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Exam 41: Corporations: Securities and Investor Protection

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Question 31

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Set forth what a registration statement filed with the SEC generally contains.

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A registration statement filed with the ...

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Question 32

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"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 although she told him to keep it quiet because it had not been made public yet. Nevertheless, unable to keep a secret, Frank 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 announcement 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. -For which of the following is George liable?

A) His own profits and also the profits of Frank.
B) His own profits and also the profits of both Frank and Linda.
C) His own profits regardless of whether he knew he was trading in information that had not been made public.
D) Only his own profits and those of Linda.
E) Only his own profits and then only if it can be shown that he knew or should have known that the material information was not public.

F) A) and B)
G) A) and C)

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Question 33

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Which of the following is false regarding the Mexican Securities Market?

Which of the following permits the SEC to exempt persons, securities, and transactions from securities regulations?

"Coffee shops." Bernice wants to open a chain of coffee shops but needs some investors. Her friend Robbie tells Bernice that she should be sure that she satisfies requirements of the SEC. Robbie 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 the 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. -Which of the following is the term for the document referenced by Robbie involving information provided 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?

"In Trouble." Bruno, an issuer of stock, may be in trouble. He sold stock in a new health club venture before the effective date of registration. He did so because he was in financial trouble due to other projects. Bruno thought that the health club venture would be such a success that he would never get caught. Unfortunately, he was wrong. The health club venture has significant problems, and investors are looking for some way to hold Bruno responsible. Another problem Bruno has is that he inflated information regarding the prospects of the health club in the prospectus. Rick, a new lawyer, told Bruno that as far as he knew, Bruno could be fined for violations under the Securities Act of 1933, but he could not be sent to jail. Bruno told Rick that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture. Bruno says that he plans to rely on the due diligence defense. Bruno also asks Rick if he is aware of any other defenses. Bruno says that once before he was held liable for a violation of the Securities Act of 1933, and he does not want to be in trouble again. -Which of the following is true regarding Bruno's sale of securities before the effective date of registration?

Set forth the four major responsibilities of the SEC as set forth in the text.

Which of the following is not an example of material information under Section 10(b) and Rule 10(b) -5?

The Securities and Exchange Commission is headed by how many individuals?

Which of the following created the Securities and Exchange Commission?

"In Trouble." Bruno, an issuer of stock, may be in trouble. He sold stock in a new health club venture before the effective date of registration. He did so because he was in financial trouble due to other projects. Bruno thought that the health club venture would be such a success that he would never get caught. Unfortunately, he was wrong. The health club venture has significant problems, and investors are looking for some way to hold Bruno responsible. Another problem Bruno has is that he inflated information regarding the prospects of the health club in the prospectus. Rick, a new lawyer, told Bruno that as far as he knew, Bruno could be fined for violations under the Securities Act of 1933, but he could not be sent to jail. Bruno told Rick that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture. Bruno says that he plans to rely on the due diligence defense. Bruno also asks Rick if he is aware of any other defenses. Bruno says that once before he was held liable for a violation of the Securities Act of 1933, and he does not want to be in trouble again. -Which of the following is true regarding Bruno's plan to rely on the due diligence defense?

How are the heads of the Securities and Exchange Act chosen?

"Coffee shops." Bernice wants to open a chain of coffee shops but needs some investors. Her friend Robbie tells Bernice that she should be sure that she satisfies requirements of the SEC. Robbie 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 the 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. -Assuming requirements are satisfied, which of the following, if any, may allow Bernice to avoid registration with the SEC if she proceeds with her plan to offer securities only to friends without advertisement?

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

Which of the following is true regarding exempt transactions?

Which of the following regulates how companies issue corporate securities?

Which of the following is true regarding federal acts regulating securities transactions?

"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 although she told him to keep it quiet because it had not been made public yet. Nevertheless, unable to keep a secret, Frank 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 announcement 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, if any, was Linda engaged by purchasing the shares after she found out about the merger?

Securities may be sold during the prefiling period.

Under the 1933 act, any security offered or sold to a permanent resident of the single state where the issuer of the security resides and does business is exempt.