Q&A Hero

Q: Which of the following constitutes insider trading? A) an employee makes a profit by personally purchasing shares of the corporation prior to public release of favorable information B) a manager purchases all shares of a corporation available to the public C) a director purchases enough shares of a public company to gain a majority stake in its management D) an employee sells his shares of the company to another employee without notice to the company

Q: SEC Rule 506 is known as the ________. A) nonissuer exemption B) intrastate offering exemption C) private placement exemption D) interstate offering exemption

Q: Which of the following is true of small offering exemptions? A) Securities coming under this exemption cannot be advertised to the public. B) Securities coming under this exemption can only be sold to accredited investors. C) Securities coming under this exemption can only be bought by nonaccredited investors. D) Securities coming under this exemption have no resale restrictions imposed on them.

Q: Which of the following is enough to prove a violation of Section 10(b) and Rule 10b-5? A) nonexemption status B) scienter C) aiding and abetting D) negligent conduct

Q: The ________ is a federal statute that permits the SEC to obtain a civil penalty of up to three times the illegal benefits received from insider trading. A) Securities Act B) Securities Exchange Act C) Insider Trading Sanctions Act D) SEC Rule 506

Q: The electronic data and record system of the Securities and Exchange Commission is known as ________. A) EDGAR B) NASDAQ C) MICEX D) SPSE

Q: Which of the following is true of exempt securities? A) Only the federal government can issue exempt securities. B) Once a security is exempt, it is exempt forever. C) An exemption notice must be filed with SEC every time the exempt security is transferred. D) Exempt securities cannot be traded publicly.

Q: Which of the following is an example of exempt securities? A) stock dividends and stock splits B) IPOs made by multi-national corporations C) securities that has been held by a single investor for longer than a year D) securities worth $1 million or more

Q: A(n) ________ is 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. A) intrastate offering exemption B) private placement exemption C) regulation A offering D) nonissuer exemption

Q: A(n) ________ is an exemption from registration that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC. A) intrastate offering exemption B) regulation A offering C) private placement exemption D) nonissuer exemption

Q: Small businesses can file ________ with the SEC if they plan on raising $1 million or less from the public issue of securities. A) Form U-7 B) a registration statement C) an operation agreement D) a certificate of interest

Q: Which of the following is true of Small Company Offering Registration (SCOR) form? A) SCOR forms can only be used for raising more than $1 million through sale of securities. B) SCOR forms are available to both domestic and foreign companies. C) SCOR forms that have been completed act as the offering circular for potential investors. D) SCOR forms have to be completed by the issuee before purchasing securities.

Q: ________ is a provision of the Securities Act of 1933 that imposes civil liability on persons who intentionally defraud investors by making misrepresentations or omissions of material facts in the registration statement. A) Section 24 of the Securities Act of 1933 B) Section 12 of the Securities Act of 1933 C) Section 11 of the Securities Act of 1933 D) SEC Rule 506

Q: Which of the following is true of Section 11 of the Securities Act of 1933? A) It permits injured private parties to bring criminal action against fraudulent registration statements filed by issuers. B) It imposes liability on those who are negligent in not discovering the fraud. C) It allows an issuer to assert a due diligence defense against the imposition of Section 11 liability. D) It cannot be imposed on cases involving negligent omission of a material fact in a registration statement.

Q: Which of the following is true of Section 24 of the Securities Act of 1933? A) It imposes civil liability on any person who violates the provisions of Section 5 of the act. B) It imposes criminal liability on any person who willfully violates the 1933 act or the rules or regulations adopted. C) It imposes civil liability on persons who intentionally defraud investors by making misrepresentations of material facts in the registration statement. D) It exclusively regulates the sale of securities online.

Q: Which of the following has the largest trading volume of any securities exchange in the world? A) NYSE B) Euronext C) NASDAQ D) London Stock Exchange

Q: Which of the following is true of a Regulation A offering? A) It imposes resale restrictions on the securities it offers. B) It necessitates the issuers to prepare a registration statement for offers exceeding $100,000. C) It requires the most disclosure of information to investors at the time of the issuance of the securities. D) It mandates that an offering circular be provided to the investors prior to the purchase of securities.

Q: Which of the following is true of registration statements? A) A registration statement must be accompanied by financial statements certified by certified public accountants.. B) A registration statement once submitted, cannot be amended. C) The SEC judges the merits of the securities based on the registration statement. D) The registration statement need not reveal how a company plans on using the proceeds from the offering.

