REG Quiz 4 - Sec

Answer: C) New securities offered for sale in interstate commerce be registered with the SEC.

A main provision of the Securities Act of 1933, as amended in 1934, is the requirement that A) Bonds be issued only under a trust indenture approved by the Securities and Exchange Commission (SEC). B) Public utility holding companies register with the SEC. C) New securities offered for sale in interstate commerce be registered with the SEC. D) All security brokers be licensed by the SEC.

Answer: A) File an offering statement with the SEC.

An offering made under the provisions of Regulation A Tier 1 requires that the issuer A) File an offering statement with the SEC. B) Sell only to accredited investors. C) Provide investors with the prior 4 years' audited financial statements. D) Provide investors with a proxy registration statement.

Answer: A) Only Apogee may make oral communications at any time if certain conditions are met.

Apogee Co. has filed with the SEC for many years, and its market capitalization is $10 billion. Perigee Co. has filed continuously with the SEC for 3 years, and its market capitalization is $75 million. Which of the following is most likely a true statement about communications prior to and during a registered offering of securities? A) Only Apogee may make oral communications at any time if certain conditions are met. B) Only Apogee may communicate a free-writing prospectus after the registration statement is filed. C) Apogee and Perigee may make written offers at any time. D) Neither Apogee nor Perigee may make communications prior to filing the registration statement.

Answer: C) Craven and Hanson would be considered insiders and Spore would be considered a tippee, all with knowledge of material, nonpublic information.

Craven was the CEO of Engines Plus, Inc., a publicly-traded company. Hanson, CPA, was the long-time controller for the company. Engines Plus was about to be sued in a class action suit for defective engines. Only Craven knew about the impending suit. On March 1, Craven told Hanson about the impending suit. On March 2, Craven told Spore, an old friend, about the suit. Spore knew that Craven was the CEO of Engines Plus. On March 3, Craven, Hanson, and Spore all sold the stock they owned in Engines Plus. On March 4, the class action suit was filed and the value of Engines Plus stock plummeted. Under the insider trading provisions of the Securities Exchange Act of 1934, which of the following statements is correct regarding Craven, Hanson, and Spore? A) Only Craven would be considered an insider having knowledge of material, nonpublic information. B) Craven, Hanson, and Spore would all be considered insiders with knowledge of material, nonpublic information. C) Craven and Hanson would be considered insiders and Spore would be considered a tippee, all with knowledge of material, nonpublic information. D) Craven would be considered an insider and Hanson and Spore would be considered tippees, all with knowledge of material, nonpublic information.

Answer: C) File the periodic report listing newly appointed officers.

Integral Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934. For its current fiscal year, Integral filed the following with the SEC: quarterly reports, an annual report, and a periodic report listing newly appointed officers of the corporation. Integral did not notify the SEC of shareholder "short-swing" profits, report that a competitor made a tender offer to Integral's shareholders, and report changes in the price of its stock as sold on the New York Stock Exchange. Under the SEC reporting requirements, which of the following was Integral required to do? A) Report the tender offer to the SEC. B) Notify the SEC of shareholder "short-swing" profits. C) File the periodic report listing newly appointed officers. D) Report the changes in the market price of its stock.

Answer: B) Its shares are listed on a national stock exchange.

Integral Corp., with assets in excess of $4 million, has issued common and preferred stock and has 350 shareholders. Its stock is sold on the New York Stock Exchange. Under the Securities Exchange Act of 1934, Integral must be registered with the SEC because A) It issues both common and preferred stock. B) Its shares are listed on a national stock exchange. C) It has more than 300 shareholders. D) Its shares are traded in interstate commerce.

Answer: B) If Valiant is listed on a national stock exchange, Fisk must file his tender offer with the SEC.

James Fisk recently acquired Valiant Corporation by purchasing all of its outstanding stock pursuant to a tender offer. Fisk demanded and obtained the resignation of the existing board of directors and replaced it with his own slate of nominees. Under these circumstances, A) Fisk had no right to demand the resignation of the existing board members; their resignations are legally ineffective, and they remain as directors. B) If Valiant is listed on a national stock exchange, Fisk must file his tender offer with the SEC. C) The former shareholders of Valiant are parties to a tax-free reorganization. Hence, they are not subject to federal income tax on their gain, if any, on transferring their stock to Fisk. D) If Valiant is engaged in interstate commerce, the acquisition is exempt under the antitrust laws because the SEC has jurisdiction.

