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Business Law
Q:
In a bankruptcy proceeding against an individual, the individual's property is liquidated under Chapter 7 of the bankruptcy law.
Q:
The Consumer Financial Protection Bureau (CFPB) is run by a director appointed by the president with the advice and consent of the Senate.
Q:
Bankruptcy laws are subject to regulatory interpretation.
Q:
A report containing information solely as to transactions between the consumer and the person making the report is not a "consumer report" covered by the Fair Credit Reporting Act (FCRA).
Q:
The Truth-in-Lending Act covers transactions in which the debtor is a corporation or a business entity,
Q:
Recording fees and taxes are not considered in a loan's finance charge.
Q:
The Fair Debt Collection Practices Act applies only to consumer debt collections.
Q:
The Fair Debt Collection Practices Act exempts attorneys who collect consumer debts on behalf of their clients.
Q:
Using zip codes as a factor in denying credit has been determined to be illegal by the FTC due to possible discrimination that could result.
Q:
Marie is a married woman with a good job. If she applies for credit solely in her own name, the credit company may not deny her individual credit if she is creditworthy, but the credit company is permitted to ask if she is married to maintain a complete file on her.
Q:
The basic penalty for trade practice violations under the FTC Act is a civil fine of not more than $10,000 per violation.
Q:
Industry guides issued by the FTC are formal and legally binding.
Q:
Under the cease and desist order issued by the Bureau of Consumer Protection, a party assents to sign an order which restrains the promotional activity deemed offensive.
Q:
The major duty of the Magnuson-Moss Warranty Act is to require the FTC to issue rules regarding consumer product warranties.
Q:
Trade practice regulation ensures fair competition by preventing those who would deceive consumers from diverting trade from those who compete honestly.
Q:
What contributions did Sarbanes-Oxley Act make in the area of corporate governance?
Q:
What provisions have been made by the Sarbanes-Oxley Act to provide protection for whistleblowers?
Q:
Use and transfer of personal property by individuals in the U.S. is unrestricted.
Q:
Consumer protection laws arise when legislatures define an ambiguous legal boundary between certain types of sellers and buyers in ways that favor buyers.
Q:
The Fair Credit Reporting Act regulates credit reports on both consumers and businesses.
Q:
What are the three different forms of registration that apply to a state's application of blue sky laws?
Q:
What are the primary provisions of the Sarbanes-Oxley Act?
The Sarbanes-Oxley Act served to accomplish five major functions. It
increased the SEC budget significantly.
created the Public Company Accounting Oversight Board.
Q:
State the new or proposed rules issued by the SEC post the revitalization process initiated by the Sarbanes-Oxley Act of 2002.
Q:
Under Sarbanes-Oxley, what types of services are auditing firms prohibited from providing to companies?
Q:
When is the use of nonpublic information not considered a violation of the Security Exchange Act of 1934 provisions?
Q:
What is the difference between Section 18 of the 1934 Act and Sections 11 and 12 of the 1933 Act with regard to liability in case of fraud?
Q:
What are the criminal penalties incorporated by the Congress for violating the Securities Exchange Act of 1934?
Q:
What was the purpose of the Private Securities Litigation Reform Act of 1995? What are some of the provisions of the Act?
Q:
What are the four common exemptions from blue sky laws that have been identified?
Q:
Materiality is one of the several defenses that is recognized by the Securities Act of 1933 and may be used to avoid civil liability. Explain "materiality".
Q:
What are the common issues regarding litigation under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934?
The common issues regarding litigation under Section 10(b) and Rule 10b-5 include the following:
Who is liable?
What can be recovered by the plaintiff, and does the defendant have the right to seek contribution from third parties?
When is information material to the transaction?
Where does the law apply?
Q:
Explain the concept of fraud under Section 10(b) of the Securities Exchange Act of 1934.
Q:
How does the Securities Exchange Act of 1934 seek to deal with insider transactions?
Q:
Explain the term "waiting period" with regard to the registration of securities.
Q:
What is the civil liability under the Securities Act of 1933? Which sections of the Act directly apply to civil liability?
