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Exam 41: Corporations: Securities and Investor Protection

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Question 31

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A company employee or executive who has inside information may be liable depending on whether the information is material. How does

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If there is a material omissio...

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Question 32

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Provide the Howey three-part test for determining if a security exists.

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Under the Howey test, a securi...

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Question 33

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The term associated with state securities laws is known as ________.

The SEC may issue bounty payments to insider-trading whistle-blowers.

The Securities and Exchange Act oversees ________.

ABC Company, a designer of computer software, had a number of new products ready to launch. Sean, a seller of office supplies to ABC Company, was talking with Yumi, the president of the company, regarding a product order. Yumi was called away from her office for a few minutes, and Sean, who liked to be curious, took the opportunity to go through the papers on her desk. Sean discovered a description of the new software products. He immediately bought lots of ABC Company stock and made a significant profit following the public announcement of the new software and the resulting increase in the price of ABC Company stock. Is there any theory on which Sean could be held liable for a securities violation, and, if so, what? Describe any such theory.

The average investor does not have to register securities when he or she wants to sell.

[Coffee Shops] Marley wants to open a chain of coffee shops but needs some investors. Her friend Marc tells her that she should be sure that she satisfies the requirements of the SEC. Marc tells her that she has to provide information to the SEC involving a description of the securities, an explanation of how proceeds will be used, information regarding the management of the company and other matters. He tells her that she also has to provide a document to the SEC that will be provided as an advertising tool to potential investors who can rely on it to decide whether they should buy the securities. Marley says that she does not want to do that. She explains to Marc that insofar as the coffee shop venture is concerned, she does not want to advertise, and she only wants to offer securities to a limited number of wealthy friends. Particularly, she has her friend Annaliese in mind, who has a net worth of at least $3 million. -Which of the following is the term for the document referenced by Marc which contains information provided to the SEC including a description of the securities, an explanation of how proceeds will be used, information regarding the management of the company and other matters?

For which of the following is Charlie liable?

Which of the following created SEC oversight over the Public Company Accounting Oversight Board to regulate public accounting firms?

Which of the following is false regarding the Mexican Securities Market?

Which of the following terms is associated with an investment banking firms that purchases securities from an issuing corporation with the intent of selling them to brokerage houses?

Which of the following is not a requirement for the application of the exemption involving intrastate issues?

SEC regulations do not apply to online advertising and security transactions.

The Securities and Exchange Commission is headed by ________?

Which of the following is known as a prospectus with a warning written in red print at the top of the page warning investors registration is complete with the SEC but the SEC has not yet approved the registration?

Which of the following permits the SEC to seek punishment of violators of foreign securities laws?

[Wrongful Discharge] Monique worked as an administrative assistant for B&B Corporation. According to paragraph 16 of B&B's employee handbook's progressive discipline policy, an employee whose performance is unsatisfactory may be discharged if no improvement is shown within thirty days after receiving a written warning. Monique was having difficulty learning the software program required for her job. On July 1, she met with her supervisor, who told her that her performance needed improvement and gave her a written warning which referenced paragraph 16 of the employee handbook. Monique stayed up late each night trying to learn the new program. She was away from her job for one week for jury duty. On her return to work from jury duty on July 20, Monique was terminated for poor performance. Monique called B&B's Human Resources Department, but was told she has no case for wrongful discharge because she was an employee-at-will and can be terminated at any time for any reason. -The SEC issues opinions regarding the worth of securities.

[Vineyard Development] A community group in Montana wanted to revitalize the area and held a meeting urging residents to invest in local businesses. After the meeting, Mai and Trent, who own Valley Vineyard, decide to expand by adding a spa and first-class restaurant to the property to attract tourists. They plan to raise capital for the vineyard development by issuing securities to local investors. All of Valley Vineyard's property and assets are in Montana and their wine sales are about 85% to stores, consumers, or distributors within the state. Once the spa and restaurant are running, they would like to use their profits to open a small wine-bar in Florida. -Which of the following statements is false about marketing securities on the internet?

The Private Securities Litigation Reform Act of 1995, provides a(n) ________ from liability for publicly held issuers who make financial forecasts as long as the forecasts are accompanied by meaningful cautionary statements.