Q: A(n) ________ is submitted along with the registration statement to the SEC, and also used as a selling tool to help prospective investors evaluate the financial risk of an investment. A) organization document B) certificate of interest C) prospectus D) operation agreement

Q: Scissorwire Inc. sells shares of its stock to the public, with each share valued at $16. After a year, the company incurs a loss and the price of the stock drops to $5. The company reveals that it had deliberately not registered with the SEC before going public and that it has no money to pay the investors. Which of the following holds well in this context? A) Scissorwire Inc. can register with the SEC at any point after the dip in shares. B) The U.S. government can file a criminal lawsuit against Scissorwire Inc. to seek criminal penalties. C) The investors have been negligent in not verifying registration before purchase of shares and cannot rescind their purchase. D) Scissorwire Inc. is liable for the violation of the Securities Exchange Act of 1934.

Q: ________ permits issuers to sell up to $5 million of securities to the public during a 12-month period, pursuant to a simplified registration process. A) SEC Rule 506 B) Section 12 of the Securities Act of 1933 C) Section 5 of the Securities Act of 1934 D) Regulation A

Q: ________ is a doctrine that says if a shareholder dominates a corporation and uses it for improper purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations.

Q: A(n) ________ is a member of a board of directors who is not an officer of the corporation.

Q: A director or corporate officer who usurps a corporate opportunity would be violating the director's fiduciary duty, called the ________.

Q: The ________ Act prohibits public companies from making personal loans to their directors or executive officers.

Q: A(n) ________ is a situation in which one corporation is absorbed into another corporation and ceases to exist.

Q: Involuntary dissolution of a corporation that is ordered by the secretary of state if a corporation has failed to comply with certain procedures required by law is known as ________.

Q: Utilities Ltd. decided to go public by an initial public offering. It sold securities, some of which were bought by James Jefferson. Six months later, Mr. Jefferson sold the Utilities shares he had purchased to Martha Graham and Mark Franco. Two years later, Mr. Jefferson bought back the Utilities shares from Ms. Graham and Mr. Franco and made a profit out of both transactions. Who is the issuer in this scenario? A) Utilities Ltd. B) James Jefferson C) Martha Graham D) Mark Franco

Q: A contract between a corporation and a holder that contains the terms of a debt security is known as a(n) ________.

Q: A shareholder's authorization of another person to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is called a(n) ________.

Q: A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates is known as ________.

Q: A requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders is known as the ________ requirement.

Q: A panel of persons who are elected by the shareholders that make policy decisions concerning the operation of a corporation is known as a(n) ________.

Q: A ________ is a long-term unsecured debt instrument that is based on a corporation's general credit standing.

Q: A corporation that is incorporated in another country is known as a(n) ________ corporation.

Q: A(n) ________ is a person or a corporation that is empowered to accept service of process on behalf of a corporation and is identified in the articles of incorporation.

Q: The articles of incorporation is also known as a(n) ________.

Q: Stock that permits a corporation to buy back the preferred stock at some future date is known as the ________.

Q: Authorized shares that have not been sold by the corporation are known as ________.

Q: Dissolution of a corporation that has begun business or issued shares upon recommendation of the board of directors and a majority vote of the shares entitled to vote is known as ________. A) liquidation B) judicial dissolution C) administrative dissolution D) voluntary dissolution

Q: Give an account of publicly held and closely held corporation.

Q: What is the CEO and CFO provision laid out by the Sarbanes-Oxley Act of 2002?

Q: Explain the business judgment rule followed by corporations when it comes to breach of duty by directors and officers.

Q: What is a merger?

Q: What is a common stock? What are its features?

Q: Which of the following best defines a surviving corporation? A) a corporation that continues its operations after filing for bankruptcy B) a corporation that has been in existence for at least 50 years C) a proprietorship or partnership that evolved into a corporation D) a corporation that continues to exist after a merger

Q: Karlovsky and Sons Inc., a retail corporation reports financial losses for three years in a row. Two larger corporations, Gatsby Retail Inc. and Chelsea Sales Corp compete to acquire Karlovsky and Sons. Initially, Chelsea Corp. places a higher bid than Gatsby Retail Inc. but eventually backs out of the merger. In the end, a Boston-based MNC named J.Y. Corp. acquires Karlovsky and Sons and permits the latter to expand as a wholesaler. Which of the following is the surviving corporation in this scenario? A) Gatsby Retail Inc. B) Chelsea Corp. C) J.Y. Corp. D) Karlovsky and Sons

