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Exam 39: Investor Protection Insider Trading and Corporate Governance

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Question 31

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The Securities Exchange Act of 1934 applies to all cases involving the trading of securities, except in private transactions.

A) True
B) False

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Question 32

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Securities must be registered under the Securities Act of 1933 for the Securities Exchange Act of 1934 to apply.

A) True
B) False

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Question 33

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Small-business issues can use a securities registration and reporting system that requires simpler forms than the full registration system.

Eli, an officer for Food Stores Inc., buys 10,000 shares of its stock. One week later, the company announces that it will merge with a competitor, Grocery Mart Corporation, and the price of Food Stores' stock increases. One month later, Eli sells his shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Eli would not be liable if, after buying the stock, he had waited

State securities laws apply mainly to intrastate transactions.

Home Stuff Corporation is poised to issue securities that, under the Securities Act of 1933, are exempt. This means that the securities can be sold

Movie Time Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by

To avoid a conviction in a criminal prosecution under the securities laws, there must be at least a reasonable doubt that the defendant knew he or she was acting wrongfully.

Ridley is an officer of Sun Watts, Inc. Ridley knows that a Sun Watts engineer recently developed a new, inexpensive method for collecting, storing, and converting solar power into fuel. Ridley takes advantage of this information to buy Sun Watts stock from Taylor and, after the discovery is announced, to sell the stock to Ulrich at a profit. Taylor claims that this is a violation of federal law. Is Taylor correct? If so, what federal law has Ridley violated, and what are its possible penalties?

The Securities Exchange Act of 1934 provides for continuous periodic disclosures by certain publicly held companies.

A well-known seasoned investor has less flexibility in filing registration statements and using free-writing prospectuses than other issuers.

An insider must use inside information in connection with the purchase and sale of securities to violate Section 16(b)of the Securities Exchange Act of 1934.

Household Products Corporation wants to make an offering of securities to the public. The offering is not exempt from registration under the Securities Act of 1933. Before the firm sells its securities, it must provide investors with

Providing investors with more information helps them make buying and selling decisions about securities.

Chris, a coder for Drones Inc., learns of undisclosed company plans to market a new, smart drone. Chris buys 10,000 shares of the firm's stock. If Chris is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of the stock was

Ross, a sales executive with Steel Mill Inc., learns of undisclosed company plans to produce a new type of steel. Ross tells Tim, who tells Uri, who buys 100 shares of Steel Mill stock. Uri knows that Tim got the information from Ross. When the firm publicly announces its new product, Uri sells the stock for a profit. Under the Securities Exchange Act of 1934, Uri is most likely

Most private, midsize-business, noninvestment company offers of securities are exempt from the registration requirements.

Forward-looking forecasts that turn out to be wrong can be protected against liability for securities fraud if they include "meaningful cautionary statements."

Under the Sarbanes-Oxley Act of 2002, all members of a publicly traded corporation's audit committee must be outside directors.

As part of a stock offering for Design Media Corporation, the firm's accountant Eve intentionally misrepresents material facts in the prospectus. Fred buys the stock unaware of the misrepresentation and suffers a loss. Eve may be subject to