Securities Regulation

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Quiz by harpratap_singh, updated more than 1 year ago
harpratap_singh
Created by harpratap_singh over 4 years ago
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Quiz on Securities Regulation, created by harpratap_singh on 05/28/2015.
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Question 1

Question
Tork purchased restricted securities that were issued pursuant to Regulation D of the Securities Act of 1933. Which of the following statements is correct regarding Tork's ability to resell the securities
Answer
  • Tork may not resell the securities if the certificates contain a legend indicating that they are unregistered securities.
  • Tork may resell the securities as part of another transaction exempt from registration.
  • Tork may resell the securities so long as the sale does involve interstate commerce.
  • Tork may not resell the securities unless Tork obtains a written SEC exemption.

Question 2

Question
The prospectus for the sale of securities of a not-for-profit corporation contained material misrepresentations due to the negligence of the person who prepared the financial statements. As a result of the misrepresentations, purchasers of the shares lost their investment. Do the anti-fraud provisions of the Securities Act of 1933 apply in this situation?
Answer
  • Yes, because the misrepresentations were material.
  • No, because the securities are exempt from registration.
  • Yes, because the securities are required to be registered.
  • No, because only the issuer was negligent.

Question 3

Question
Dean, Inc., a publicly traded corporation, paid a $10,000 bribe to a local zoning official. The bribe was recorded in Dean's financial statements as a consulting fee. Dean's unaudited financial statements were submitted to the SEC as part of a quarterly filing. Which of the following federal statutes did Dean violate?
Answer
  • North American Free Trade Act.
  • Federal Trade Commission Act.
  • Securities Act of 1933.
  • Securities Exchange Act of 1934.

Question 4

Question
Under the Securities Act of 1933, which of the following statements most accurately reflects how securities registration affects an investor?
Answer
  • The investor is assured by the SEC against loss resulting from purchasing the security.
  • The investor is guaranteed by the SEC that the facts contained in the registration statement are accurate.
  • The investor is provided with information on the principal purposes for which the offering's proceeds will be used.
  • The investor is provided with information on the stockholders of the offering corporation.

Question 5

Question
Which of the following securities would be regulated by the provisions of the Securities Act of 1933?
Answer
  • Securities issued by savings and loan associations.
  • Securities issued by insurance companies.
  • Securities guaranteed by domestic governmental organizations.
  • Securities issued by not-for-profit, charitable organizations.

Question 6

Question
Under the Securities Act of 1933, which of the following statements concerning an offering of securities sold under a transaction exemption is correct?
Answer
  • The offering is exempt from the anti-fraud provisions of the 1933 Act.
  • Resales of the offering must be made under a registration or a different exemption provision of the 1933 Act.d
  • Resales of the offering are exempt from the provisions of the 1933 Act.
  • The offering is subject to the registration requirements of the 1933 Act.

Question 7

Question
Which of the following facts will result in an offering of securities being exempt from registration under the Securities Act of 1933?
Answer
  • The securities are nonvoting preferred stock.
  • The sale or offer to sell the securities is made by a person other than an issuer, underwriter, or dealer.
  • The securities are AAA-rated debentures that are collateralized by first mortgages on property that has a market value of 200% of the offering price.
  • The issuing corporation was closely held prior to the offering.

Question 8

Question
Which of the following statements concerning an initial intrastate securities offering made by an issuer residing in and doing business in that state is correct?
Answer
  • .The shares of the offering could not be resold to investors outside the state for at least one year.
  • The offering would be exempt from the registration requirements of the Securities Act of 1933.
  • The offering would be regulated by the SEC.
  • The offering would be subject to the registration requirements of the Securities Exchange Act of 1934.

Question 9

Question
Which of the following statements concerning the prospectus required by the Securities Act of 1933 is correct?
Answer
  • The prospectus must be filed after an offer to sell.
  • The prospectus is a part of the registration statement.
  • The prospectus is prohibited from being distributed to the public until the SEC approves the accuracy of the facts embodied therein.
  • The prospectus should enable the SEC to pass on the merits of the securities.

Question 10

Question
A preliminary prospectus, permitted under SEC Regulations, is known as the:
Answer
  • Qualified prospectus.
  • Unaudited prospectus.
  • "Red-herring" prospectus.
  • "Blue-sky" prospectus.

Question 11

Question
Which of the following transactions will be exempt from the full registration requirements of the Securities Act of 1933?
Answer
  • All offerings made under Regulation
  • Any stockbroker transaction.
  • All intrastate offerings.
  • Any resale of a security purchased under Regulation D offering.

Question 12

Question
Under the Securities Exchange Act of 1934, which of the following types of instruments is excluded from the definition of "securities?"
Answer
  • Investment contracts.
  • Certificates of deposit.
  • Convertible debentures.
  • Nonconvertible debentures.

