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Exam 42: Investor Protection, Insider Trading, and Corporate Governance

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Question 31

Multiple Choice

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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​

A) ​the investors were not aware of the misrepresentations.
B) ​the issuer reasonably believed the misstatements were true.
C) ​the offering was made available to the general public.
D) ​the untrue statements were not material.

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

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Question 32

Multiple Choice

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

A) ​a copy of prospectuses to be provided to investors.
B) ​a description of securities being offered for sale.
C) ​a record of pre-registration sales in securities.
D) ​all of the choices.

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

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Question 33

Multiple Choice

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Fact Pattern 42-1 ​ College Bound, Inc., markets test and study prep materials and courses. College Bound wants to make an initial public offering of securities. The firm believes that it qualifies for an exemption under Regulation A from the full registration requirement of the Securities Act of 1933. -Refer to Fact Pattern 42-1. College Bound decides to sell its new securities via the Internet. Most likely, this offering​

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​

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

Fleet Delivery Corporation is a public company with a market capitalization of less than $75 million. Fleet is poised to issue securities in a transaction that, under the Securities Act of 1933, is "exempt." This enables Fleet 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​

Brian, the chief executive officer of Chairs & Tables, Inc., intentionally understates the amount of the firm's debts in information provided to investors as part of an issue of stock. Darla buys the stock and suffers a loss. Brian may be subject to​

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 2002, Leo must personally​

For a defendant to be convicted in a criminal prosecution under the securities laws, there can be no reasonable doubt that the defendant knew he or she was acting wrongfully.​

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​

While the Securities and Exchange Commission reviews a registration statement for completeness, the securities can be offered for sale but not sold.​

The Securities and Exchange Commission has implemented no new regulations since the Securities Exchange Act.​

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

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​

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates​

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

Boats & Ships Corporation is a public company, which Colorado regulates and in which Dennis invests. The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to​

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.​

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