Answer: A) LPCO makes unlimited offers to nonresidents.

LPCO intends to sell securities. It is organized in the state where it carries on all of its business activities. If LPCO offers the securities in reliance on Rule 147, which of the following is a violation of federal securities laws and regulations? A) LPCO makes unlimited offers to nonresidents. B) The offering exceeds $5 million. C) Interstate distribution is prevented. D) The number of purchasers exceeds 100.

Answer: A) The resale of the limited partnership interests by a purchaser will not be restricted.

Lux Limited Partnership offered $300,000 of its limited partnership interests under Rule 504 of Regulation D of the Securities Act of 1933. The securities were registered and disclosure was made under state law. Which of the following statements is true? A) The resale of the limited partnership interests by a purchaser will not be restricted. B) The limited partnership interests may be sold only to accredited investors. C) The exemption under Rule 504 is not available to an issuer of limited partnership interests. D) The limited partnership interests may not be sold to more than 35 investors.

Answer: C) Must file with the SEC, the issuer, and the national securities exchange information concerning the purpose of the acquisition.

On May 1, Apel purchased 7% of Stork Corp.'s preferred stock traded on a national securities exchange. After the purchase, Apel owned 9% of the outstanding preferred stock. Stork is registered under the Securities Exchange Act of 1934. With respect to the purchase, Apel A) Is not required to file any report or information with the SEC because Apel owns less than 10% of the preferred stock. B) Is not required to file any report or information with the SEC because the security purchased was preferred stock. C) Must file with the SEC, the issuer, and the national securities exchange information concerning the purpose of the acquisition. D) Must file only with the SEC information concerning the source of the funds used to purchase the preferred stock.

Answer: A) Not required to provide any specified information to the accredited investors.

Pate Corp. is offering $3 million of its securities solely to accredited investors pursuant to Regulation D of the Securities Act of 1933. Under Regulation D, Pate is A) Not required to provide any specified information to the accredited investors. B) Required to provide the accredited investors with audited financial statements for the 2 most recent fiscal years. C) Not permitted to make a general solicitation. D) Not eligible for an exemption if the securities are debentures.

Answer: A) $7 million of securities to an unlimited number of accredited investors and up to 35 nonaccredited investors under Rule 506.

Pax Co. is making a $7 million stock offering and wants the issue to be exempt from registration under the Securities Act of 1933. Regulation D provides that Pax can offer A) $7 million of securities to an unlimited number of accredited investors and up to 35 nonaccredited investors under Rule 506. B) $7 million of securities to an unlimited number of accredited investors and up to 35 nonaccredited investors under Rule 504. C) Up to $5 million of securities under Rule 506. D) An unlimited amount of securities under Rule 504.

Answer: D) Sales are made before the offering statement is approved by the SEC.

Regulation A provides an exemption for issuers of securities under the Securities Act of 1933. In reliance on Regulation A, Issuer has offered $18 million of securities for sale during the current calendar year. Which of the following violates federal securities laws and regulations? A) Issuer makes a general solicitation. B) The securities may be resold without restriction. C) Issuer tests the waters by making written advertisements. D) Sales are made before the offering statement is approved by the SEC.

Answer: C) Issuer does not register under state blue-sky laws.

Regulation A provides an exemption for issuers of securities under the Securities Act of 1933. In reliance on Regulation A, Issuer has offered $18 million of securities for sale during the current calendar year. Which of the following violates federal securities laws and regulations? A) Issuer sells to 50 nonaccredited investors. B) Issuer does not make annual filings. C) Issuer does not register under state blue-sky laws. D) Issuer filed financial statements for the last 2 complete fiscal years.

Answer: D) Anyone who bases his or her trading activities on the inside information.

The SEC's antifraud Rule 10b-5 prohibits trading on the basis of inside information of a business corporation's stock by A) Officers and directors only. B) Officers, directors, and shareholders only. C) Officers, directors, and beneficial holders of 10% of the corporation's stock. D) Anyone who bases his or her trading activities on the inside information.

