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Exam 23: Securities Regulation

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Question 41

True/False

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If an investor purchased securities and suffered damages as a result of an issuer's false or misleading statement, the investor is entitled to bring a civil suit to recover his or her losses.

A) True
B) False

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Question 42

Multiple Choice

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Which of the following permit(s) the SEC to exempt persons, securities, and transactions from securities regulations?

A) The Sarbanes-Oxley Act of 2002
B) The Securities Acts Amendments of 1990
C) The Market Reform Act of 1990
D) The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
E) The National Securities Markets Improvement Act of 1996

F) A) and B)
G) All of the above

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Question 43

Multiple Choice

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Which of the following is the period beginning when an issuer begins to think about issuing securities and ending when the issuer files the registration statement and prospectus with the SEC?

Reference - Coffee shops. Bernice wants to open a chain of coffee shops and begins by asking her friends in various states around the country to invest through the purchase of securities in the coffee shops. Her friend Robbie says that he would like to invest but that she should be sure that she satisfies requirements of the SEC. He 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 securities. Bernice says that she does not want to do that. She explains to Robbie that insofar as the coffee shop venture is concerned, she does not want to advertise; and she wants to offer securities only to a limited number of wealthy friends. Particularly, she has in mind Scott who has a net worth of at least $3 million and Mary, a psychiatrist. Mary recently filed bankruptcy because of some bad decisions involving an elaborate decoration of her office. Although her income for the past couple of years has been in the range of $80,000, business is improving based on her recent involvement with a number of patients suffering anxiety based upon a fear of alien invasion. Considering only the information available, which of the following is a term that would describe Scott as an investor?

Which of the following describes investment banking firms that purchase securities from the issuing corporation with the intent of selling them to brokerage houses which then sell them to the public?

Reference - Presidential Profits. Linda was president of a publicly traded tractor company, Tough Tractors. Linda became aware that stock in her company would likely increase significantly in value because her company had a contract to purchase the assets of Rough Tractors. The boards of both companies wanted the information kept confidential until the purchase was complete and a news release was made. Before the news was made public, Linda immediately purchased a significant number of shares in Tough Tractors. Linda also told her friend Frank about the contract to purchase assets. Frank, who knew that the information was not public, told his brother, George. Frank and George purchased a number of shares of stock in Tough Tractors prior to any public announcement of the sale. After the public announce was made and the purchase of assets went through, Linda, George and Frank, all sold their shares in Tough Tractors and made a nice profit. In which of the following prohibited practices was Linda engaged by purchasing the shares after she found out about the merger?

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

What is a proxy solicitation and how is it regulated by the SEC?

Which of the following references a profit made by a statutory insider from the purchase and sale of their own company stock within a six-month period?