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Exam 28: Investor Protection and Corporate Governance

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Question 1

Multiple Choice

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As part of a stock offering for Design Studio 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​

A) none of the choices.
B) job termination but no other sanctions,penalties,or liability.
C) a fine,imprisonment,and damages.
D) professional censure but no criminal sanctions or civil liability.

E) A) and D)
F) A) and C)

Correct Answer

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C

Question 2

Multiple Choice

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Trail Bike Corporation is a public company whose shares are traded in the public securities markets.Under the Securities Act of 1933,Trail Bike 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) all of the choices.

E) C) and D)
F) A) and D)

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Question 3

Multiple Choice

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Fact Pattern 28-3 Dan,an accountant for Eureka! Inc.learns of undisclosed company plans to market a new laptop.Dan buys 1,000 shares of the firm's stock.He reveals the company plans to Fay,who tells Greg.Both Fay and Greg buy 100 shares.Greg knows that Fay got her information from Dan.When Eureka! publicly announces its new laptop,Dan,Fay,and Greg sell their stock for a profit. -Refer to Fact Pattern 28-3.Under the Securities Exchange Act of 1934,Fay is most likely​

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

Under the Sarbanes-Oxley Act of 202,chief financial officers must certify the accuracy of information in corporate financial statements.

Global Trade Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration.This means that Global Trade must​

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.

Rico does not work for Street Bikes Company,but wrongfully obtains inside information concerning the firm.Based on the information,Rico buys and sells Street Bikes stock for personal gain.The Securities and Exchange Commission prosecutes Rico,arguing that he is liable because he stole information rightfully belonging to another.This argument is​

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

Issuers of securities offerings must comply with either federal or state securities laws,but not both.

Space Trips 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​

Under the Sarbanes-Oxley Act of 202,all members of a publicly traded corporation's audit committee must be outside directors.

While the Securities and Exchange Commission reviews a registration statement for completeness,most issuers can distribute a free-writing prospectus.

Guitar Factory 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​

Leo is the chief financial officer of Moneysworth Corporation,which is required to file certain financial statements with the Securities and Exchange Commission (SEC) .Under the Sarbanes-Oxley Act of 202,Leo must personally​

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​

Media Marketing Corporation is required to file a registration statement with the Securities and Exchange Commission.This statement must contain​

Fact Pattern 28-3 Dan,an accountant for Eureka! Inc.learns of undisclosed company plans to market a new laptop.Dan buys 1,000 shares of the firm's stock.He reveals the company plans to Fay,who tells Greg.Both Fay and Greg buy 100 shares.Greg knows that Fay got her information from Dan.When Eureka! publicly announces its new laptop,Dan,Fay,and Greg sell their stock for a profit. -Refer to Fact Pattern 28-3.Under the Securities Exchange Act of 1934,Geoff is most likely​

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders.Gourmand Pastries,Inc. ,has assets of more than $50 million and more than five hundred shareholders.The Securities Exchange Act of 1934 applies to​

Shoes & Sox Corporation is a public company whose shares are traded in the public securities markets.With respect to financial and other significant information concerning its securities,the Securities Act of 1933​