Answer: B) An issuer.

The Securities Act of 1933 broadly classifies the parties involved in the initial offering and sale of securities. The individual or business organization offering a security for sale to the public is A) A dealer. B) An issuer. C) A broker. D) An underwriter.

Answer: C) The SEC is not informed of exempt sales.

The Securities Act of 1933 provides an exemption from registration for offers and sales of securities made only to accredited investors. Federal securities laws and regulations are violated if the exemption is claimed and A) Offers and sales are made to more than 100 accredited investors. B) Resale of the securities is restricted. C) The SEC is not informed of exempt sales. D) No information is given to investors.

Answer: C) Comfort letters for underwriters.

The Securities and Exchange Commission requires public companies to disclose all of the following except A) Management's discussion and analysis. B) Proxy statements. C) Comfort letters for underwriters. D) A prospectus.

Answer: A) Requirement that firms offering securities for public sale to file a registration statement and provide a prospectus to potential investors.

The provisions of the Securities Exchange Act of 1934 include all of the following except the A) Requirement that firms offering securities for public sale to file a registration statement and provide a prospectus to potential investors. B) Registration of securities listed on national exchanges. C) Regulation of proxy solicitations for the election of directors or for approval of other corporate actions. D) Required disclosure of pertinent information in tender offer solicitations.

Answer: A) Names of owners of at least 5% of any class of nonexempt equity security.

The registration provisions of the Securities Exchange Act of 1934 require disclosure of all of the following information except the A) Names of owners of at least 5% of any class of nonexempt equity security. B) Bonus and profit-sharing arrangements. C) Financial structure and nature of the business. D) Names of officers and directors.

Answer: B) Apply to a corporation that registered under the Securities Act of 1933 but that did not register under the Securities Exchange Act of 1934.

The reporting requirements of the Securities Exchange Act of 1934 and its rules A) Apply only to issuers, underwriters, and dealers. B) Apply to a corporation that registered under the Securities Act of 1933 but that did not register under the Securities Exchange Act of 1934. C) Require all corporations engaged in interstate commerce to file an annual report. D) Require all corporations engaged in interstate commerce to file quarterly audited financial statements.

Answer: B) Cannot be the subject of an immediate unregistered reoffering to the public.

Under Regulation D of the Securities Act of 1933, which of the following conditions apply to private placement offerings? The securities A) Cannot be sold for longer than a 6-month period. B) Cannot be the subject of an immediate unregistered reoffering to the public. C) Must be sold only to accredited institutional investors. D) May be sold to no more than 20 purchasers who are not accredited investors.

Answer: D) Companies with assets in excess of $10 million and 500 or more nonaccredited shareholders.

Under Section 12 of the Securities Exchange Act of 1934, in addition to companies whose securities are traded on a national exchange, what class of companies is subject to the SEC's registration requirements? A) Companies with annual revenues in excess of $5 million and 300 or more shareholders. B) Companies with annual revenues in excess of $10 million and 500 or more nonaccredited shareholders. C) Companies with assets in excess of $5 million and 300 or more shareholders. D) Companies with assets in excess of $10 million and 500 or more nonaccredited shareholders.

Answer: B) The investor is provided with information on the principal purposes for which the offering's proceeds will be used.

Under the Securities Act of 1933, which of the following statements most accurately reflects how securities registration affects an investor? A) The investor is provided with information on the shareholders of the offering corporation. B) The investor is provided with information on the principal purposes for which the offering's proceeds will be used. C) The investor is guaranteed by the SEC that the facts contained in the registration statement are accurate. D) The investor is assured by the SEC against loss resulting from purchasing the security.

Answer: D) Is subject to having the registration of its securities suspended or revoked.

Under the Securities Exchange Act of 1934, a corporation whose common stock is listed on a national stock exchange A) Is prohibited from making private placement offerings. B) Must submit Form 10-K to the SEC except in those years in which the corporation has made a public offering. C) Must distribute copies of Form 10-K to its shareholders. D) Is subject to having the registration of its securities suspended or revoked.

Answer: B) The issuer would act unlawfully if it were to sell the common stock without providing the investor with a prospectus.