Q:
Who is liable under the Section 11 civil liability provision dealing with registration statements?
Q:
What does Section 12 of the Securities Act of 1933 deal with?
Section 12 of the 1933 Act is divided into two parts. The first subsection of Section 12 imposes liability on those who offer or sell securities that are not registered with the SEC. This liability exists regardless of the intent or conduct of those who fail to comply with the registration requirements. Thus, liability traditionally has been imposed against violators even though they lacked any wrongful intent. The Supreme Court has held that a defendant is free from liability if the plaintiff is equally responsible for the failure to file the registration statement.
The second subsection of Section 12 imposes liability on sellers who use a prospectus or make communications that contain an untrue statement of material facts required to be stated or necessary to make statements not misleading. The plaintiff does not have to prove reliance on the false or misleading prospectus or communication. Nor does the plaintiff have to establish that the defendant intended the deception. Purchasers of such securities may sue for their actual damages.
Q:
What must an expert prove to successfully present the defense of due diligence?
Q:
Parties who are involved with or who promote the initial sale of securities fall into one or more of four roles. Mention these roles.
Q:
When is a prospectus issued, what is its purpose, and what has the SEC specified as requirements to be contained in the prospectus?
Q:
According to the Sarbanes-Oxley Act, auditors are required to preserve audit records for a period of:
A. three years.
B. five years.
C. two years.
D. nine years.
E. seven years.
Q:
Sarbanes-Oxley provides that whenever there is a restatement of the company's financial condition, then the executives:
A. would be morally rather than legally culpable for the bonuses paid as a result of the incorrect financial statements.
B. have to forfeit their salaries to cover for the amount of the bonuses paid to them on the basis of incorrect financial statements.
C. would not be legally bound to return any bonuses paid as a result of the incorrect financial statements.
D. must return any bonuses paid as a result of the incorrect financial statements along with the interest.
E. must return any bonuses paid as a result of the incorrect financial statements.
Q:
The Financial Stability Oversight Council was established by the:
A. Securities Exchange Act of 1934.
B. Sherman Antitrust Act of 1890.
C. Sarbanes-Oxley Act of 2002.
D. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
E. Securities Act of 1933.
Q:
What are the three questions that a court will seek to answer when determining whether a person has purchased a security?
Courts seek positive answers to the following three questions when determining whether a person has purchased a security:
Is the investment in a common business activity?
Is the investment based on a reasonable expectation of profits?
Will these profits be earned through the efforts of someone other than the investor?
Q:
What are the sanctions recognized by the 1933 Securities Act in case of untrue or misleading information being provided to a potential investor?
Q:
According to the Sarbanes-Oxley Act, the accuracy of the company's financial records is certified by the:
A. CEO and COO.
B. COO and CFO.
C. CEO and CFO.
D. CEO and CIO.
E. CFO and CIO.
Q:
The Private Securities Litigation Reform Act mandated that:
A. plaintiffs could proceed with minimal evidence of fraud.
B. only the SEC could pursue claims against third parties not directly responsible for a securities law violation.
C. the PCAOB was given the authority to decide whether third parties not directly responsible for a securities law violation were nevertheless involved so closely with the violation that they could have claims pursued against.
D. private plaintiffs who suffered injury could maintain private causes of action against third parties not directly responsible for a securities law violation.
E. the FTC could pursue claims against third parties not directly responsible for a securities law violation.
Q:
The process of registration created by the Uniform Securities Act is known as registration by:
A. coordination.
B. notification.
C. qualification.
D. pronouncement.
E. announcement.
Q:
Registration by notification:
A. is required by those issuers who do not have a proven record and who are not subject to the Securities Act of 1933.
B. refers to documents filed with the Securities & Exchange Commission (SEC) by a privately held company, declaring its intent to offer shares of its stock to the general public.
C. is required for those issuers of securities who must register with the SEC and the duplicate documents are filed with the state's administrative agency.
D. refers to the quality certification process in which an independent and accredited quality auditor conducts an on-site audit of a firm.
E. allows issuers to offer securities for sale automatically after a stated time period expire unless the administrative agency takes action to prevent the offering.
