Ch. 28 Corp Gov

Question 1

After the stock market crash of October 19, 1929 and the ensuing economic depression, Congress enacted the Securities Act of ___ and the Securities Exchange Act of ___ to regulate securities markets.

Answer 1

1. 1933
2. 1934

Question 2

Section 5 of the Securities Act broadly provides that if a security does not qualify for an exemption, that security must be registered before it is offered to the public. T or F

Answer 2

True

Question 3

___ are items that represent an ownership interest in a corporation or a promise of repayment of debt by a corp and can be in the form stocks, bonds, and investment contracts.

Answer 3

Securities

Question 4

examples of securities

Answer 4

stocks, bonds, investment contracts

Question 5

Securities and Exchange commission (SEC) is the main independent regulatory agency that administers the 1933 and 1934 securities acts. T or F

Answer 5

True

Question 6

The ___ is a written document required by securities laws when a security is being sold, and it describes the security being sold, the financial operations of the issuing corporation and the risk attaching to the security being sold.

Answer 6

Prospectus

Question 7

It is a violation of the Securities Act to intentionally defraud investors by misrepresenting or omitting facts in a registration statement or prospectus. T or F

Answer 7

True

Question 8

The 1934 Securities Exchange Act provides for the regulation and registration of:

Answer 8

Brokers

Question 9

___ rule of the Securities and Exchange commission that prohibits the commission of fraud in connection with the purchase or sale of any security.

Answer 9

Rule 10b-5

Question 10

Private parties cannot sue for securities fraud under Rule 10b-5. T or F

Answer 10

False, private parties can sue.

Question 11

A set of policies specifying the right s and responsibilities of the various participants in a corporation and spelling out the rules and procedures for making corporate decisions is the..

Answer 11

Corporate Governance

Question 12

A transaction in which a person invests in a common enterprise
reasonably expecting profits that are derived primarily from the efforts of others is known as a …

Answer 12

Investment contract (also known as the Howey Test)

Question 13

All companies, both domestic and foreign, must file their registration
statements electronically so that they can be posted on the SEC’s online…

Answer 13

EDGAR

Question 14

The purchase or sale of securities on the basis of
information that has not been made available to the public is known as…

Answer 14

Insider trading

Question 15

Profits earned by a purchase and sale, or sale and
purchase, of the same security within a six-month period are

Answer 15

Short swing profits

Question 16

For either criminal or civil sanctions to be imposed, ___ must exist—that
is, the violator must have had an intent to defraud or knowledge of his or her
misconduct

Answer 16

scienter

Question 17

___ helps protect investors from fraudulent financial reporting by corporations.

Answer 17

Sarbanes-Oxley Act of 2002

Question 18

___ governs initial sales of stock by
businesses

Answer 18

Securities Act of 1933

Question 19

___ provides for the regulation and
registration of brokers, securities exchanges, dealers, national associations

Answer 19

1934 Securities Exchange Act