Q: Which of the following best defines a merged corporation? A) the corporation that is absorbed in the merger and ceases to exist after the merger B) the corporation that is absorbed in the merger and continues to exist after the merger C) the corporation that is not absorbed in the merger but gains stake in the surviving corporation D) the corporation that is not absorbed in the merger but is owned by a parent company

Q: According to priority, which of the following claimants is the last to be paid after assets have been liquidated of a corporation? A) creditors B) common stockholders C) preferred shareholders D) bond holders

Q: According to the provisions set forth by the Sarbanes-Oxley Act, the ________, a federal government agency, may issue an order prohibiting any person who has committed securities fraud from acting as an officer or a director of a public company. A) United States International Trade Commission B) Federal Reserve System C) Federal Communications Commission D) Securities and Exchange Commission

Q: Which of the following policies helps a corporate officer from being sued for honest mistakes made on behalf of a corporation? A) duty of loyalty B) duty of obedience C) business judgment rule D) self-dealing

Q: A duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders is known as ________. A) duty of care B) duty of loyalty C) duty of obedience D) self-dealing

Q: Which of the following would be seen as a breach of the duty of loyalty by a corporate officer? A) straight voting B) cumulative voting C) piercing the corporate veil D) self-dealing

Q: Helen works as the vice-president of Gotspeed Corporation, a company that develops and sells sports shoes. Nestor, a private cobbler, makes a new model of shoes that help a user's feet grip the shoe better, and he calls it the Anklator. Nestor's friend fixes an appointment for him with Helen to present his shoe model for possible adoption by Gotspeed. Instead of bringing the opportunity to Gotspeed's board of directors and the corporation, Helen pays Nestor's asking price and purchases the Anklator model for herself. Helen leaves Gotspeed Corporation and forms her own company that manufactures and markets the Anklator shoe models. What breach of the duty of loyalty has Helen committed here? A) self-dealing B) usurping a corporate opportunity C) making a secret profit D) competing with the corporation

Q: Jameson works for Fishy-Mart Corporation, a chain of superstores that sell large quantities of seafood. Jameson's job is to locate future sites for Fishy-Mart stores. Jameson finds a piece of real estate near a coastline that would make a great site for a Fishy-Mart store. Jameson tells his friend to purchase the property from its current owner, which he does. Jameson has a secret agreement with his friend to split the profits when he sells the property to Fishy-Mart. Jameson, without disclosing his interest in the property, recommends the site to Fishy-Mart, which then purchases the property from Jameson's friend. The friend splits the profits with Jameson. What breach of the duty of loyalty has Jameson committed here? A) usurping a corporate opportunity B) self-dealing C) competing with the corporation D) proxy

Q: Marshall is the purchasing agent for the DigitoolArt Corporation. His duties require him to negotiate and execute contracts to purchase office supplies and equipment for the corporation. Assume that Bronson, a computer salesperson, pays Marshall a $20,000 kickback to purchase from him computers needed by the DigitoolArt Corporation. What breach of the duty of loyalty has Marshall committed here? A) competing with the corporation B) making a secret profit C) self-dealing D) usurping a corporate opportunity

Q: Which of the following is true about dividends? A) Dividends are paid at the discretion of the shareholders. B) Dividends cannot be used for corporate purposes. C) Dividends will be paid to shareholders who have sold their shares prior to the record date. D) Dividends in cash or property, once declared, cannot be revoked.

Q: In which of the following cases can the alter ego doctrine be invoked in a corporate civil case? A) when shareholders bring a lawsuit on behalf of the corporation after the corporation failed to do it itself B) when unpaid creditors are trying to collect from shareholders who owe a debt to the corporation C) when there is a mismanagement of stocks by the board of directors D) when shareholders are trying to collect for fraud committed by a third-party

Q: Which of the following are considered as owners of a corporation? A) shareholders B) board of directors C) the CEO D) corporate officers

Q: ________ are a panel of decision makers who are elected by the shareholders. A) Registered agents B) Corporate officers C) Stakeholders D) Board of directors

Q: A member of the board of directors who is also an officer of the corporation is known as a(n) ________. A) inside director B) ombudsman C) registered agent D) shareholder

Q: ________ are employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation. A) Corporate officers B) Shareholders C) Registered agents D) Ombudsmen