Q:
The Public Company Accounting Oversight Board members are appointed by the:
A. President.
B. Senate.
C. FTC.
D. Congress.
E. SEC.
Q:
The Public Company Accounting Oversight Board was created by the:
A. Securities Act of 1933.
B. Securities Exchange Act of 1934.
C. Security Fraud Enforcement Act.
D. Sarbanes-Oxley Act.
E. Sherman Act.
Q:
The civil penalty provided by the Insider Trading and Securities Fraud Enforcement Act of 1988 for profits gained with nonpublic information is:
A. imprisonment up to two years.
B. return of illegal profits gained.
C. recovery of double damages.
D. recovery of triple damages.
E. imprisonment up to a period of 10 years.
Q:
The Insider Trading and Securities Fraud Enforcement Act of 1988 provides that suits alleging illegal use of nonpublic information may be filed up to a maximum period of _____ years after the wrongful transaction.
A. six
B. ten
C. eight
D. five
E. seven
Q:
The Securities Enforcement Remedies Act:
A. allows for the prohibition of an individual's service as an officer or director of a business organization.
B. created the SEC.
C. changes membership requirements of corporate audit committees.
D. requires proof of criminal violation for individual and organizational fines to be imposed.
E. refrains from imposing liability on a theory of fraud on any person who shall make or cause to be made any false or misleading statements.
Q:
Under the 1934 Act, a business organization found guilty of filing false or misleading documents with the SEC may be fined up to:
A. $81,000,000.
B. $55,000,000.
C. $25,000,000.
D. $50,000,000.
E. $75,000,000.
Q:
Under the 1934 Act, an individual found guilty of filing false or misleading documents with the SEC may be imprisoned up to:
A. 5 years.
B. 10 years.
C. 15 years.
D. 20 years.
E. 25 years.
Q:
Sarbanes-Oxley requires that information pertaining to an insider's transaction be filed:
A. by mail, postmarked within two business days of the transaction.
B. electronically within two business days of the transaction.
C. by any effective means within 10 business days of the transaction.
D. by any effective means within 10 business days after the close of the calendar month in which the transaction occurred.
E. electronically on the day of the transaction.
Q:
Prohibitions against insiders from engaging in short-swing profits are enforced by the:
A. SEC.
B. FTC.
C. SEC and FTC.
D. issuer of the security or by a person who owns a security of the issuer.
E. issuer of the security or the SEC.
Q:
An insider is any person who owns more than _____ percent of any security.
A. 5
B. 10
C. 15
D. 20
E. 50
Q:
Short-swing profits:
A. refer to any profits made by insiders who buy and sell company stock within a three-month time period.
B. rule of Section 16 depends on any misuse of information.
C. by insiders, regardless of the insiders' states of mind, are absolutely prohibited.
D. requires proof of intent to deceive under Section 10(b).
E. liability is created by the Securities Act of 1933.
Q:
According to the SEC, a person should be considered to be a temporary insider if that person conveys nonpublic information that was to have been kept confidential. This philosophy has become known as the:
A. quasi-insider theory.
B. implied-insider theory.
C. temporary insider theory.
D. misappropriation theory.
E. mosaic theory.
Q:
The _____ regulates transfers of securities after the initial sale.
A. Securities Exchange Act of 1934
B. Sherman Antitrust Act of 1890
C. Sarbanes-Oxley Act of 2002
D. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
E. Securities Act of 1933
Q:
The damages of a defrauded purchaser of securities:
A. are measured at the time of purchase.
B. include a punitive amount to discourage further fraud.
C. are measured at the time the fraud is discovered.
D. are considered a "sunk cost" and are not recoverable.
E. include speculative damages.
Q:
"Benefit of the bargain" refers to the damages awarded to the buyer which is:
A. designed to restore the injured party to the economic position he/she occupied at the time the contract was entered.
B. equal to the out-of-pocket expenses such as the legal fees incurred by the plaintiff.
C. equal to what the security was represented to be worth in the market.
D. equal to the combination of the out-of-pocket expenses and what the security was represented to be worth in the market.
