Unit 7

Question 1

The FTC’s principal missions are to keep the US economy ……..

Answer 1

both free and fair 1305

Question 2

_____ of the FTC Act empowers the commission to to prevent unfair methods of competition and unfair or deceptive acts or practices

Answer 2

Section 5; 1305

Question 3

List the 3 important FTC enforcement devices:

Answer 3

1. procedures for facilitating voluntary compliance
2. issuance of trade regulation rules
3. adjudicative proceedings 1306

Question 4

A prime example of voluntary compliance enforced by the FTC are the issuance of _________. These are not _____, however they are often followed.

Answer 4

Industry Guides 1306

Question 5

An FTC adjudicative proceeding is headed by an FTC _________. Decisions from this proceeding can be appealed to the ______, and then the _______, and finally the _______.

Answer 5

administrative law judge, FTC’s 5 commissioners, federal court of appeals, U.S. Supreme Court 1306

Question 6

The usual penalty resulting from a final decision against the respondent in an adjudicative proceeding is an _________.

Answer 6

cease-and-desist order 1306

This orders the respondent to stop their illegal behavior

Question 7

The civil penalty for noncompliance with a cease-and-desist order is up to ________.

Answer 7

$16,000 per violation 1307

Question 8

a _________ is an alternative to adjudication. It is an order approving a negotiated agreement in which the responded promises to cease certain activities.

Answer 8

Consent order 1306

Question 9

to be deceptive, the representation, omission, or practice must also be likely to ___________.

Answer 9

Miss lead reasonable consumers under the circumstances 1309

Question 10

The TSR ACT governs….

Answer 10

telemarketer behaviors ensuring they disclose required information, call the consumer only during the hours of 8am to 9pm (time based on the consumer’s location), and ensure they are not harassing. 1314

Question 11

The _________ Act requires warrantied products valued more than _____ to be in writing.

Answer 11

Magnuson-Moss, $15 1319

Question 12

The Truth in Lending Act (TILA) generally applies to creditors who extend credit to a debtor on a regular basis, not exceeding _______. Consumers seeking protection under TILA must be a _______ and the act does not protect _______ .

Answer 12

$53,000, natural person, business organization 1319

Question 13

The TLA provisions are broken down into 3 main categories:

Answer 13

1. open-end credit
2. closed-end credit
3. credit card applications and solicitations 1320

Question 14

Under the TILA a credit card holder liability for unauthorized use of the card is limited to _____.

Answer 14

$50; 1320

Question 15

The ___________ was enacted to give people protection against abuses in the process of disseminating information about their credit worthiness.

Answer 15

Fair Credit Reporting Act (FCRA) 1320

Question 16

Under the FCRA, users of credit reports (such as employers) that order an __________ must provide the consumer a copy if the report is to to be relied on in a decision and inform the consumer _____________.

Answer 16

Investigative consumer report, if the reliance led to an adverse action 1321

Question 17

Another name for a credit bureau is ________.

Answer 17

consumer reporting agency 1321

Question 18

The general duty that auditors, consultants, and securities professionals owe to their clients and to other persons who are affected by their actions is to exercise the _____ and _____ of the ordinarily prudent professional in the same circumstances.

Answer 18

skill, care 1235

Question 19

When clients sue professionals, there are three principal bases of liability:

Answer 19

1. contract
2. tort
3. trust (the professional must maintain the clients confidentiality) 1235

Question 20

When an accountant negligently fails to discover embezzlement, generally he is liable to his client only for an equal amount to the embezzlement that occurred…..

Answer 20

…. After he should have discovered the embezzlement 1237

Question 21

The accountant is usually not liable for any part of the embezzlement that occurred…

Answer 21

…Prior to the time he should have uncovered the embezzlement. 1237

Question 22

a person acts with _____ when he knows of the falsity of a statement or he recklessly disregards the truth. Thus, accountants are liable in ______ for their intentional or reckless disregard for accuracy in their work.

Answer 22

scienter, fraud 1239

Question 23

Usually, a client may receive only _______ damages for a breach of contract for negligence. By proving fraud, a client may be awarded ________ damages as well.

Answer 23

compensatory, punitive 1240

Question 24

Under the doctrine of __________, course refuse to intervene in a dispute between litigants when both have engaged in wrongdoing.

Answer 24

in pari delicto 1240

Question 25

Under the __________ exceptions, outside auditors or other professionals ______ use the in pari delicto defense when they share some blame for the corporate insiders fraud if the corporation has innocent parties such as shareholders. In sum, the shareholders should not be prevented from collecting damages.

Answer 25

adverse interest, can not 1240

Question 26

In New York, for in pari delicto not to apply, the client's agent must have totally abandoned the ______ interests and be acting entirely for ____ or _____,

Answer 26

client's, his own, another's interests 1241

Question 27

While an auditor or investment banker may be able to assert in pari delicto as a defense in an action by the _____ against the ________, the defense will not exist when on their own behalf ___________ sue an auditor or investment banker for causing direct harm to the ______.

Answer 27

client, auditor or investment banker, innocent shareholders of the client, shareholders 1241

Question 28

Purchasers who buy the client's securities based on false statements in a document prepared for investors by an investment banker may sue the ________.

