Question 1

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?​

Accepted Answer

Yes, assuming that Taylor did not know a...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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​

Accepted Answer

A)   ​a forward-looking financial forecast.
B)   ​an investment contract.
C)   ​a prospectus.
D)   ​samples of its products.E) All of the above
F) B) and D)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Orbital Flights, Inc., is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 16(b)  of the act covers​

Accepted Answer

A)   ​the declaration of dividends by Orbital's board of directors.
B)   ​the later re-registration of Orbital's securities.
C)   ​the short-swing activities of Orbital's insiders.
D)   ​the solicitation of proxies from Orbital's shareholders.E) B) and C)
F) A) and D)

Question 6

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.​

Accepted Answer

A) True 
 B)False

Question 7

Fact Pattern 42-2​
Ben, an accountant for AirLift, Inc., a ride service, learns of undisclosed company plans to distribute a new app. Ben buys 10,000 shares of AirLift stock. He reveals the company plans to Carly, who buys 5,000 shares. Carly tells Don, who tells Erwin, and each buys 1,000 shares. They know that Carly got her information from Ben. When AirLift publicly announces its new app, Ben, Carly, Don, and Erwin sell their stock for a profit.
-Refer to Fact Pattern 42-2. If Ben is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of AirLift stock was​

Accepted Answer

A)   ​a forward-looking forecast.
B)   ​not material.
C)   ​not yet public.
D)   ​not yet true.E) B) and D)
F) A) and B)

Question 8

Food Service Corporation, and its officers, directors, and shareholders, buy and sell securities. Section 10(b)  of the Securities Exchange Act of 1934 applies to the purchase or sale of a security​

Accepted Answer

A)   ​only by an investment company.
B)   ​only involving short-swing profits.
C)   ​only involving a tipper and tippee.
D)   ​in almost any circumstances.E) A) and B)
F) A) and C)

Question 9

Small-business issues can use an integrated registration and reporting system that requires simpler forms than the full registration system.​

Accepted Answer

A) True 
 B)False

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

Correct Answer
verified

Orbital Flights, Inc., is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 16(b) of the act covers

Correct Answer
verified

Food Service Corporation, and its officers, directors, and shareholders, buy and sell securities. Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of a security

Correct Answer
verified

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

Correct Answer
verified

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Yes, assuming that Taylor did not know a...
View Answer

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

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

Orbital Flights, Inc., is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 16(b) of the act covers​

Correct AnswerverifiedShow Answer

Food Service Corporation, and its officers, directors, and shareholders, buy and sell securities. Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of a security​

Correct AnswerverifiedShow Answer

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​

Correct AnswerverifiedShow Answer

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.​

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYes, assuming that Taylor did not know a...View AnswerShow Answer

Small-business issues can use an integrated registration and reporting system that requires simpler forms than the full registration system.​

Correct AnswerverifiedShow Answer

Correct Answer
verified

Orbital Flights, Inc., is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 16(b) of the act covers

Correct Answer
verified

Food Service Corporation, and its officers, directors, and shareholders, buy and sell securities. Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of a security

Correct Answer
verified

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

Correct Answer
verified

Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Yes, assuming that Taylor did not know a...
View Answer

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

Correct Answer
verified