E. equal to the difference between what he/she paid and what the security was represented to be worth.
Q:
Under Rule 10b-5, plaintiffs are entitled to:
A. contemptuous damages.
B. consequential damages.
C. aggravated damages.
D. restitutionary damages.
E. punitive damages.
Q:
Section 10(b) and Rule 10b-5 are usually referred to as the _____ provisions of the 1934 Act.
A. civil
B. discretionary
C. general duties
D. antifraud
E. rulemaking
Q:
_____ ads are brief announcements identifying the security and stating its price, by whom orders will be executed, and from whom a prospectus may be obtained.
A. Tombstone
B. Institutional
C. Coupon
D. Adjunct
E. Overlay
Q:
_____ refers to the intent of a defendant-seller to deceive or mislead.
A. Handhabend
B. Double jeopardy
C. Per minas
D. Mens rea
E. Scienter
Q:
Due diligence defense requires that an expert prove that a reasonable investigation of the financial statements of the issuer and _____ was conducted.
A. sellers
B. bailees
C. underwriters
D. controlling persons
E. guarantors
Q:
Which of the following is NOT true of the statute of limitations?
A. The statute of limitations is a defense for both civil and criminal liability.
B. The basic limitations period is one year.
C. In no event may a suit be brought more than one year after the sale.
D. The one year limitations period does not start to run until the discovery of the untrue statement or omission.
E. The one year limitations period does not start to run until the time such discovery would have been made with reasonable diligence.
Q:
Tombstone ads refer to:
A. solicitations made during the waiting period.
B. notices filed during the posteffective period announcing that the sale of securities has ended.
C. announcements issued by the SEC warning potential investors that a company is being investigated for fraud.
D. feedback from the SEC requiring additional information or a clarification of supplied information needed to complete a filed registration statement.
E. the statement that is required to be filled with the SEC.
Q:
The registration process waiting period typically lasts:
A. 10 days.
B. 20 days.
C. 30 days.
D. 45 days.
E. 60 days.
Q:
According to the Securities Act of 1933, which of the following is illegal during the waiting period?
A. Soliciting buyers for a company's securities.
B. Receiving offers to buy a company's securities.
C. Selling security subject to the act.
D. Soliciting through the use of a summary prospectus.
E. Soliciting offers for later acceptance.
Q:
According to the Securities Act of 1933, which of the following is considered legal during the prefiling period?
A. Selling a covered security.
B. Negotiations and agreements with underwriters.
C. Offering to sell a covered security.
D. Offering to buy a covered security.
E. Sellers may solicit offers for later acceptance.
Q:
Which of the following statements is true of a seller?
A. It refers to anyone who contracts with a purchaser or who is a motivating influence that causes the purchase transaction to occur.
B. It refers to the individual or business organization offering a security for sale to the public.
C. It refers to anyone who participates in the original distribution of securities by selling such securities for the issuer or by guaranteeing their sale.
D. It refers to a person with whom some article is left, usually pursuant to a contract who is responsible for the safe return of the article to the owner when the contract is fulfilled.
E. It refers to anyone who controls or is controlled by the issuer, such as a major stockholder of a corporation.
Q:
A(n) _____ is one who controls or is controlled by the issuer, such as a major stockholder of a corporation.
A. seller
B. bailee
C. underwriter
D. guarantor
E. controlling person
Q:
A prospectus is filed during the:
A. prefiling period.
B. waiting period.
C. preeffective period.
D. posteffective period.
E. elimination period.
Q:
A(n) _____ is the individual or business organization offering a security for sale to the public.
A. seller
B. controlling person
C. issuer
D. underwriter
E. financial sponsor
Q:
An individual who participates in the original distribution of securities by selling such securities for the issuer or by guaranteeing their sale is referred to as the:
A. seller.
B. controlling person.
C. issuer.
D. underwriter.
E. bailee.
Q:
The _____ is a disclosure law which makes it illegal to use mails or any other means of interstate communication or transportation to sell securities without disclosing certain financial information to potential investors.
A. Securities Exchange Act of 1934
B. Sherman Antitrust Act of 1890
C. Sarbanes-Oxley Act of 2002
D. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
E. Securities Act of 1933