Chapter 8 Part 5 Flashcards Preview

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Flashcards in Chapter 8 Part 5 Deck (11)
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The Securities Exchange Act of 1934 defines an insider as

any officer, director, or owner of more than 10% or more of a company's stock. An insider's immediate family is also included


Anyone inappropriately using

material, nonpublic information may be charged with insider trading, where the penalties may include fines, imprisonment, and expulsion from the industry


The maximum civil penalty is

three times the profit gained or loss avoided (treble damages)


The maximum criminal penalty is a fine of

of $5 million for an individual and $25 million for a corporation or other entity. An individual may also be sentenced to prison for a period up to 20 years


By the nature of their position, certain people have access to nonpublic information, but may not take advantage ofil to earn a profit or to avoid a loss on a securities transaction. An insider is also not allowed to make a

short-swing profit (i.e., a profit earned on stock held less than six months) on the company's stock. Any short-swing profit must be returned to the company. If not, the owner may be sued for disgorgement of all profits


Your exam may include an example of an individual who possesses insider information (the tipper} and provides the information to another individual (the tippee} who ultimately profits with the information. Both parties would be

in violation under the Act


The Municipal Securities Rulemaking Board was created by Congress in

1975 as part of an amendment to the Securities Exchange Act of 1934


As with FINRA, the MSrB is a

self-regulatory organization that is subject to oversight by the Securities and Exchange Commission. The purpose of the MSRB is to oversee practices within the municipal securities industry


The MSrB requires every broker or dealer of municipal secmities to comply with its rules. The MSRB is concerned mainly with the standards of

professional practice, including qualifications of brokerdealers, rules of fair practice, and record keeping


MSRB rules do not apply to

issuers of municipal securities


Municipal securities are exempt from the registration requirements of

the Securities Act of 1933, but issuers remain subject to the antifraud provisions set forth in the federal securities acts

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