62. Under Rule 144A some U.S. and foreign securities are exempt from registration requirements for the sale of stocks
and bonds.
a. True
b. False
63. Accredited investors often buy private placement securities through Small Corporate Offering Registration
(SCORs), which can be as small as a $1 million offering.
a. True
b. False
64. Accredited investors often buy private placement securities through Regulation D offerings. The SEC must be
informed of such offerings.
a. True
b. False
65. Accredited investors often buy private placement securities through Regulation D offerings. They receive a private-
placement memorandum, which is similar to a prospectus, even though the security is not registered.
a. True
b. False
66. Securities issued by WKSIs are subject to fewer SEC rules than other new offerings.
a. True
b. False
67. Securities issued by well-known seasoned issuers do not have to be submitted to the SEC for staff review of the
offering before being sold.
a. True
b. False
68. Securities issued by well-known seasoned issuers can use a free-writing prospectus that can be continuously
updated on the Web.
a. True
b. False
69. Securities issued by well-known seasoned issuers must be sold within three months or be returned for re-review by
the SEC staff.
a. True
b. False
70. Securities sold subject to shelf-registration can be sold at any time over a three year period, rather than be sold all
at once.
a. True
b. False
71. The 1934 Act imposes disclosure requirements on corporations issuing new securities.
a. True
b. False
72. The 1934 Securities Exchange Act established regulation of new securities issues.
a. True
b. False
73. A “publicly held company” is one that has issued securities that are publicly traded.
a. True
b. False
74. By SEC rules, a private company is one with less than 100 shareholders that does not allow its stock to be actively
traded.
a. True
b. False
75. By SEC rules, a private company is one with less than 500 shareholders that does not have stock traded that is
traded publicly.
a. True
b. False
76. Companies that issue publicly traded securities must turn in quarterly and annual financial reports to the SEC.
a. True
b. False
77. Companies that issue publicly traded securities must report daily stock transaction volumes to the SEC.
a. True
b. False
78. The Securities Act of 1934 prevents the trading of securities of risky companies.
a. True
b. False
79. The Securities Act of 1934 requires publicly held companies to file annual 10-Q financial reports.
a. True
b. False
80. The Securities Act of 1934 requires publicly held companies to file financial reports with the SEC and post them on
the companies’ websites.
a. True
b. False
81. The Securities Act of 1934 requires publicly held companies to file annual 10-K audited financial reports.
a. True
b. False
82. The Securities Act of 1934 requires publicly held companies to file 8-K reports anytime significant financial events
occur.
a. True
b. False
83. Regulation Fair Disclosure requires that public companies must file reports with the SEC to report significant
financial developments whenever they happen.
a. True
b. False
84. Regulation Fair Disclosure requires that when public companies release material information about the company,
they must do so to the public in general.
a. True
b. False
85. Regulation Fair Disclosure requires that when public companies release material information, they may not release
it to securities professionals before releasing the information to the public.
a. True
b. False
86. A proxy is when the vote of a shareholder is provided to be voted a certain way on a certain issue.
a. True
b. False
87. When proxies are solicited, firms must provide shareholders with information about major proposed changes in the
company’s business.
a. True
b. False
88. Proxy statements are permissible but not mandatory.
a. True
b. False
89. When one company wants to take over another, one way it may be done is by proxy.
a. True
b. False
90. When one company wants to take over another, one device used is the tender offer.
a. True
b. False
91. Securities issued with the approval of the SEC are subject only to SEC regulation; they are exempted from common
law fraud.
a. True
b. False
92. Securities fraud can arise from misleading information reports for the SEC.
a. True
b. False
93. The securities law imposes civil liability for misleading statements in securities registration material.
a. True
b. False
94. The securities law imposes civil liability for leaving important information out of securities registration material or
reports.
a. True
b. False
95. SEC Rule 10b-5 (securities fraud) applies only to registered securities.
a. True
b. False
96. Liability for securities fraud is imposed only on the directors of a company.
a. True
b. False
97. A chief executive of a company is exempt from liability in a case of securities fraud.
a. True
b. False
98. Liability for misstatements or omissions under SEC Rule 10b-5 applies to both registered and unregistered
securities.
a. True
b. False
99. Liability for securities fraud under SEC Rule 10b-5 may be imposed because a company did not release
information.
a. True
b. False
100. Liability for misstatements by corporate executives can be imposed if the executives fail to tell some fact that they
should have disclosed to help investors avoid losing money.
a. True
b. False
101. When the SEC becomes involved in an enforcement action it is most likely to use remedial actions to punish a
wrongdoer⎯not financial penalties.
a. True
b. False
102. The Securities Litigation Reform Act of 1995 repeals the 1934 Securities Act, replacing it with a statute that takes
into account the use of computers and electronics in securities markets.
a. True
b. False
103. Under the Securities Litigation Reform Act of 1995, companies face reduced liability for inaccurate statements
predicting future corporate performance.
a. True
b. False
104. Under the Securities Litigation Reform Act of 1995, companies have a safe harbor for forward-looking statements
about the company made by executives.
a. True
b. False
105. The Securities Litigation Reform Act of 1995 raises the standards for plaintiffs bringing suit for misstatements of
corporate officials in federal court.
a. True
b. False
106. The Securities Litigation Uniform Standards Act of 1998 requires all states to amend their securities laws to
conform to federal standards.
a. True
b. False
107. The Securities Litigation Uniform Standards Act of 1998 requires securities fraud suits involving nationally traded
securities to be brought in federal court.
a. True
b. False
108. In City of Livonia Employees Retirement System v. Boeing Co., City sued Boeing on behalf of all persons
who bought Boeing stock in a certain time period on the basis that the company was overly optimistic about the
time schedule for the new 787 aircraft. When problems with the plane developed, the stock fell ten percent. Suit
claimed that company executives made false statements about the plane, so committed securities fraud. The
appeals court held that Boeing was “overly optimistic” in its forecasts about its financial future so was liable to
investors who lost money when things turned out worse than expected.
a. True
b. False
109. In City of Livonia Employees Retirement System v. Boeing Co., City sued Boeing on behalf of all persons
who bought Boeing stock in a certain time period on the basis that the company was overly optimistic about the
time schedule for the new 787 aircraft. When problems with the plane developed, the stock fell ten percent. Suit
claimed that company executives made false statements about the plane, so committed securities fraud. The
appeals court held that Boeing was not misleading in its forecasts about its financial future so was not liable to
investors who lost money when things turned out worse than expected.
a. True
b. False
110. Sarbanes-Oxley requires top executives to personally certify the correctness of financial reports made to the SEC.
a. True
b. False
111. Sarbanes-Oxley requires firms to ensure that there is no insider trading occurring within an organization.
a. True
b. False
112. Sarbanes-Oxley provides protection for corporate whistleblowers who report securities violations.
a. True
b. False