Q&A Hero

Q: Roy owns Roy's Cafe. A fire destroys the cafe, and Roy is arrested on suspicion of setting it to collect the insurance. At the time of the arrest, Roy is not informed of his rights. Any statement Roy makes will be admissible a. in all circumstances. b. in some circumstances. c. in no circumstances. d. regardless of the circumstances.

Q: According to the United States Supreme Court in Case 9.3, Miranda v. Arizona, an individual must be apprised of certain of his or her rights a. after any questioning. b. at any time during questioning. c. only in the absence of questioning. d. prior to any questioning.

Q: Because stock is intangible personal property, a stockholder's ownership of the stock a. exists independently of the stock certificate itself. b. cannot exist without a tangible stock certificate. c. cannot exist without the original stock certificate. d. cannot be transferred to another person.

Q: 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. Jaq buys the stock and suffers a loss. Hobie may be subject to a. government prosecution and Jaq's suit. b. neither government prosecution nor Jaq's suit. c. only government prosecution. d. only Jaq's suit.

Q: Fiona owns one share of stock in SK8 Boards Corporation, as evidenced by a stock certificate. Fiona loses the certificate. Her ownership of the stock is a. forfeited immediately. b. forfeited within ten days of a third party's claim to ownership. c. forfeited within thirty days if she cannot find the certificate. d. not affected.

Q: 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 a. as is. b. if all of the investors are also given certain material information. c. if the offering is also made available to the general public. d. under no circumstances.

Q: According to the United States Supreme Court in Case 9.3, Miranda v. Arizona, an individual must be apprised of certain of his or her rights whenever the individual is a. arraigned in a court. b. imprisoned in a jail. c. sentenced for a crime. d. taken into custody.

Q: Lara is indicted. Mac, the arresting officer, advises Lara of her right to counsel. Lara waives the right and confesses to the crime. Later, Lara claims that her confession should be excluded as evidence from her trial. Under the ruling in Case 9.1, Fellers v. United States, the statement will most likely be a. admitted because Lara knew she did the crime and confessed. b. admitted because Lara made it after being advised of her rights. c. excluded because a confession is not admissible in a criminal trial. d. excluded because it was elicited before Lara was advised of her rights.

Q: Fact Pattern 31-1Fresh Goods, Inc., wants to make an initial public offering of securi­ties. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.Refer to Fact Pattern 31-1. If Fresh is exempt from the federal registration requirement, Fresh isa. automatically exempt from any state registration requirement.b. not subject to any state securities laws.c. not necessarily exempt under a state registration requirement.d. automatically subject to all state registration requirements.

Q: Jaycee is a shareholder for Designer Pet Clothes, Inc. Designer Pet Clothes uses cumulative voting to elect directors. This means that the number of Jaycee's votes is determined by a. how long Jaycee has been a shareholder. b. the number of members of the board to be elected multiplied by the total number of voting shares Jaycee holds. c. the number of shareholders present at the most recent shareholder' meeting. d. the number of shareholder' meetings Jaycee has attended in the past year.

Q: Jim is indicted. Before he is arrested, he confesses to the crime in a conversation with Kelly, the arresting officer. Kelly then arrests Jim and advises him of the right to counsel. Jim waives the right and repeats his confession. Later, Jim claims that his initial statement should be excluded as evidence from his trial. Under the ruling in Case 9.1, Fellers v. United States, the statement will most likely be a. admitted because Jim knew he did the crime and confessed. b. admitted because Jim repeated it after being advised of his rights. c. excluded because a confession is not admissible in a criminal trial. d. excluded because it was elicited before Jim was advised of his rights.

Q: Fact Pattern 31-1Fresh Goods, Inc., wants to make an initial public offering of securi­ties. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.Refer to Fact Pattern 31-1. Fresh decides to sell its new securities via the Internet. This offeringa. will avoid the payment of commissions to brokers or underwriters.b. is an investment scam.c. is a Ponzi scheme.d. constitutes insider trading.

Q: Thor Power Products Corporation permits its directors to be elected by cumulative voting. This a. allows minority shareholders to be represented on the board. b. assures directors that they will be selected by their peers. c. guarantees Thor's executive officers of the final choice. d. ensures against persons who may "cloud" the corporate direction.

