223. In SEC v. Ginsburg, Ginsburg was CEO of a company that merged with another company, and he told his
relatives that the merger might occur. Knowing that the stock price might then rise, the relatives bought stock in the
company and profited. Ginsburg was prosecuted by the SEC for insider trading. The appeals court held that:
a. there was not enough evidence to reasonably permit the inference that Ginsburg conveyed nonpublic
information to his family members, so he was not liable for securities fraud
b. Ginsburg did not use the information himself so there was no fraud
c. Ginsburg did not have a fiduciary obligation to the company, so could not be guilty of insider trading
d. Ginsburg had a fiduciary obligation to the company, but his conduct could not be proven to have violated it
e. none of the other choices are correct
224. Insider trading laws in Europe:
a. do not exist
b. exist, but their constitutionality is not certain
c. exist, but are generally not enforced as much as the law is in the U.S.
d. are generally tougher than U.S. insider trading laws
e. lead to about 100 criminal prosecutions per year for violations
225. Federal statutes provide for a maximum fine of $2.5 million per criminal action for violations of the law against
insider trading. A person may also:
a. not be sent to prison
b. receive up to six months in prison per violation
c. receive up to one year in prison per violation
d. receive up to ten years in prison per violation
e. none of the other choices
226. If a person is convicted under the Insider Trading Sanctions Act he or she may face:
a. treble damages payments
b. payments of the traders’ illegal profits to those persons who suffered losses
c. criminal penalties
d. all of the other choices
e. none of the other choices; the Act provides injunctive relief only
227. What law gives the SEC a basis for prosecuting insider trading?
a. Securities Act of 1933
b. Insider Trading Sanctions Act
c. Merit Regulations Act
d. Investment Advisers Act
e. none of the other choices; these matters are governed by state law
228. The gave the SEC a statutory basis for prosecuting insider trading.
a. Securities Act of 1933
b. Securities Exchange Act of 1934
c. Securities Fraud Regulation Act of 1995
d. Insider Trading Sanctions Act of 1984
e. Insider Trading Regulation Act of 1994
229. The gave the SEC a statutory basis for prosecuting insider trading.
a. Securities Act of 1933
b. Securities Exchange Act of 1934
c. Securities Fraud Regulation Act of 1995
d. Insider Trading Regulation Act of 1994
e. none of the other choices are correct
230. The Investment Company Act (ICA):
a. holds investment companies liable to private parties for violations of the Act
b. holds investment companies liable to the SEC for violations of the Act
c. makes the activities of investment companies subject to regulation
d. requires investment companies to register with the SEC
e. all of the other choices apply under the ICA
231. The Investment Company Act of 1940 regulates:
a. open-end companies (mutual funds)
b. closely held companies
c. stock exchanges
d. over-the-counter (OTC) exchanges
e. all of the other choices
232. The requires investment companies to register as such with the SEC, which then makes the companies
subject to regulations of their activities and holds them liable to the SEC, and to private parties, for violations.
a. Investment Company Act of 1940
b. Securities Exchange Act of 1934
c. Securities Fraud Regulation Act of 1995
d. Insider Trading Sanctions Act of 1984
e. Insider Trading Regulation Act of 1994
233. The requires investment companies to register as such with the SEC, which then makes the companies
subject to regulations of their activities and holds them liable to the SEC, and to private parties, for violations.
a. Investment Regulation Act of 1944
b. Securities Exchange Act of 1934
c. Securities Fraud Regulation Act of 1995
d. Insider Trading Sanctions Act of 1984
e. none of the other choices are correct
234. Which of the following is a type of investment company as defined by the Investment Company Act:
a. face-amount certificate company
b. unit investment trust
c. management company
d. all of the other specific choices are correct
e. none of the other specific choices are correct
235. Which of the following is NOT a type of investment company as defined by the Investment Company Act:
a. face-amount certificate company
b. unit investment trust
c. management company
d. all of the other specific choices are types of investment companies
e. none of the other specific choices are correct
236. Which of the following is NOT a type of investment company as defined by the Investment Company Act:
a. face-amount certificate company
b. “no-load” company
c. management company
d. all of the other specific choices are types of investment companies
e. none of the other specific choices are correct
237. A company that issues debt securities paying a fixed return would be defined by the Investment Company Act as
a(n):
a. face-amount certificate company
b. unit investment trust
c. management company
d. “no load” company
e. none of the other specific choices are correct
238. A company that issues debt securities paying a fixed return would be defined by the Investment Company Act as
a(n):
a. face-value certificate company
b. unit investment trust
c. management company
d. “no load” company
e. none of the other specific choices are correct
239. A company that offers a fixed portfolio of securities would be defined by the Investment Company Act as a(n):
a. face-amount certificate company
b. unit investment trust
c. management company
d. “no load” company
e. none of the other specific choices are correct
240. A company that offers a fixed portfolio of securities would be defined by the Investment Company Act as a:
a. face-amount certificate company
b. fixed investment company
c. management company
d. “no load” company
e. none of the other specific choices are correct
241. The most common investment management company is the:
a. mutual fund
b. face-amount certificate company
c. free portfolio company
d. fixed fund
e. real fund
242. are sold through a securities dealer and have a sales commission of some percentage of the price.
