Question 1

Fact Pattern 21-1
In 2005, Bettina opened Bettina Brownies in a shopping mall. The brownies were a hit and soon Bettina was operating shops in several malls in Illinois. By 2012 she had expanded operations to Indiana and she decided that it was time to finance expansion through the equity markets. With an investment banker, she prepared for the initial offering of Bettina Brownies. She sold 50,000 shares of stock at $10 a share.
Expansion continued. Keebler determined that Bettina was a well-run company with an attractive financial position. It began secret negotiations with Bettina to buy her interest in the business. News of the negotiations leaked. Mr. Little, CEO of Keebler, denied that they were pursuing a deal with Bettina. A month later Bettina sold her share of the business to Keebler.
Shortly before Bettina sold her interest to Keebler, Joe Kelso, a carpet cleaner was working at Bettina office when he overheard discussion of the sale to Keebler. Joe bought a large number of shares in Bettina. After the Keebler sale was completed, Joe sold his stock for a substantial profit.
-Refer to Fact Pattern 21-1. Suppose Bettina took Rob's advice and called her offerings "brownie squares" rather than a stock. The SEC decided to sue Bettina for failure to follow federal securities laws. To prove that the "brownie squares" were securities for purposes of federal regulation, the SEC must show that:

Accepted Answer

A)   the investors expected to make a profit
B)   the investors actually invested money
C)   the investors controlled the work that makes Bettina a success or failure
D)   the investors expected to make a profit and the investors controlled the work that makes Bettina a success or failure
E)   the investors expected to make a profit and the investors actually invested moneyF) B) and C)
G) A) and E)

Question 2

A proxy is best described as:

Accepted Answer

A)   a detailed audited financial report
B)   a registration statement
C)   an unaudited financial report
D)   permission for a stockholder to file a proposal with the board at the annual meeting
E)   none of the other choicesF) C) and D)
G) C) and E)

Question 3

Securities financing is:

Accepted Answer

A)   the raising of money through purchasing bonds
B)   the raising of funds through borrowing money from banks
C)   the raising of money through trades of bonds
D)   the raising of money through donations
E)   none of the other choices are correctF) A) and E)
G) A) and C)

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

Someone who does not have a fiduciary duty to the shareholders of a company and uses inside information to make a profit with company stocks:

Accepted Answer

A)   is probably guilty of insider trading
B)   is probably not guilty of insider trading
C)   can only be guilty of insider trading if he shares the information with others
D)   is guilty of insider trading if he makes more than $50,000 in profits
E)   none of the other choices are correctF) C) and D)
G) A) and B)

Question 6

The Investment Advisers Act requires investment advisers and stock brokers to be registered with the SEC, but not stock dealers, who are regulated by the stock exchanges.

Accepted Answer

A) True 
 B)False

Question 7

The prospectus condenses the longer registration statement provided by security issuers to the SEC.

Accepted Answer

A) True 
 B)False

Question 8

An open-end investment company is usually called a mutual fund.

Accepted Answer

A) True 
 B)False

Question 9

A proxy is best described as:

Accepted Answer

A)   an elaborate audited report
B)   a registration statement
C)   permission by a stockholder to someone else to vote their shares a certain way
D)   permission for a stockholder to file a proposal with the board at the annual meeting
E)   none of the other choicesF) None of the above
G) All of the above

Question 10

The registration requirement of the Securities Act of 1933 applies to:

Accepted Answer

A)   charitable or religious organizations' securities
B)   securities issued by mutual funds
C)   insurance policies
D)   all of the other specific choices
E)   none of the other choicesF) C) and D)
G) A) and B)

Question 11

Companies are required to release material information to the public, rather than to reveal such information selectively under:

Accepted Answer

A)   the 10-Q Report Regulation
B)   Regulation Fair Disclosure (F
D)  
C)   Insider Trading Rule (ITR) 
D)   OTC Rule
E)   none of the other choicesF) A) and C)
G) B) and C)

Question 12

In the event that the SEC staff believes that a prospectus that has been submitted for review does not adequately explain the high-risk factors of an offering, it can:

Accepted Answer

A)   do nothing so long as the required elements have been provided
B)   require shelf registration proceedings to begin
C)   obtain a Commission order barring the sale of the security
D)   obtain a federal court order barring the sale of the security
E)   none of the other choicesF) All of the above
G) A) and B)

Question 13

When the SEC reviews a prospectus for a new stock offering it may not:

Accepted Answer

A)   demand more information from the promoters
B)   issue a deficiency letter ordering the issuer to amend the prospectus
C)   issue a stop order preventing the issue from going forward
D)   none of the other choices may be done; the SEC only records the prospectus for public inspection
E)   all of the other specific choices may be doneF) All of the above
G) A) and B)

Question 14

At least 40 percent of the directors of investment companies must be outside directors with no business relationship with the company.