Q: According to the RMBCA, what establishes a quorum to hold a meeting of the shareholders? A) a majority of outstanding shares B) a majority of unissued shares C) a majority of treasury shares D) a majority of liquidated shares

Q: ________ is a system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open. A) Cumulative voting B) Straight voting C) Supramajority voting D) Trust vote

Q: An agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement is referred to as ________. A) preemptive sale B) right of first refusal C) buy-and-sell agreement D) shareholder voting agreement

Q: The Inkilwas Corporation has 30,000 shares outstanding. A shareholders' meeting is duly called to amend the articles of incorporation, and 17,501 shares are represented at the meeting. If an Inkilwas Corporation amendment for its articles of incorporation is put to vote at this meeting, which of the following statements would be true with respect to the passing of the amendment? A) The amendment would not pass as all 30,000 votes have to be represented. B) The amendment would only pass if all 17,501 votes approve. C) The amendment would be passed if 4,376 votes approve. D) The amendment will pass if 8,751 votes approve.

Q: Bilkis Brans has 20,000 outstanding shares with four shareholders. Ester owns 9,000 shares, Mendez owns 4,000 shares, Judy owns 4,000 shares, and Aaron owns 3000 shares. Suppose that two directors of the corporation are to be elected from a potential pool of 5 candidates. Ester is in favor of Candidates 1 and 5; Mendez in favor of Candidates 2 and 4; Judy in favor of Candidates 4 and 3; and Aaron in favor of Candidates 2 and 3. If the voting was done by straight voting, which of the two candidates are likely to win? A) Candidate 1 and Candidate 5 B) Candidate 1 and Candidate 4 C) Candidate 2 and Candidate 3 D) Candidate 2 and Candidate 4

Q: Derrick has 2,000 shares of the Unistone Corporation which is planning to vote for two new directors. Through a special voting provision in the corporation's articles of incorporation, Derrick was able to vote for both his preferred candidates with 2,000 shares, giving him a virtual voting count of 4,000 shares. What voting rule in the articles of incorporation allows Derrick to achieve this? A) supramajority voting B) noncumulative voting C) cumulative voting D) preemptive voting

Q: The Merrick and Stanley Corporation has 28,000 outstanding shares. During a proposal for a merger, the shareholders decided to increase the quorum of the vote of shareholders to 75 percent, using the supramajority voting rule. How many minimum affirmative votes would be needed to pass the supramajority voting requirement? A) 14,001 B) 21,280 C) 21,000 D) 28,000

Q: Which of the following has a fixed maturity date? A) bonds B) common stock C) cumulative preferred stock D) participating preferred stock

Q: Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________. A) corporate officers B) shareholders C) registered agents D) managing directors

Q: Which of the following is true of shareholders? A) They cannot enter into contracts that bind the corporation. B) They cannot vote to elect the board of directors. C) They cannot take active charge in deciding fundamental changes in the corporation. D) They are considered as agents of the corporation.

Q: When is the annual shareholders' meeting held? A) according to the dates fixed in the bylaws B) at the whim of the board of directors C) only if and when there is a crisis D) only at the time of electing a new board of members

Q: The written document submitted by a person who has been authorized by a shareholder to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is known as ________. A) record date B) notice of shareholder's meeting C) certificate of authority D) proxy card

Q: The Inkilwas Corporation has 30,000 shares outstanding. A shareholders' meeting is duly called to amend the articles of incorporation, and 17,501 shares are represented at the meeting. According to the RMBCA, what is the minimum outstanding shares that must be represented in this case to have a quorum? A) 12,001 B) 18,501 C) 15,001 D) 17,501

Q: Issued shares that have been repurchased by the corporation are referred to as ________. A) outstanding shares B) liquidated shares C) unissued shares D) treasury shares

Q: Which of the following is true of treasury shares? A) They cannot be issued by the corporation. B) They cannot be voted by the corporation. C) They are owned by shareholders. D) They are paid dividends for.

Q: Securities that establish a debtor-creditor relationship in which the corporation borrows money from the investor to whom a debt security is issued are known as ________. A) authorized shares B) preferred stocks C) common stocks D) fixed income securities

Q: A long-term debt security that is secured by some form of collateral is referred to as a ________. A) treasury share B) bond C) note D) debenture

Q: A(n) ________ is a debt security with a maturity of five years or less. A) bond B) debenture C) indenture D) note