Question 13

Question
One of the elements necessary to recover damages if there has been a material misstatement in a registration statement filed under the Securities Act of 1933 is that the:
Answer
  • .Plaintiff gave value for the security.
  • Issuer failed to exercise due care in connection with the sale of the securities.
  • Issuer and plaintiff were in privity of contract with each other.
  • Plaintiff suffered a loss.

Question 14

Question
An offering made under the provisions of Regulation A of the Securities Act of 1933 requires that the issuer:
Answer
  • Sell only to accredited investors.
  • Provide investors with the prior four years' audited financial statements.
  • File an offering circular with the SEC.
  • Provide investors with a proxy registration statement.

Question 15

Question
Adler, Inc. is a reporting company under the Securities Exchange Act of 1934. The only security it has issued is voting common stock. Which of the following statements is correct?
Answer
  • Because Adler is a reporting company, it is not required to file a registration statement under the Securities Act of 1933 for any future offerings of its common stock.
  • Any person who owns more than 10% of Adler's common stock must file a report with the SEC.
  • Adler need not file its proxy statements with the SEC because it has only one class of stock outstanding.
  • It is unnecessary for the required annual report (Form 10K) to include audited financial statements.

Question 16

Question
Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements?
Answer
  • A stockholder who owns more than 10% of the outstanding common stock.
  • An attorney for the corporation.
  • An owner of 5% of the corporation's outstanding debentures.
  • A member of the board of directors.

Question 17

Question
Pix Corp. is making a $6,000,000 stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following provisions of the Act would Pix have to comply with for the offering to be exempt?
Answer
  • Regulation D, Rule 505.
  • Regulation A.
  • Regulation D, Rule 504.
  • Regulation D, Rule 506.

Question 18

Question
Pix Corp. is making a $6,000,000 stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following requirements would Pix have to comply with when selling the securities?
Answer
  • No more than 35 unaccredited investors.
  • No more than 35 investors
  • Accredited investors only.
  • Unaccredited investors only.

Question 19

Question
Frey, Inc. intends to make a $2,000,000 common stock offering under Rule 505 of Regulation D of the Securities Act of 1933. Frey:
Answer
  • .May sell the stock to an unlimited number of investors.
  • May make the offering through a general advertising.
  • Must notify the SEC within 15 days after the first sale of the offering.
  • Must provide all investors with a prospectus.

Question 20

Question
Which of the following disclosures must be contained in a securities registration statement filed under the Securities Act of 1933?
Answer
  • The names of all prospective accredited investors.
  • A copy of the corporation's latest proxy solicitation statement.
  • .The principal purposes for which the offering proceeds will be used.
  • A list of all existing stockholders.

Question 21

Question
Which of the following is least likely to be considered a security under the Securities Act of 1933?
Answer
  • General partnership interests.
  • Limited partnership interests.
  • Warrants.
  • Stock options.

Question 22

Question
Corporations that are exempt from registration under the Securities Exchange Act of 1934 are subject to the Act's:
Answer
  • .Proxy solicitation provisions.
  • Provisions imposing periodic audits.
  • Provisions dealing with the filing of annual reports.
  • Antifraud provisions.

Question 23

Question
Under the Securities Exchange Act of 1934, a corporation with common stock listed on a national stock exchange:
Answer
  • Is prohibited from making private placement offerings.
  • Must distribute copies of Form 10-K to its stockholders.
  • Must submit Form 10-K to the SEC except in those years in which the corporation has made a public offering.
  • Is subject to having the registration of its securities suspended or revoked.

Question 24

Question
Regulation D of the Securities Act of 1933:
Answer
  • Is exclusively available to small business corporations as defined by Regulation D.
  • Permits an exempt offering to be sold to both accredited and unaccredited investors.
  • Is limited to offers and sales of common stock that do not exceed $1.5 million.
  • Restricts the number of purchasers of an offering to 35.

Question 25

Question
Under the liability provisions of Section 18 of the Securities Exchange Act of 1934, for which of the following actions would an accountant generally be liable?
Answer
  • Intentionally preparing and filing with the SEC a reporting corporation's incorrect quarterly report.
  • Negligently filing a reporting corporation's tax return with the IRS.
  • Intentionally failing to notify a reporting corporation's audit committee of defects in the verification of accounts receivable.
  • Negligently approving a reporting corporation's incorrect internal financial forecasts.

Question 26

Question
Which of the following securities is exempt from registration under the Securities Act of 1933?
Answer
  • One-year notes issued to raise working capital.
  • Municipal bonds.
  • Pre-incorporation stock subscriptions.
  • Securities sold by a discount broker.

Question 27

Question
Which of the following circumstances is a defense to an accountant's liability under Section 11 of the Securities Act of 1933 for misstatements and omissions of material facts contained in a registration statement?
Answer
  • The absence of privity between purchasers and the accountant.
  • The absence of scienter on the part of the accountant.
  • Nonreliance by purchasers on the misstatements.
  • Due diligence on the part of the accountant.

