1. All of the following are elements of a security except
a. the hope that profits will be made primarily by the efforts of the investor
b. an investment of money.
c. a common enterprise
d. the expectation that profits will be made by the efforts of people other than the investor
2 The primary reason that corporations issue securities is to
a. obtain financing
b. increase their market share.
c. reduce their production costs.
d. increase their visibility
3. Preferred stockholders
a. have the right to payment of an annual dividend but usually do not have voting rights
b. have the right to payment of an annual dividend and voting rights.
c. do not have the right to payment of an annual dividend and may or may not have voting rights.
d. do not have the right to payment of an annual dividend but always have voting rights.
4. Venturecorp files a registration statement that contains material misrepresentations regarding the financial health of the company. The parties involved in preparing the registration statement who might be found guilty of violating the securities laws would include
a. the persons who signed the statement
b. the underwriters of the issue.
c. the auditors of the company S financial statements.
d. all of the above.
5. The Securities and Exchange Commission
a. was created by a law passed by Congress in 1934.
b. was created by the United States Supreme Court.
c. gives opinions as to the value of securities upon request by people.
d. issues a prospectus concerning the sale of common stocks.
6. Profits made by an insider who purchases and sells or sells and purchases the corporation's stock within any six-month period are
a. short-term profits.
b. short-swing profits.
C. short-sell profits.
d. short-line profits.
7. Which of the following are not covered by Section 16(b) of the Securities Exchange Act of 1934?
a. Officers
b. Large shareholders
c. Tippees
d. Directors
Fact pattern 8-1
Regis, the treasurer of Xanadu Company, learns that the corporation is planning to sell an engine part that will double the gas mileage of any automobile. Regis decides to purchase 10,000 shares of company stock. He also tells his friend Herb, who knows what Regis's job is, about the part, prompting Herb to purchase 5,000 shares of xanadu stock. Herb tells Fritz, who purchases 1,000 shares. Fritz tells Trevor, who purchases 500 shares. Fritz and Trevor are also told where the information came from.
8. Pefer to Fact Pattern 28-1. Regis1s best defense to charges of insider trading would be that the information about the engine part
a. is not material
b. has already been made public
c. is overly speculative.
d. none of the above.
9. Refer to Fact Pattern 8-1. Who would be subject to insider trading liability under the Securities Exchange Act 1934?
a. Regis
b. Herb
c. Fritz
d. All of the above
Fact pattern 8-1
Regis, the treasurer of Xanadu Company, learns that the corporation is planning to sell an engine part that will double the gas mileage of any automobile. Regis decides to purchase 10,000 shares of company stock. He also tells his friend Herb, who knows what Regis's job is, about the part, prompting Herb to purchase 5,000 shares of xanadu stock. Herb tells Fritz, who purchases 1,000 shares. Fritz tells Trevor, who purchases 500 shares. Fritz and Trevor are also told where the information came from.
10. Refer to Fact Pattern 8-1. If a court were to issue guidelines to persons such as Regis and Herb, regarding how long they should wait before they could be confident that information about the engine part had become public knowledge, the court would most likely suggest that Regis and Herb refrain from investing for
a. two weeks.
b. thirty days.
c. six months.
d. a reasonable waiting period.