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Exam 21: Investor Protection, Insider Trading, Corp Gov

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Question 21

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Frothy Beverage Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Frothy is required to

A) contribute to the operations of national stock exchanges.
B) disclose financial and other information about its securities.
C) engage in market surveillance to deter undesirable practices.
D) solicit proxies for voting.

E) A) and D)
F) B) and D)

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Question 22

Multiple Choice

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Fact Pattern 21-2 (Questions 21-22 apply) Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit. -Refer to Fact Pattern 21-2. Regarding Sid's profits on the purchase and sale of Tech stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapture

A) all of Sid's profits.
B) half of Sid's profits.
C) 10 percent of Sid's profits.
D) none of Sid's profits.

E) A) and B)
F) B) and D)

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Question 23

Multiple Choice

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Kitsch Niche Corporation is a noninvestment company that wants to is?sue $3 million of stock in a twelve-month period. Kitsch Niche, with less than $20 mil?lion in annual sales, qualifies as a small business issuer. Before Kitsch Niche sells the stock, it must provide investors with

Before filing a registration statement, an issuer must offer to sell securities.

Securities of nonprofit, educational, and charitable organizations are not exempt from the registration requirement of the 1933 Securities Act.

Securities that are exempt from the registration requirement can generally be sold and resold without being registered.

The Securities Exchange Act of 1934 provides for continuous, periodic disclosures by publicly held corporations.

Violations of the Securities Exchange Act of 1934 may be subject to criminal prosecution, but not civil liability.

Fact Pattern 21-3 (Questions 23-26 apply) Dhani, an accountant for Eureka, Inc., learns of undisclosed com?pany plan?s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re?veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa?tion from Dhani. When Eureka publicly an?nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit. -Refer to Fact Pattern 21-3. If Dhani is liable under the Securities Ex?change Act of 1934, it will be because the infor?mation on which he based his purchase of Eureka stock was

Catalina promises high returns to Darby and other investors, who then agree to trust their funds to Catalina. She uses these funds to pay previous investors. This is

Hi-Five Aero Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates

Private offerings of securities in unlimited amounts can be exempt from the registration requirement of the Securities Act of 1933.

Generally, federal se?curities law are patterned after states' antifraud laws.

SEC Rule 10b-5 applies to almost all cases involving the trading of securities.

Willful violations of the Sarbanes-Oxley Act of 2002 may be subject to harsh penalties.

Heavy Hauling, Inc., is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that Heavy Hauling's financial results are accurate and timely, the firm's senior officers must set up and maintain

To raise $12 million to expand operations, Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. Star plans to notify the SEC of sales. Under the Securities Act of 1933, this issue may qualify as an "exempt" transaction

Global Investments Corporation buys and sells securities. Section 10(b) of the Securities Ex?change Act of 1934 applies to

Generally, stock offerings that involve a small dollar amount are ex?empt from the registration requirement.

State securities laws apply mainly to intrastate transactions.