Q: Alan, the president of Beta Investments, Inc., and Colin, Beta's accountant, are charged with a crime, after the police search Beta's offices. Under the exclusionary rule a. certain Beta records are excluded from subpoena by the government. b. certain parties to a criminal action may be excluded from a trial. c. illegally obtained evidence must be excluded from a trial. d. persons who have biases that would prevent them from fairly deciding the case may be excluded from the jury.

Q: Kitsch Niche Corporation is a noninvestment company that wants to is­sue $3 million of stock in a twelve-month period. Kitsch Niche, with less than $20 mil­lion in annual sales, qualifies as a small business issuer. Before Kitsch Niche sells the stock, it must provide investors with a. an offering circular. b. a notice of the issue. c. a red herring prospectus. d. a tombstone ad.

Q: Flo-Thru Corporation is poised to issue securities that, under the Securities Act of 1933, are "exempt." This means that the securities can be sold a. on the basis of a material omission or misrepresentation. b. on the basis of nonpublic information. c. within any six-month period by certain insiders. d. without being registered.

Q: Corporate business matters are presented at a shareholder' meeting in the form of a. resolutions. b. proxies. c. articles of incorporation. d. bylaws.

Q: Dian points a gun at Edie, threatening to shoot her unless she takes a certain file from Great Pharmaceutical Corporation. Charged with theft, Edie can successfully claim as a defense, a. consent. b. duress. c. entrapment. d. self-defense.

Q: Niche Stores, Inc., must hold a shareholder' meeting a. once a month. b. once a year. c. once every two years. d. only when it is called by the board of directors.

Q: Celfone Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain a. a copy of prospectuses to be provided to investors. b. a description of securities being offered for sale. c. a record of pre-registration sales in securities. d. a sample of advertising to be used to attract investments in Celfone.

Q: Rosa and Sean are directors of Tech, Inc. Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholder' meeting is a. a violation of the duty of care. b. a preemptive right. c. a proxy. d. a quorum.

Q: Mary, who is charged with a crime, claims that Nick, a government agent, entrapped her. For entrapment to be a valid defense a. Mary must not have been predisposed to commit the crime. b. Nick must have pressured Mary into committing the crime. c. Nick must have suggested that the crime be committed. d. all of the above.

Q: Mit-E Clean Corporation wants to make an offering of securities to the pub­lic. This offering is not exempt from registration under the Se­curities Act of 1933. Before the firm sells its securities, it must provide in­vestors with a. a forward-looking financial forecast. b. an investment contract. c. a prospectus. d. a road show.

Q: Louise is a director for Icy Ices, Inc. Louise is also a director for Creamy Creams, Inc. When Icy Ices enters into a contract with Creamy Creams, Louise a. must resign from one of the boards. b. must resign from both boards. c. must make a full disclosure of any conflicts of interest and abstain from voting on the proposed transaction. d. need not do anything.

Q: Sandy, a businessperson, is convicted of RICO offenses. Sandy's penalties may include a. closing her business but not forfeiting its assets or selling it. b. forfeiting business assets but not closing or selling the business. c. selling her business but not closing it or forfeiting its assets. d. closing her business, forfeiting its assets, or selling it.

Q: Etta is a director of Trendy Stuff Corporation. Without informing Trendy, Etta goes into business with GR8 Things, Inc., in competition with Trendy. Etta is li­able for breach of a. no duty or rule b. the business judgment rule. c. the duty of care. d. the duty of loyalty.

Q: Dina, a businessperson, is charged with RICO offenses. Dina may be subject to penalties under RICO only if she a. committed two or more certain federal or state crimes. b. has never been convicted of a crime. c. intends to commit future RICO offenses. d. was previously convicted of a crime.

Q: Begin Anew Enterprise, Inc., completes its registration process and issues a free-writing prospectus. This tells pro­spective investors a. about investing freely. b. how to write their own prospectus. c. that they can "freely write their own ticket" to buy Begin's securities. d. that they may obtain the prospectus at the SEC's Web site.

Q: Bild-It-Rite Corporation is a public company that is preparing to issue securities that do not qualify for an exemption from registration. This means that Bild-It-Rite must a. file a registration statement with the SEC. b. issue the securities through an online registration site. c. refrain from issuing the securities to unregistered investors. d. register the securities with a national stock exchange.

Q: Josh is a director of Sippy Soups, Inc. Josh opposes a tender offer that is in Sippy's best interest because its acceptance would cost him his position as a director. Josh is liable for a breach of duty of a. no duty or rule. b. the business judgment rule. c. the duty of care. d. the duty of loyalty.