Answer 28

Investment banker 1242

Question 29

Many courts have restricted the ability of non-clients to sue a professional for damages _______ caused by the professional's negligent conduct. These courts limit nonclient suits on the grounds that nonclient users of the professionals work product have not contracted with a professional and therefore, are not in _________ with her.

Answer 29

proximate, privity of contract 1242

Question 30

The _________ requirement protects an ______ or other professional who does not know the user or the extent of use of its work product and, therefore, is unable to assess the potential dollar amount of liability or the user's propensity to sue. There; however, now 3 tests courts use to determine whether a nonclient may sue a professional for negligence:

Answer 30

Ultremares privity, auditor 1. Primary benefit test 2. Foreseen users & foreseen class of users test 3. foreseeable users test 1242

Question 31

under the primary benefit test, the non-client must be a _______ of the professional's work product. The professional must know _____ and the client must have a _____ intent that user use the work product.

Answer 31

foreseen, name of the user, primary 1243

Question 32

Under the concept of the Foreseen users & foreseen class of users test; if the accountant negligently prepared the client's income statement for the purpose filing a tax return, but instead the client obtained a loan, the accountant ______ be liable to the nonclient bank.

Answer 32

would not 1243

Question 33

Few courts have extended liability of an accountant's audit or other report under the foreseeable users test for those nonclient's who suffered damages that were ________ by the accountant's negligence.

Answer 33

proximately caused 1244

Question 34

Fraud is such reprehensible conduct that __________ is not required when a person suffered damages that were ________ caused by professional fraud. To prove fraud, a nonclient must establish that a professional acted with _______.

Answer 34

privity of contract, proximately, scienter 1247

Question 35

The slow reaction of the common law and creating a negligence remedy for third parties has led to increased use of ________ by nonclients--that is persons not in privity with a professional.

Answer 35

securities law 1247

Question 36

Under Section ____ of the Securities Act, auditors or underwriters are liable to any purchaser of the securities issued pursuant to a defective registration statement.

Answer 36

11; 1248

Question 37

Under Section 11, auditors in underwriters may escape liability by proving that they exercised _________. This is usually proved by establishing they complied with ______ and ______ and were essentially not negligent.

Answer 37

due diligence (the due diligence defense), GAAS, GAAP 1248

Question 38

Underwriters are considered ____ whereas auditors are _____.

Answer 38

experts, not 1248

Question 39

Section ________ imposes liability on any person who missed states or omits a material fact in connection with an ______ or ______ of a security that is part of a general distribution of securities by an issuer. Privity _____ required.

Answer 39

12(a)(2), offer, sale, is 1248

Question 40

Under 12(a)(2) the defendant must: 1- 2-

Answer 40

1. must actively solicit the sale; and | 2. be motivated by ability to receive direct commission/profit from the sale 1249

Question 41

Under Section _____, a purchaser of a security must prove his reliance on a misstatement or omission of ________ for which an accountant or securities professional is responsible.

Answer 41

17(a), material fact 1249

Question 42

Section _____ imposes liability on persons who furnish misleading and false statements of material fact in any reports or document filed with the ___________. Under this section a purchaser must prove 2 things:

Answer 42

18, Securities and Exchange Commission 1- reliance on the defective statement 2- damages resulting from that reliance 1249

Question 43

Auditor me a scape section 18 liability by proving that she acted in _______ and had _______ that the information was misleading. That is, she must show that she acted without _______.

Answer 43

Good faith, no knowledge, scienter 1249

Question 44

The Private Securities Litigation Reform Act limits the liability of most auditors and securities professionals to the amount of an investors loss for which the defendant is responsible. This means that a defendant has _______ liability and need no longer fear being liable for investors entire losses when a fraudulent client is unable to pay its share of the damages.

Answer 44

Proportionate 1252

Question 45

The SEC has adopted _________ (_______) to ensure securities analysts have no conflicts of interests and their reports are their own opinions without any bias.

Answer 45

Regulation AC (Analysts Certification) 1253

Question 46

Under Regulation AC, analysts are ______ in trading for his personal account in ______ he recommends.

Answer 46

restricted, securities 1254

Question 47

________ empowered the SEC to impose a fiduciary duty on brokers-dealers and investment advisors in their dealings with customers.

Answer 47

The Dodd-Frank Act 1255

Question 48

The SEC Rule of Practice 102(e) allows the SEC to......

Answer 48

.....bar temporarily or permanently from practice before the SEC, a professional who has demonstrated a lack of qualifications required to practice before it. 1260

Question 49

The personal records that a client entrusts to a professional during an engagement, such as accounting records during an audit, remain the property of the ______.

Answer 49

client 1261

Question 50

Material created by a professional, such as working papers produced by independent auditors, belong to the _______, not the ____.

Answer 50

accountant, client 1261

Question 51

Under the Sarbanes-Oxley Act, a requirement was made that audit or review working papers be retained for __________.

Answer 51

7 years 1262

Question 52

In some states, clients enjoy an ________ privilege of confidentiality. This privilege does not exists in _____ matters. This doesn't apply for other professionals generally.

