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Chapter 43. Securities Regulation
1. The Securities and Exchange Commission can seek civil injunctions and recommend that the Justice Department
bring criminal prosecution against violators of federal securities laws.
a. True
b. False
2. The 1933 Securities Act differs from the 1934 Act in that the latter deals with issuing stock and the former has to do
with trading stock that has already been issued.
a. True
b. False
3. Registration requirements are the same under the 1933 and 1934 Acts.
a. True
b. False
4. The 1934 Act regulates tender offers and proxy solicitations.
a. True
b. False
5. The federal government alone regulates the sale of securities.
a. True
b. False
6. Registration with the SEC ensures a potential investor as to the financial soundness of the business represented by
the stock.
a. True
b. False
7. Every registration filed with the SEC is held in confidence until the business permits disclosure.
a. True
b. False
8. "Shelf registrations" have to do with delayed sales of stock.
a. True
b. False
9. "Restricted securities" are those that are sold pursuant to an exemption from registration.
a. True
b. False
10. A "private placement" involves no public offering and is exempt from registration.
a. True
b. False
11. If a limited offering of $1.6 million worth of shares is made only to banks, they will not be required to receive any
disclosure materials.
a. True
b. False
12. If a stock offering is made only to "accredited investors," there is no limit on the amount of the offering for the
exemption to apply.
a. True
b. False
13. Bob buys a share of Atlas Pizza, which is unregistered. If it was not exempt from registration, Bob may return the
stock and get his money back.
a. True
b. False
14. The antifraud provisions of the 1933 Act pertain to both unregistered and registered securities.
a. True
b. False
15. Under the antifraud provisions of the securities acts, as long as the falsity is not contained in the prospectus, there is
no liability where there is a registered security.
a. True
b. False
16. The Securities Exchange Act of 1934 primarily deals with secondary transactions in stock.
a. True
b. False
17. The 1934 Act applies only to stock traded on a national exchange for companies whose corporate assets exceed $10
million.
a. True
b. False
18. The 1933 Act imposes only civil, not criminal, sanctions for violation of its provisions.
a. True
b. False
19. Insiders may refrain from trading on inside information rather than disclose it to avoid liability under Rule 10b-5.
a. True
b. False
20. Insiders would violate the short-swing profits rule (Rule 16b) of the 1934 Act by buying stock on January 1 and
selling on May 1.
a. True
b. False
21. The profits realized for violation of Rule 16(b) are given directly to the shareholders as a penalty to the corporation.
a. True
b. False
22. In an election of directors, solicitations of proxies by a person other than the issuer must include an annual report
with a written proxy statement.
a. True
b. False
23. Under SEC requirements adopted in 2010, disclosure of any directorships held by each director and nominee at any
time during the past seven years at any public company or registered investment company must be made to
shareholders.
a. True
b. False
24. All fifty states have enacted similar statutes regulating tender offers.
a. True
b. False
25. The Foreign Corrupt Practices Act makes it illegal for an American company to pay money to a foreign official to
influence a decision of that person in his official capacity.
a. True
b. False
26. The Foreign Corrupt Practices Act makes it illegal to offer a payment of money to a foreign official to influence a
decision even if the payment is not made.
a. True
b. False
27. Bonds are not included in the definition of the term "security."
a. True
b. False
28. Shelf registrations allow issuers to respond more quickly to market conditions, but the provision allowing it does not
apply to all companies.
a. True
b. False
29. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 gives the SEC power to issue cease
and desist orders and to impose criminal fines up to $1 million.
a. True
b. False
30. In 2006, the SEC abolished the requirement that a registration statement disclose compensation paid to senior
executives and directors.
a. True
b. False
31. The SEC has adopted rules requiring an issuer’s chief executive and chief financial officers to certify the financial
and other information contained in the issuer’s annual and quarterly reports.
a. True
b. False
32. The definition of "insider" is consistent between Rule 10b-5 and Section 16(b) of the 1934 Act.
a. True
b. False
33. In 1992, the SEC issued new rules tightening the registration and reporting system for small business issuers, which
increase the cost for such issuers wishing to trade their securities publicly.
a. True
b. False
34. Under Regulation A, as amended in 1992, an issuer may make offers upon filing the offering statement but may
make sales only after the SEC has qualified the statement.
a. True
b. False
35. Under Regulation A, as amended in 1992, issuers may use a simple question-and-answer disclosure document.
a. True
b. False
36. There are rigorously enforced restrictions regarding both number and qualification of investors who purchase
securities under Regulation A.
a. True
b. False
37. In 2009, Congress enacted the Investor Protection and Securities Reform Act, which imposes new corporate
governance and investor protection rules on privately and publicly held companies.
a. True
b. False
38. The effective date of a registration statement is the thirtieth day after filing, after which investors can access it using
EDMOND.
a. True
b. False
39. The SEC may not advance the effective date of a registration statement.
a. True
b. False
40. A registration statement becomes public immediately on filing with the SEC, but a prospectus only becomes public
upon signature of the chief financial officer.
a. True
b. False
41. The 2008 amendments to the SEC rules define a small business issuer as a noninvestment company whose annual
revenues total less than $1 million.
a. True
b. False
42. The Securities and Exchange Commission (SEC) consists of five commissioners.
a. True
b. False
43. The rule that prohibits schemes and devices to defraud investors is Rule:
a. 504.
b. 14a-3.
c. 10b-5.
d. 16(b).
44. The rule that prohibits the solicitation of a proxy unless each person solicited has been furnished with a written proxy
statement containing specified information is Rule:
a. 10b-5.
b. 16(b).
c. 14a-3.
d. 505.
45. The exemption from registration for transactions not involving any public offering is the so-called private placement
provision found in Section 4(2) of the Act and SEC Rule:
a. 10b-5.
b. 504.
c. 505.
d. 506.
46. A writing signed by a shareholder, granting authority to another to vote the signer's stock at a specified shareholder
meeting is a:
a. tender offer.
b. short-term commercial paper.
c. registration.
d. proxy.
47. A defense to an action based on untrue statements contained in a registration statement is:
a. innocent mistake.
b. due diligence.
c. constructive disclosure.
d. reasonable diligence.
48. The agency responsible for enforcing the federal securities laws is the:
a. FTC.
b. SEC.
c. Commerce Department.
d. EEOC.