Accepted Answer

A) True 
 B)False

Question 15

An individual who is classified as an accredited investor has a net worth of at least $1 million.

Accepted Answer

A) True 
 B)False

Question 16

Companies that issue publicly traded securities must turn in quarterly and annual financial reports to the SEC.

Accepted Answer

A) True 
 B)False

Question 17

The Securities Litigation Uniform Standards Act of 1998 requires all states to amend their securities laws to conform to federal standards.

Accepted Answer

A) True 
 B)False

Question 18

A "publicly held company" is one that has issued securities that are publicly traded.

Accepted Answer

A) True 
 B)False

Question 19

A tender offer takes place when:

Accepted Answer

A)   a corporation dissolves
B)   a partnership terminates
C)   one company attempts to take over another company
D)   one party makes their securities available for sale
E)   the government refuses to regulate an industryF) B) and E)
G) B) and D)

Question 20

Securities do not include direct ownership in physical goods; they are an undivided interest in an asset.

Accepted Answer

A) True 
 B)False

Exam 18: Securities Regulation

A "publicly held company" is one that has issued securities that are publicly traded.

Correct Answer
verified

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.

Correct Answer
verified

Companies that issue publicly traded securities must turn in quarterly and annual financial reports to the SEC.

Correct Answer
verified

A proxy is best described as:

Correct Answer
verified

Securities do not include direct ownership in physical goods; they are an undivided interest in an asset.

Correct Answer
verified

The Securities Litigation Uniform Standards Act of 1998 requires all states to amend their securities laws to conform to federal standards.

Correct Answer
verified

Correct Answer
verified

A proxy is best described as:

Correct Answer
verified

In the event that the SEC staff believes that a prospectus that has been submitted for review does not adequately explain the high-risk factors of an offering, it can:

Correct Answer
verified

An individual who is classified as an accredited investor has a net worth of at least $1 million.

Correct Answer
verified

When the SEC reviews a prospectus for a new stock offering it may not:

Correct Answer
verified

A tender offer takes place when:

Correct Answer
verified

An open-end investment company is usually called a mutual fund.

Correct Answer
verified

Securities financing is:

Correct Answer
verified

The prospectus condenses the longer registration statement provided by security issuers to the SEC.

Correct Answer
verified

At least 40 percent of the directors of investment companies must be outside directors with no business relationship with the company.

Correct Answer
verified

The registration requirement of the Securities Act of 1933 applies to:

Correct Answer
verified

Someone who does not have a fiduciary duty to the shareholders of a company and uses inside information to make a profit with company stocks:

Correct Answer
verified

The Investment Advisers Act requires investment advisers and stock brokers to be registered with the SEC, but not stock dealers, who are regulated by the stock exchanges.

Correct Answer
verified

Companies are required to release material information to the public, rather than to reveal such information selectively under:

Correct Answer
verified

Exam 18: Securities Regulation

A "publicly held company" is one that has issued securities that are publicly traded.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Companies that issue publicly traded securities must turn in quarterly and annual financial reports to the SEC.

Correct AnswerverifiedShow Answer

A proxy is best described as:

Correct AnswerverifiedShow Answer

Securities do not include direct ownership in physical goods; they are an undivided interest in an asset.

Correct AnswerverifiedShow Answer

The Securities Litigation Uniform Standards Act of 1998 requires all states to amend their securities laws to conform to federal standards.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A proxy is best described as:

Correct AnswerverifiedShow Answer

In the event that the SEC staff believes that a prospectus that has been submitted for review does not adequately explain the high-risk factors of an offering, it can:

Correct AnswerverifiedShow Answer

An individual who is classified as an accredited investor has a net worth of at least $1 million.

Correct AnswerverifiedShow Answer

When the SEC reviews a prospectus for a new stock offering it may not:

Correct AnswerverifiedShow Answer

A tender offer takes place when:

Correct AnswerverifiedShow Answer

An open-end investment company is usually called a mutual fund.

Correct AnswerverifiedShow Answer

Securities financing is:

Correct AnswerverifiedShow Answer

The prospectus condenses the longer registration statement provided by security issuers to the SEC.

Correct AnswerverifiedShow Answer

At least 40 percent of the directors of investment companies must be outside directors with no business relationship with the company.

Correct AnswerverifiedShow Answer

The registration requirement of the Securities Act of 1933 applies to:

Correct AnswerverifiedShow Answer

Someone who does not have a fiduciary duty to the shareholders of a company and uses inside information to make a profit with company stocks:

Correct AnswerverifiedShow Answer

The Investment Advisers Act requires investment advisers and stock brokers to be registered with the SEC, but not stock dealers, who are regulated by the stock exchanges.

Correct AnswerverifiedShow Answer

Companies are required to release material information to the public, rather than to reveal such information selectively under:

Correct AnswerverifiedShow Answer

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