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Exam 42: Securities Law Corporate Governance

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Question 21

True/False

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Exemptions from federal securities laws are exemptions from state laws.

A) True
B) False

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Question 22

Multiple Choice

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Della, an officer for Energy Petrol Corporation (EPC) , buys 100 shares of EPC stock. One week later, EPC announces that it will merge with a competitor, Fuel Oil Company, and the price of EPC stock increases. One month later, Della sells her shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Della would not be liable if, after buying the stock, she had waited

A) less than fourteen days to sell it.
B) more than six months to sell it.
C) ninety days to sell it.
D) two months to sell it.

E) All of the above
F) A) and C)

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Question 23

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

The Securities and Exchange Commission can bring a civil action against anyone who aids in a violation of the Securities Exchange Act of 1934.

Before filing the registration statement, an issuer cannot sell or offer to sell the securities.

Most private, small-business, noninvestment company offers of securities are not exempt from the registration requirements.

State securities laws apply mainly to intrastate transactions.

The Securities Exchange Act of 1934 is a one-time disclosure law.

Start-Up Enterprises, Inc., completes its registration process and begins advertising the availability of its new issue of securities. Start-Up places a tombstone ad in the financial papers. This ad tells prospective investors

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

Fact Pattern 42-2A Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu, each of whom buy 100 shares. They knows that Fay got her information from Dhani. When Eureka publicly announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit. -Refer to Fact Pattern 42-2A. If Dhani is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of Eureka stock was

Fact Pattern 42-2A Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu, each of whom buy 100 shares. They knows that Fay got her information from Dhani. When Eureka publicly announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit. -Refer to Fact Pattern 42-2A. Under the Securities Exchange Act of 1934, Fay is most likely

To raise $12 million to expand operations, Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. Star plans to notify the SEC of sales. Under the Securities Act of 1933, this issue may qualify as an "exempt" transaction

Securities that are exempt from the registration requirement can not generally be resold without being registered.

Lex, a salesperson for Macro Corporation, learns that Macro will increase the dividend it pays to shareholders. Lex buys 1,000 shares of Macro stock. When the price increases, Lex sells his shares for a profit. Lex would not be liable for insider trading if the information about the dividend was

Frothy Beverage Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Frothy is required to

The Securities and Exchange Commission administrative law judges hear cases involving alleged securities law violations.

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

Rico, an engineer for Shur-2-Gro Seed Corporation, learns that Shur-2-Gro has developed a corn hybrid to triple the output of any farm. Rico buys 20,000 shares of Shur-2-Gro stock. He tells Taylor, who buys 15,000 shares. After the new hybrid is announced publicly, the price of Shur-2-Gro stock increases. Rico and Taylor sell their shares for a profit. Under the Securities Exchange Act of 1934, liability may be imposed on

Hobie, the chief executive officer of Ideal Gamers, Inc. (IGI) , intentionally understates the amount of IGI's debts in information provided to investors as part of an issue of IGI stock. Jack buys the stock and suffers a loss. Hobie may be subject to