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Exam 36: Investor Protection, Insider Trading, and Corporate Governance

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Question 1

True/False

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Crowdfunding can be exempt from the registration requirements of the Securities Act of 1933 if shares are offered directly to investors.

A) True
B) False

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Question 2

Multiple Choice

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

A) only after being registered.
B) on the basis of nonpublic information.
C) within any six-month period by certain insiders.
D) without being registered.

E) None of the above
F) A) and C)

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Question 3

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Most securities cannot be resold without registration.

Corporate "outsiders" may be held liable for insider trading under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

The definition of security in the Securities Act of 1933 includes interests that involve the right to buy a security on a national security exchange.

Mars Mission Inc. is a regulated publicly held corporation. Under the Securities Act of 1934, Mars is required to

Space Flight Inc. files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. The firm is charged with violating the Securities Act of 1933. Its best defense is

Debt Equity Inc., and its officers, directors, and employees, buy and sell securities based on financial research and analysis. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving

Jazz Inc. makes and markets music. The company wants to make an initial public offering of securities via the Internet. Most likely, this offering

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

Dez is the chief financial officer of Elements Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC) . Under the Sarbanes-Oxley Act of 2002, Dez must personally

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

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.

Misrepresenting facts in a registration statement or prospectus is known as puffery and does not violate the Securities Act of 1933.

An investment contract in a franchise does not qualify as a security.

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

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

Only the Securities and Exchange Commission can sue violators of Section 10(b) and Rule 10b-5.

Spectrum Paints Inc. is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, the firm is subject to the direct corporate governance requirements of

Under the Sarbanes-Oxley Act of 2002, chief financial officers must certify the accuracy of information in corporate financial statements.