Q: Ann, an employee of Beta, Inc., pays Curt, an employee of Beta's competitor Delta Company, for a secret Delta pricing schedule. This may be a. an effective marketing strategy. b. commercial bribery. c. creative legal bookkeeping. d. money laundering.

Q: Readmore Bookstore Corporation files a registration statement with the Securities and Exchange Commission and provides a prospectus describing the securities to investors. These items are intended to provide sufficient information so that the financial risks involved can be evaluated by a. market professionals to explain to all investors. b. government regulators to disclose to the general public. c. sophisticated investors only. d. unsophisticated investors.

Q: Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not a. authorize major corporate policy decisions. b. decide to issue stock and bonds, and declare dividends. c. select and remove corporate officers. d. subordinate the corporation's welfare to their personal interests.

Q: In relation to Edie's solicitation of investors in a nonexistent business, she is charged with "mail fraud." This requires, among other things, a. claiming that an item is "in the mail" when it is not. b. deceiving postal authorities as to the content of an item of mail. c. depositing items in the postal system without proper postage. d. mailing or causing someone else to mail a writing.

Q: RingTone Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933, a security is a. almost any stake in the ownership or debt of a company. b. an investment that is guaranteed to make a profit. c. only such common forms of debt and equity as bonds and stocks. d. whatever a company represents to the public as a security.

Q: Dave is an officer for Sweet Somethings Candies, Inc. In 2012, chocolate hearts were very popular. Acting within his managerial authority and the powers of the corporation, Dave signs a contract for an increase in chocolate heart production for 2013. In 2013 chocolate hearts do not sell well and Sweet Somethings Candies loses money. Dave is most likely a. liable for breach of duty of care. b. liable for breach of duty of loyalty. c. none of the choices. d. liable for violation of the business judgment rule.

Q: Doug gains access, over the Internet, to government records and alters certain dates and amounts in his favor. Falsifying public records is a. embezzlement. b. forgery. c. larceny. d. robbery.

Q: 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 a. contribute to the operations of national stock exchanges. b. disclose financial and other information about its securities. c. engage in market surveillance to deter undesirable practices. d. solicit proxies for voting.

Q: Rafi, a director of Super Service Station Corporation, does not attend a board meet­ing for three years. During that time, Twyla, Super's president, makes improper loans that cost the company $100,000. Rafi is most likely a. liable for negligence or mismanagement. b. liable for violation of the business judgment rule. c. not liable because missing meetings is an honest mistake. d. not liable because missing meetings is only poor judgment.

Q: Bait "˜n Tackle Corporation switches trademarks on products that it buys to sell to consumers. This is a. burglary. b. forgery. c. larceny. d. robbery.

Q: Cotton Products Corporation is a public company whose shares are traded in the public securities markets. The Securities Act of 1933 requires Cotton to disclose financial and other significant information concerning its securities in order to a. increase corporate accountability by imposing responsibility on chief corporate executives. b. prevent insiders from trading among themselves. c. protect investors. d. provide a "safe harbor" for companies that make forward-looking statements.

Q: Ben wrongfully takes an unopened carton from a City Warehouse loading dock, puts the carton in his car, and drives away. A person who wrongfully or fraudulently takes and carries away another's personal property is guilty of a. burglary. b. forgery. c. larceny. d. robbery.

Q: Coast-to-Coast Distribution, Inc., is a direct-mail distribution company. Like most corporations, Coast-to-Coast's employees include its a. board of directors. b. incorporators. c. officers. d. shareholders.

Q: Pumping up a company occurs when a single person using multiple aliases on an online forum creates the illusion of widespread interest in a stock.

Q: Karl reaches into Lora's pocket and takes her money, without her consent and without her immediate awareness. Unlike robbery, picking pockets does not involve a. breaking and entering. b. force or fear. c. large amounts of money. d. weapons.

Q: Frawsty Corporation distributes beverages in the greater Northwest. Frawsty's board of directors can delegate some of its functions to a. Frawsty's incorporators. b. Frawsty's officers. c. Frawsty's shareholders. d. no one.

Q: Corporations' chief executive officers are directly accountable for the accuracy of financial statements filed with the Securities and Exchange Commission.

Q: Willful violations of the Sarbanes-Oxley Act of 2002 may be subject to criminal prosecution.

Q: Adam is charged with the commission of a crime. To find criminal liability, most crimes require a. a specified state of mind and performance of a prohibited act. b. a specified state of mind only. c. neither a specified state and performance of a prohibited act. d. performance of a prohibited act only.