Answer 52

accountant-client privilege, federal 1262

Question 53

True or False: The FTC has no power to regulate anti-competitive practices that are governed by the Sherman, Clayton or Robinson-Patman Acts.

Answer 53

false 1309

Question 54

A credit card issuer who fails to comply with the Fair Credit Billing Act forfeits its right to collect ______

Answer 54

$50 of the disputed amount 1326

Question 55

Under the Consumer Product Safety Act, the government has the power to?

Answer 55

Issue rules banning hazardous products

Question 56

Subsequent to the America Invents Act (AIA) U.S. switched from a first-to-invent ideology to a __________.

Answer 56

first-to-file 266

Question 57

Under law of nature concerns, the PTO _______ issue patents natural phenomena and things that occur in nature.

Answer 57

cannot 266

Question 58

Abstract ideas, scientific, and mathematical concepts ______ be patented.

Answer 58

cannot 266

Question 59

Business methods ______ be patented.

Answer 59

can 266

Question 60

exclusive rights to a patented invention generally exists for ____ ; however a design patent exists for ______.

Answer 60

20, 14 272

Question 61

Under the ___________, a defendant may be held liable for infringement even though the subject matter he made, used, or sold contains elements that were not identical to those described in the pantentees's claims of invention, if the elements of the defendants subject matter nonetheless may be seen as equivalent to those of the patented invention

Answer 61

Doctrine of equivalents 274

Question 62

A party challenging a patent on the ground of invalidity must prove that the facts underlying the invalidity contentions by ___________ rather than a mere __________

Answer 62

Clear and convincing evidence, preponderance of the evidence 275

Question 63

A defense of ______ rests on the notion that the invention was not sufficiently novel or was obvious, and thus did not merit a patent

Answer 63

invalidity 275

Question 64

_____________ give certain exclusive rights to creators of original works of authorship.

Answer 64

Copyright law 276

Question 65

Registration _____ necessary for the copy right to exist.

Answer 65

is not 276

Question 66

With the enactment of the CTEA, the basic to ration rule for Works created in 1978 or thereafter is now ___________ plus ______. The duration rule for a work-for-hire is now ______ from first publication or ________ from creation, whichever comes first

Answer 66

Life of the author/creator, 70 years, 95 years, 120 years p.g277

Question 67

Copyright laws first sale doctrine extinguishes a copyright owner's rights regarding a particular copy of the copyrighted work once that copy has been _______.

Answer 67

Lawfully sold 281

Question 68

3 elements of copyright infringement:

Answer 68

1. defendant has access to the copyrighted work 2. defendant engaged in enough copying that the resemblance between the allegedly infringing work and a copyrighted work does not seem coincidental 3. there is substantial similarity between the two works. 285

Question 69

A defense of ________ could make the following uses good candidates for protection from law suit from copyright infringement: criticism or comment; news reporting; and teaching, scholarship, or research.

Answer 69

fair use 286

Question 70

The federal ___________ protects trademark owners against certain uses of their marks by third parties.

Answer 70

Lanham Act 291

Question 71

A ______ is any word, name, symbol, device, or combination thereof used by manufacturer or seller to identify its products and distinguish them from the products of competitors.

Answer 71

trademark 291

Question 72

Federal registration of a trademark last for ______,with renewals for additional _______ periods possible. However, the government must cancel it before this period if the registrant does not file for the extension within the _____ or _____.

Answer 72

10 years, 10 years, 5th or 6th year. 293

Question 73

A mark may lose its protected status under trademark law if the courts rule it has become ______. Provide an example.

Answer 73

generic. examples include: aspirin, escalator, and thermos. 295

Question 74

Because the likelihood of _______ is critical to resolution of trademark infringement cases, courts have had plenty of occasions to make such determinations.

Answer 74

Confusion determination 295

Question 75

An alternative to trademark infringement that could be sought in court is _______. This is where and association arises from the similarity between a mark or trade name in a famous mark that impairs the distinctiveness of the famous mark. This was enforced through enactment of the __________

Answer 75

Trademark dilution, Trademark Dilution Revision Act (TDRA) 296

Question 76

trademark dissolution may also occur by _______ in which the reputation of the famous mark is harmed.

Answer 76

Tarnishment 296

Question 77

To be protectable, a trade secret must usually have sufficient value or originality to provide an actual or potential competitive advantage. It need not possess the ________ required for _______ however.

Answer 77

novelty, patent protection 301

Question 78

If an employee was hired for purposes other than inventing, but she nonetheless invents something, the patent is _____. However, if it is created on company time and/or with company resources, the employer gets royalty free rights to the invention under the ________

Answer 78

hers, Shop rights doctrine 274

Question 79

____________ also goes by names such as product disparagement, slander of title, and trade libel.

Answer 79

injurious falsehood 305

Question 80

In a lawsuit for _____________, one party to a contract claims that the defendants interference with the other parties performance of the contract wrongly caused the plaintiff to lose the benefit of that performance. The contract must already _____ and there must be ______.

Answer 80

Intentional interference with contractual relations, exist, intent 306