When a common stock offering requires registration under the Securities Act of 1933, A) The registration statement is automatically effective when filed with the SEC. B) The issuer would act unlawfully if it were to sell the common stock without providing the investor with a prospectus. C) The SEC will determine the investment value of the common stock before approving the offering. D) The issuer may make sales 10 days after filing the registration statement.

Answer: B) The principal purposes for which the offering proceeds will be used.

Which of the following disclosures must be contained in a securities registration statement filed under the Securities Act of 1933? A) A list of all existing shareholders. B) The principal purposes for which the offering proceeds will be used. C) A copy of the corporation's latest proxy solicitation statement. D) The names of all prospective accredited investors.

Answer: B) Shares listed on a national securities exchange.

Which of the following factors, by itself, requires a corporation to comply with the reporting requirements of the Securities Exchange Act of 1934? A) Six hundred employees. B) Shares listed on a national securities exchange. C) Total assets of $2 million. D) Four hundred holders of equity securities.

Answer: C) The sale or offer to sell the securities is made by a person other than an issuer, underwriter, or dealer.

Which of the following facts will result in an offering of securities being exempt from registration under the Securities Act of 1933? A) The securities are nonvoting preferred stock. B) The issuing corporation was closely held prior to the offering. C) The sale or offer to sell the securities is made by a person other than an issuer, underwriter, or dealer. D) The securities are AAA-rated debentures that are collateralized by first mortgages on property that has a market value of 200% of the offering price.

Answer: B) An owner of 5% of the corporation's outstanding debentures or the corporation's general counsel.

Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements? A) An officer of the corporation. B) An owner of 5% of the corporation's outstanding debentures or the corporation's general counsel. C) A member of the board of directors. D) A shareholder who owns 12% of the outstanding common stock.

Answer: D) Securities issued by insurance companies.

Which of the following securities are regulated by the provisions of the Securities Act of 1933? A) Securities issued by not-for-profit, charitable organizations. B) Securities guaranteed by domestic governmental organizations. C) Securities issued by savings and loan associations. D) Securities issued by insurance companies.

Answer: A) The prospectus is a part of the registration statement.

Which of the following statements about the prospectus required by the Securities Act of 1933 is true? A) The prospectus is a part of the registration statement. B) The prospectus should enable the SEC to pass on the merits of the securities. C) The prospectus must be filed after an offer to sell. D) The prospectus is prohibited from being distributed to the public until the SEC approves the accuracy of the facts stated.

Answer: D) A report (Form 8-K) must be filed with the SEC after a material important event occurs.

Which of the following statements is true about corporations subject to the reporting requirements of the Securities Exchange Act of 1934? A) The annual report (Form 10-K) need not include audited financial statements. B) The annual report (Form 10-K) must be filed with the SEC before the end of the corporation's fiscal year. C) A quarterly report (Form 10-Q) need only be filed with the SEC by those corporations that are also subject to the registration requirements of the Securities Act of 1933. D) A report (Form 8-K) must be filed with the SEC after a material important event occurs.

Answer: D) The public sale by a corporation of its negotiable 10-year notes.

Which of the following transactions is subject to registration requirements of the Securities Act of 1933? A) The public sale of stock of a trucking company regulated by the Interstate Commerce Commission. B) A public sale of municipal bonds issued by a city government. C) The issuance of stock by a publicly traded corporation to its existing shareholders because of a stock split. D) The public sale by a corporation of its negotiable 10-year notes.

Answer: B) Securities Exchange Act.

Which one of the following laws addresses the issue of insider trading? A) Federal Trade Commission Act. B) Securities Exchange Act. C) Clayton Act. D) North American Free Trade Agreement.

Answer: B) Any person who owns more than 5% of Wool's common stock must file a report with the SEC.

Wool, Inc., is a reporting company under the Securities Exchange Act of 1934. The only security it has issued is its voting common stock. Which of the following statements is true? A) It is unnecessary for the required annual report (Form 10-K) to include audited financial statements. B) Any person who owns more than 5% of Wool's common stock must file a report with the SEC. C) Because Wool is a reporting company, it is not required to file a registration statement under the Securities Act of 1933 for any future offerings of its common stock. D) Wool need not file its proxy statements with the SEC because it has only one class of stock outstanding.