Q&A Hero

Q: A principalagent relationship exists when an employer hires an employee to perform some form of physical service.

Q: An employeremployee relationship occurs when an employer gives an employee authority to act and enter into contracts on his or her behalf.

Q: A principal can authorize an independent contractor to enter into contracts.

Q: Which of the following best defines an initial public offering? A) the issuance of an offering statement to the public prior to purchase B) the filing of a registration statement by an issuer C) the disclosure document released for public scrutiny D) the sale of securities by an issuer to the public

Q: A(n) ________ refers to a document that an issuer of securities files with the SEC that contains required information about the issuer, the securities to be issued, and other relevant information. A) articles of organization B) operating statement C) registration statement D) certificate of interest

Q: Which of the following must be included in the registration statement? A) judgments passed by the SEC on the merits of the securities offered B) how proceeds from the offering will be used C) date of termination of the initial public offering D) maximum number of times a share can be sold post issue

Q: Agency law is a mixture of tort and contract laws.

Q: The principal works on behalf of an agent.

Q: Interests or instruments that are expressly mentioned in securities acts are known as ________. A) common securities B) implicit securities C) investment contracts D) statutorily defined securities

Q: Interests in oil, gas, and mineral rights are classified as ________. A) statutorily defined securities B) implicit securities C) investment contracts D) common securities

Q: A(n) ________ is a flexible standard for defining a security. A) red herring prospectus B) investment contract C) certificate of interest D) debenture

Q: The courts apply the ________ in determining whether an arrangement is an investment contract. A) Howey test B) misappropriation theory C) strict scrutiny test D) intermediate test

Q: ________ requires securities offered to the public through the use of the mails or any facility of interstate commerce to be registered with the SEC by means of a registration statement and an accompanying prospectus. A) Section 24 of the Securities Act of 1933 B) Section 12 of the Securities Act of 1933 C) Section 5 of the Securities Act of 1933 D) SEC Rule 506

Q: The ________ is a federal statute primarily designed to prevent fraud in the trading of securities after they are issued. A) Securities Act of 1933 B) Securities Exchange Act of 1934 C) Sarbanes-Oxley Act of 2002 D) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Q: Which of the following is regulated by the Securities Act of 1933? A) fraud in the purchase and sale of securities B) hedge funds and derivatives C) reporting to the investors D) the issue of securities online

Q: Which of the following is classified under "common securities?" A) real estate B) bullion C) debenture D) bank deposit

Q: Blue-sky laws are state laws that regulate the issuance and trading of securities.

Q: The ________ is a federal statute that primarily regulates the issue of securities by companies and other businesses. A) Securities Act of 1933 B) Securities Exchange Act of 1934 C) Sarbanes-Oxley Act of 2002 D) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Q: Section 10(b) of the Securities Exchange Act prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC.

Q: In order to be found guilty for violation of Rule 10b-5, intentional conduct (scienter) must be proven.

Q: It is legal for a company employee to make a profit by personally purchasing shares of the corporation prior to public release of favorable information.

Q: A tipper cannot be held liable for the profits made by the tippee.

Q: A 10-percent shareholder of an equity security of a reporting company is considered a statutory insider.

Q: Section 12 of the Securities Act of 1933 provides purchasers who have been injured by securities pursuant to an unwarranted exemption to rescind the securities purchase.

Q: EDGAR is the world's largest electronic securities exchange.

Q: Drafts that have a maturity date of six months are exempt from registration with the SEC.

Q: The nonissuer exemption permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.

Q: An accredited investor is defined as a person who does not understand the risks involved in securities investment and will suffer considerable financial damage if the investment fails.

Q: An issuer who plans on raising $1 million or less from the public must answer the questions on Form U-7, which then becomes the offering circular that must be given to prospective investors.

Q: Liability under Section 11 is imposed on issuers who are negligent in not discovering fraud in their security offerings.

Q: The issuer is permitted to assert a due diligence defense against the imposition of Section 11 liability.

Q: Defendants cannot assert a due diligence defense against liabilities arising from the violation of Section 11 of the Securities Act of 1933.

Q: An offering circular must be provided to the investors immediately after the purchase of a Regulation A offering.

Q: There are no resale restrictions on securities that come under Regulation A.

Q: During the review of a registration statement, the SEC does not pass judgment on the merits of the securities offered.

Q: A prospectus is a written disclosure provided with the registration statement that helps the SEC to evaluate the financial risk of an investment.

Q: An investor who has purchased an unregistered security can rescind their purchase, but not recover damages.

Q: According to Regulation A, securities of up to $5 million can only be sold to accredited investors.

Q: Regulation A offerings can be sold without registration with the SEC provided that an offering statement is provided prior to the purchase of the securities.

Q: An offering statement requires less disclosure compared to a registration statement.

Q: The Howey test is used to determine if an arrangement is an investment contract.

Q: Interests in oil, gas, and mineral rights are considered statutorily defined securities.