Question 28

Question
Under Section 12 of the Securities Exchange Act of 1934, in addition to companies whose securities are traded on a national exchange, what class of companies is subject to the SEC's continuous disclosure system?
Answer
  • Companies with annual revenues in excess of $5 million and 300 or more shareholders.
  • Companies with annual revenues in excess of $10 million and 500 or more shareholders
  • Companies with assets in excess of $10 million and 500 or more shareholders
  • Companies with assets in excess of $5 million and 300 or more shareholders.

Question 29

Question
Under Regulation D of the Securities Act of 1933, what is the maximum time period during which an exempt offering may be made?
Answer
  • .Twenty-four months.
  • Twelve months.
  • Three months.
  • Six months.

Question 30

Question
Under the liability provisions of Section 11 of the Securities Act of 1933, a CPA who certifies financial statements included in a registration statement generally will not be liable to a purchaser of the security:
Answer
  • If the CPA can prove due diligence.
  • If the financial statements were materially misstated.
  • Unless the purchaser can prove scienter on the part of the CPA.
  • Unless the purchaser can prove privity with the CPA.

Question 31

Question
What is the standard that must be established to prove a violation of the anti-fraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934?
Answer
  • Intentional misconduct.
  • Strict liability.
  • Negligence.
  • Criminal intent.

Question 32

Question
Under the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934, a CPA may be liable if the CPA acted:
Answer
  • Negligently.
  • Without good faith.
  • With independence.
  • Without due diligence.

Question 33

Question
Which of the following transactions is subject to registration requirements of the Securities Act of 1933?
Answer
  • Issuance of stock by a publicly-traded corporation to its shareholders because of a stock split.
  • The public sale by a charitable organization of 10-year bearer bonds.
  • The public sale by a corporation of its negotiable 10-year notes.
  • The sale across state lines of municipal bonds issued by a city

Question 34

Question
What defense must an accountant establish to be absolved from civil liability under Section 18 of the Securities Exchange Act of 1934 for false or misleading statements made in reports or documents filed under the Act?
Answer
  • Good faith and lack of knowledge of the statement's falsity.
  • Exercise of due care.
  • Lack of gross negligence.
  • Lack of privity with an injured party.

Question 35

Question
According to the Securities Act of 1933, which of the following statements is correct regarding an issuer of securities?
Answer
  • An issuer is permitted to advertise an initial offering of securities only through distribution of the prospectus.
  • .All securities issuers must register the securities offering with the Securities and Exchange Commission (SEC).
  • All securities issuers must provide potential investors with a prospectus containing specified information.
  • If an issuer sells a security and fails to meet certain disclosure requirements, the purchaser may sell it back to the issuer and recover the price paid.

Question 36

Question
Which of the following transactions is subject to registration requirements of the Securities Act of 1933?
Answer
  • The public sale of stock of a trucking company regulated by the Interstate Commerce Commission.
  • The issuance of stock by a publicly-traded corporation to its existing shareholders because of a stock split.
  • A public sale of municipal bonds issued by a city government.
  • The public sale by a corporation of its negotiable 10-year notes.

Question 37

Question
Sam's Retail Outlet's certified public accountant prepares financial statements that omit a material fact. The financial statements are part of Sam's registration statement. An investor purchases Sam's stock. Under Section 11 of the Securities Act of 1933, the accountant can avoid liability by showing that she:
Answer
  • None of the answer choices are correct.
  • Exercised due diligence in preparing the financial statements.
  • Lacked criminal intent in preparing the financial statements.
  • Was not in privity of contract with the Investor.

Question 38

Question
KMC, Inc., is issuing $7 million of stock in a single offering. If KMC does not want to provide investors with any material information about itself, its business, or its securities, it may only do so if:
Answer
  • At least 35 investors are accredited.
  • All of the investors are accredited.
  • All of the investors are sophisticated.
  • Any of the investors are accredited.

Question 39

Question
Under Regulation D, Rule 505, of the Securities Act of 1933, which of the following statements is correct regarding a $3,000,000 stock offering sold only to accredited investors?
Answer
  • The issuer may sell the stock to only 35 accredited investors.
  • The issuer may make the offering through a general advertising.
  • The issuer must supply all accredited investors with financial information.
  • The issuer must notify the SEC within 15 days after the first sale of the offering.

Question 40

Question
Pick, CPA, was engaged by Edge Corp. to audit Edge's financial statements. Pick, in performing the audit and rendering an unmodified opinion, intentionally ignored several material omissions in the financial statements. Edge included Pick's audit report in its annual filing with the SEC and in its annual stockholders' report. Drane purchased shares of Edge stock based on Drane's review of the past performance of the stock and current-year financial statements. When the omissions in the financial statements became known, the value of Edge stock declined and Drane suffered a loss. Under the provisions of Rule 10b-5 of the Securities Exchange Act of 1934, what will be the result of a suit by Drane against Pick?
Answer
  • Drane will lose because the stock purchased was not part of a new issue.
  • Drane will lose because only Edge is liable.
  • Drane will win because Pick was negligent.
  • Drane will win because Pick acted with intent.
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