principal is liable for any injuries caused by the agent's intentional torts. A. worker's compensation B. coming and going C. frolic and detour D. work-related E. tacit approval
work-related
Which of the following is an INCORRECT statement regarding corporate shareholders? A. Generally, shareholders have unlimited liability for corporate debts. B. The limited liability of shareholders means that they are liable only to the extent of their capital contributions. C. As separate legal entities, corporations are liable for their own debts and obligations. D. The limited liability of shareholders is a general rule of corporate law. E. Shareholders do not have personal liability for the corporation's debts.
Generally, shareholders have unlimited liability for corporate debts.
Which of the following is an INCORRECT statement regarding corporate bylaws? A. In addition to the articles ofincorporation, corporations are governed by their bylaws. B. The bylaws are much more detailed than are the articles of incorporation. C. The bylaws govern the internal management structure of a corporation. D. Bylaws do not have to be filed with any government official. E. Incorporators, not the initial directors, can adopt the bylaws of the corporation.
Incorporators, not the initial directors, can adopt the bylaws of the corporation.
Which of the following is NOT true regarding crowdfunding? A. Crowdfunding is used by companies that do not want to meet the requirements and expense of issuing securities pursuant to a registered offering. B. Crowdfunding offerings are subject to the Securities Act of 1933. C. Non-U.S. companies can use crowdfunding in the U.S. D. Crowdfunding is used by entrepreneurs and small businesses to raise small amounts of capital by selling securities to public investors using online portals. E. The JOBS Act created a new funding mechanism called crowdfunding.
Non-U.S. companies can use crowdfunding in the U.S.
Rani decides to sell her house and hires Mark, a real estate broker, to list and sell the house for a price of $1 million. They agree that Mark will disclose the existence of the agency and the identity of the principal to interested third parties. Mark shows the house to Heather, a prospective buyer, and discloses to Heather that he is acting as an agent for Rani. Heather agrees to buy the house, and Mark signs the contract on behalf of Rani. Which of the following statements is true? A. Heather may choose not to honor the contract. B. Rani, the principal, is not liable on the contract, but Mark, theagent, is. C. Rani, the principal, and Mark, the agent, both are liable. D. Rani, the principal, is liable on the contract, but Mark, theagent, is not. E. Neither Rani, the principal, nor Mark is liable on the contract.
Rani, the principal, is liable on the contract, but Mark, theagent, is not.
_____ Rule 504 exempts from registration the sale of securities not exceeding _____ during a 12-month period. This is known as the _____ exemption. A. UCC; $250,000; peppercorn B. SEC; $5 million; small offering C. FTC; $1 million; de minimis D. SEC; $500,000; small offering E. FTC; $5 million; de minimis
SEC; $5 million; small offering
________________ profits are profits that are made by statutory insiders on trades involving equity securities of their corporation that occur within____ months of each other. A. Long-range;18 B. Short-swing; 12 C. Tipper; 12 D. Short-swing; 6 E. Tippee; 3
Short-swing; 6
Which of the following is an INCORRECT statement regardingcorporations? A. Corporations are the most dominant form of business organization in the United States. B. Owners of corporations are called shareholders. C. Today, most corporations are formed pursuant to general corporation laws of the federal government. Your answer is correct. D. Corporations generate more than 85 percent of the country's gross business receipts. E. Corporations range in size from one owner to thousands of owners.
Today, most corporations are formed pursuant to general corporation laws of the federal government.
Sometimes principals request that agents run errands or conduct other acts on their behalf while the agent or employee is on personal business. In this case, the agent is on a _____, and most jurisdictions hold _____ liable if the agent injures someone while on such a mission. A. dual-purpose mission; both the principal and the agent B. dual-purpose mission; the agent, but not the principal, C. unilateral mission; both the principal and the agent D. unilateral mission; neither the principal nor the agent E. dual-purpose mission; the principal, but not the agent,
dual-purpose mission; both the principal and the agent
A power of attorney is an _____ agency agreement that is often used to give a(n) _____ the power to sign legal documents on behalf of the_____. A. express; third party beneficiary; incidental beneficiary B. express; agent; principal C. implied; principal; agent D. implied; agent; principal E. express; principal; agent
express; agent; principal
Suppose that Technology Incorporated wants to acquire Digital Corporation. Technology Incorporated makes a tender offer directly to the shareholders of Digital Corporation to acquire their shares of Digital Corporation. This is a _____ tender offer in which Technology Incorporated is the tender _____ and Digital Corporation is the _____ corporation. A. hostile; offeror; parent B. hostile; offeror; target C. hostile; offeror; partner D. friendly; offeree; partner E. friendly; offeree; target
hostile; offeror; target
A Small Company Offering Registration (SCOR) is a method for________________ companies to sell up to $1 million of securities during a _____________ -month period to the public by using aquestion-and-answer disclosure form called Form _____________. A. medium-sized; 12, S-1 B. small; 6; 8-K C. small; 12; U-7 D. large; 12; 10-K E. small; 18; 10-Q
small; 12; U-7