Q: Odell is a director of Price Rite, Inc. As a director, with respect to the corporation, Odell is a. a fiduciary. b. a forum. c. a proxy. d. a quorum.

Q: Corporate governance can be defined as the relationship between a corporation and its shareholders.

Q: Nina is a director of Omega, Inc. Under the standard of due care owed by di­rectors of a corporation, Nina's decisions must be a. ambiguous and questionable. b. arguable and defensible. c. informed and reasonable. d. perfect and unassailable.

Q: Earl, driving while intoxicated, causes a car accident that results in the death of Frank. He is arrested and charged with involuntary manslaughter, a third degree felony. This type of felony is punishable by a. death. b. life imprisonment. c. up to five years' imprisonment. d. up to ten years' imprisonment.

Q: Taking trade secrets without permission is not a crime if it is done online.

Q: Generally, states have antifraud patterned after federal se­curities law.

Q: At a criminal trial, the burden of proof is on an accused person to prove his or her innocence.

Q: In Case 9.3, Miranda v. Arizona, the United States Supreme Court held that criminal defendants must be informed of their right to remain silent.

Q: "Blue sky laws" are state securities laws.

Q: Mickey is a director of Fine Art Dealers, Inc. Mickey is trained in art valuation. Fine Art Dealers makes several purchases in which it pays too much money for artwork. Mickey approves all the transactions without reading the details. Mickey is most likely a. liable for breach of the duty of care. b. not liable for breach of the duty of care. c. liable for breach of duty of loyalty. d. liable for violation of the business judgment rule.

Q: Under the Fifth Amendment, there is no circumstance in which a person can be compelled to give testimony.

Q: State securities laws apply only to interstate transactions.

Q: RayAnn is a corporate officer for Timmy's Trees, Inc. As a corporate officer, RayAnn is a. the head of the board of directors. b. involved in the day-to-day operations of Timmy's Trees. c. not involved in the day-to-day operations of Timmy's Trees. d. in charge of selecting members of the board of directors.

Q: Under the exclusionary rule, all illegally obtained evidence must be included in any criminal prosecution.

Q: Private parties cannot sue violators of Section 10(b) and Rule 10b-5.

Q: Violations of the Securities Exchange Act of 1934 may be subject to criminal prosecution.

Q: Great Gates, Inc. has a board of ten directors. Great Gate' bylaws do not state any quorum requirements. In most states, a quorum for Great Gates will be defined as a. two directors. b. six directors. c. nine directors. d. ten directors.

Q: Most crimes must be prosecuted within a certain period of time.

Q: A corporation can recapture any profits realized by an insider on any purchase or sale of the firm's stock within any twelve-month period.

Q: The board of directors of Integral Components Corporation consists of Frida, Gayla, and Hart. A quorum is the minimum number of these directors a. who must be at odds in a dispute to call for its resolution. b. who must be present to validly transact business. c. that the shareholders may remove from office at any one time. d. whose positions must be vacant to warrant an election.

Q: Only outsiders who would ordinarily be deemed fiduciaries of the corporations in whose stock they trade can be liable for insider trading.

Q: Voluntary intoxication is always a defense to criminal liability.

Q: Doyle and Emily are officers of Freshé Bottled Water Corporation. As cor­porate officers, their compensation is determined by Freshé's a. directors. b. incorporators. c. other officers. d. shareholders.

Q: Philip is elected as a director for Fatless Foods, Inc. His term of office will most probably last for a. three months. b. six months. c. nine months. d. one year.

Q: Ignorance of the law is a valid defense to criminal liability.

Q: "Forward-looking" financial forecasts are prohibited under SEC Rule 10b-5.

Q: Lexy and Mort act as the incorporators for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected by a vote of NuGame's a. board of directors. b. employees. c. officers. d. shareholders.

Q: Forfeiture of a business interest and dissolution of a business are possible penalties under RICO.

Q: Buying or selling securities on the basis of nonpublic information is illegal only if the profit from the transaction is unreasonable.

Q: Under federal law, financial institutions must report currency transactions in excess of $10,000.

Q: Rhea is a director of Spex Corporation, which makes and sells sunglasses and other eyewear. As a Spex director, Rhea sits on the board, which a. governs Spex. b. is governed by the Spex incorporators. c. is governed by the Spex officers. d. is governed by the Spex shareholders.