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Exam 42: Securities Law Corporate Governance

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Question 21

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Hobie,the chief executive officer of Ideal Gamers,Inc.(IGI) ,inten?tionally understates the amount of IGI's debts in information provided to investors as part of an issue of IGI stock.Jack buys the stock and suffers a loss.Hobie may be subject to

A) government prosecution and Jack's suit.
B) neither government prosecution nor Jack's suit.
C) only government prosecution.
D) only Jack's suit.

E) B) and D)
F) A) and B)

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Question 22

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Exemptions from federal securities laws are exemptions from state laws.

A) True
B) False

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Question 23

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Fact Pattern 42-1A (Questions A6-A7 apply) Fresh Fruits & Veggies,Inc.,wants to make an initial public offering of securi?ties.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 42-1A.If Fresh is exempt from the federal registration requirement,Fresh is

For a defendant to be convicted in a criminal prosecution under the securities laws,there can be no reasonable doubt that the defendant knew he or she was acting wrongfully.

The Securities and Exchange Commission can bring a civil action against anyone who aids in a violation of the Securities Exchange Act of 1934.

Accredited investors include banks,but not investment companies.

Anyone who wrongfully obtains inside information and trades on it for his or her personal gain can be liable under SEC Rule 10b-5.

Securities that are exempt from the registration requirement can not generally be resold without being registered.

Start-Up Enterprises,Inc.,completes its registration process and be?gins ad?vertising the availability of its new issue of securi?ties.Start-Up places a tomb?stone ad in the financial papers.This ad tells pro?spective investors

The definition of security in the Securities Act of 1933 does not include instruments and interests commonly known as securities.

RingTone Corporation is a public company whose securities are traded among investors.Under the Securities Act of 1933,a security is

Rico,an engineer for Shur-2-Gro Seed Corporation,learns that Shur-2-Gro has developed a corn hybrid to triple the output of any farm.Rico buys 20,000 shares of Shur-2-Gro stock.He tells Taylor,who buys 15,000 shares.After the new hybrid is announced publicly,the price of Shur-2-Gro stock in?creases.Rico and Taylor sell their shares for a profit.Under the Securities Exchange Act of 1934,liability may be imposed on

State corporation statues set up the legal framework for corporate governance.

Celfone Corporation is required to file a registration statement with the Securities and Exchange Commission.This statement must contain

State securities laws apply mainly to intrastate transactions.

Lex,a salesperson for Macro Corporation,learns that Macro will in?crease the dividend it pays to shareholders.Lex buys 1,000 shares of Macro stock.When the price increases,Lex sells his shares for a profit.Lex would not be liable for insider trading if the information about the dividend was

Della,an officer for Energy Petrol Corporation (EPC) ,buys 100 shares of EPC stock.One week later,EPC announces that it will merge with a competitor,Fuel Oil Company,and the price of EPC stock increases.One month later,Della sells her shares for a profit.Under Section 16(b) of the Securities Exchange Act of 1934,Della would not be liable if,after buying the stock,she had waited

Flo-Thru Plumbing Corporation is poised to issue securities that,under the Securities Act of 1933,are "exempt." This means that the securities can be sold

Standard Corporation is a public company whose shares are traded in public securities markets.Standard's officers want to set up and main?tain a system of "good corporate governance." What is "corporate govern?ance"? What is its practical significance? What,at a minimum,should a "good" system of corporate governance include?

New Discoveries Corporation,and its officers,directors,and share?holders,buy and sell securities.Section 10(b) of the Securities Ex?change Act of 1934 applies to