Q: Section 5 of the Securities Act of 1933 requires an issuer to register its securities with the SEC prior to selling them to the public.

Q: The sale of securities by an issuer to the public is known as an initial public offering.

Q: Only an established company is permitted to sell new securities to the public.

Q: A registration statement need not contain details on how the proceeds from the offering will be used.

Q: The SEC is concerned with regulating issues and trading of securities alone and cannot regulate the activities of securities brokers and advisors.

Q: An investment contract is a flexible standard for defining a security.

Q: The Securities Act of 1933 is a federal statute that primarily regulates the issue of securities by companies and other businesses.

Q: Continuous reporting to investors and the SEC is a requirement imposed by the Securities Act of 1933.

Q: The Securities Act of 1933 regulates the purchase and sale of securities online.

Q: A "whistleblower bounty program" allows a person who provides information that leads to a successful SEC action to recover 10 percent to 30 percent of the monetary sanctions over $1 million recovered by the SEC.

Q: The Securities Act of 1933 provides a(n) ________ exemption that permits local businesses to obtain from local investors capital to be used in the local economy without the need to register with the SEC.

Q: Rule 506known as the private placement exemptionallows issuers to raise capital from an unlimited number of ________ without having to register the offering with the SEC.

Q: ________ occurs when a company employee or company advisor uses material nonpublic information to make a profit by trading in the securities of the company.

Q: A(n) ________ is a financial instrument whose value is determined by the price movements of another asset.

Q: Interests or instruments that are expressly mentioned in securities acts are ________ securities.

Q: The courts apply the Howey test in determining whether an arrangement is a(n) ________ and therefore a security.

Q: The sale of securities by an issuer to the public is known as ________.

Q: Issuers with offerings exceeding $100,000 must file a(n) ________ with the SEC.

Q: A(n) ________ issued by the SEC indicates that a defendant agrees not to violate securities laws in the future but does not admit to having violated securities laws in the past.

Q: An exemption from registration which states that securities transactions not made by an issuer, an underwriter, or a dealer do not have to be registered with the SEC is known as known as a(n) ________ exemption.

Q: The SEC provides a(n) ________ which allows a person who provides information that leads to a successful SEC action to recover 10 percent to 30 percent of the monetary sanctions over $1 million recovered by the SEC.

Q: Debentures are an example of ________ securities.

Q: Insider trading in the purchase and sale of securities in the after markets is prohibited under the statute of the ________.

Q: The ________ is a federal agency that is created by the Securities Exchange Act of 1934 and it is empowered to administer federal securities laws.

Q: The Securities and Exchange Commission is an administrative agency composed of five members who are appointed by the ________.

Q: Distinguish between nonissuer exemption, intrastate offering exemption, and private placement exemption.

Q: What is insider trading? How is it regulated in the U.S.A?

Q: How does Section 16(b) of the Securities Exchange Act of 1934 protect the interests of a corporation? Explain with an example.

Q: The ________ is a federal statute that primarily regulates the issue of securities by companies and other businesses.

Q: ________ requires that any profits made by a statutory insider on transactions involving short-swing profits belong to the corporation. A) Section 5 of the Securities Act of 1933 B) Section 12 of the Securities Act of 1933 C) Section 16(b) of the Securities Exchange Act of 1934 D) SEC Rule 10b5-1

Q: The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes regulations on ________. A) hedge funds and derivatives B) stock dividends and splits C) interests in realty D) restricted securities

Q: The ________ coordinates state securities laws with federal securities laws. A) Insider Trading Sanctions Act B) Securities Act of 1934 C) Securities Act of 1933 D) Uniform Securities Act

Q: How does a company sell its shares to the public for the first time? Explain the contents of a registration statement.

Q: List the securities exempt from registration with the SEC.

Q: A(n) ________ is a person who discloses material nonpublic information to another person. A) issuer B) tippee C) grantor D) tipper

Q: The ________ imposes liability under Section 10(b) and Rule 10b-5 on an outsider who misappropriates information about a company, in violation of his or her fiduciary duty, and then trades in the securities of that company. A) Insider Trading Sanctions Act B) Sarbanes-Oxley Act C) tort of appropriation D) misappropriation theory

Q: Who among the following is considered a statutory insider? A) Sharon Muller, an editor who was tipped by her friend to buy shares of KYU Corp. B) Robert Morgan, a government employee who owns ten percent of all equity security of KYU Corp. C) Jim Downey, a graphics engineer who quit KYU Corp. after five years of service D) Kate Harris, a legal consultant to KYU Corp.

Q: Which of the following best defines short-swing profits? A) profits that are made by an insider by selling shares of the corporation prior to the public disclosure of unfavorable information B) profits that are made by an insider by personally purchasing shares of the corporation prior to public release of favorable information C) profits that are made by a statutory insider on trades involving equity securities of their corporation that occur within six months of each other D) profits that are made by a tippee by personally purchasing shares of the corporation prior to or post public release of favorable information