a. open mutual funds
b. load mutual funds
c. no–load mutual funds
d. fixed mutual funds
e. limited mutual funds
243. are sold through a securities dealer and have a sales commission of some percentage of the price.
a. open mutual funds
b. limited mutual funds
c. no–load mutual funds
d. fixed mutual funds
e. none of the other choices are correct
244. are sold directly to the public through the mail or Internet with no sales commission.
a. open mutual funds
b. load mutual funds
c. no–load mutual funds
d. fixed mutual funds
e. limited mutual funds
245. are sold directly to the public through the mail or Internet with no sales commission.
a. open mutual funds
b. load mutual funds
c. limited mutual funds
d. fixed mutual funds
e. none of the other choices are correct
246. Investment companies (that are in the business of investing or trading in securities) are:
a. not subject to the Investment Company Act
b. not subject to the Investment Company Act if they are insurance companies
c. not subject to the Investment Company Act if they are only involved in internal investing, such as banks
d. not subject to the Investment Company Act if they are insurance companies or if they are only involved in
internal investing, such as banks
e. all subject to the Investment Company Act
247. “No-load” mutual funds:
a. are sold directly to the public
b. are sold by mail or Internet
c. involve a sales commission
d. are sold directly to the public and involve a sales commission
e. are sold directly to the public by mail or by the Internet
248. Under the Investment Company Act, investment companies must:
a. pay dividends to investors equal to at least 20 percent of their taxable ordinary income
b. certify their employees with the SEC
c. hold their capital and debts in ways approved by the SEC
d. pay dividends to investors equal to at least 20 percent of their taxable ordinary income and hold their capital
and debts in ways approved by the SEC
e. pay dividends to investors equal to at least 20 percent of their taxable ordinary income and certify their
employees with the SEC and hold their capital and debts in ways approved by the SEC
249. To reduce possible conflicts of interest, the Investment Company Act requires that boards of directors:
a. be composed entirely of outsiders
b. be composed of at least 40% outsiders
c. be composed of at least 20% outsiders
d. be composed entirely of corporate managers
e. hire corporate attorneys to advise them on possible issues of conflicts of interest
250. The Investment Company Act requires that at least 40% of the board of directors of an investment company must
be outsiders to:
a. reduce possible conflicts of interest
b. prevent insider trading
c. reduce the possibility of insider trading
d. make sure the board is very diverse
e. none of the other choices are correct
251. Merrill Lynch and other brokerage firms, in an effort to reduce conflicts of interest inside the company, have
established policies:
a. restricting the sale of securities they underwrite
b. not trading securities for clients in which the company will not invest
c. restricting trading in securities by analysts who comment on those securities
d. restricting the sale of securities they underwrite and restricting trading in securities by analysts who comment
on those securities
e. not trading securities for clients in which the company will not invest and restricting trading in securities by
analysts who comment on those securities
252. Investment advisers:
a. manage pension funds and insurance portfolios
b. have a fiduciary duty towards the investment companies they work for
c. manage several trillion dollars‘ worth of investments
d. are usually paid a fee based on the net asset value of the funds they manage
e. all of the other choices
253. Which of the following securities professionals must be registered with the SEC to be able to engage in business?
a. brokers
b. dealers
c. corporate officers
d. brokers and dealers
e. brokers, dealers and corporate officers
254. A securities professional who engages in the business of buying and selling securities for their own account is a(n):
a. broker
b. dealer
c. investment adviser
d. scalper
e. churner
255. A securities professional who engages in the business of buying and selling securities for their own account is a(n):
a. broker
b. churner
c. investment adviser
d. scalper
e. none of the other choices
256. A securities professional who engages in the business of buying and selling securities for the accounts of others is
a(n):
a. broker
b. dealer
c. investment adviser
d. scalper
e. churner
257. A securities professional who are in the business of charging fees for recommendations on investments is a(n):
a. broker
b. dealer
c. investment adviser
d. scalper
e. churner
258. A securities professional who are in the business of charging fees for recommendations on investments is a:
a. broker
b. dealer
c. churner
d. scalper
e. none of the other choices
259. Which of the following is a securities professional:
a. a broker
b. a dealer
c. an adviser
d. all of the other specific choices are correct
e. none of the other specific choices are correct