LENB 3135 Chapter 19 Study Questions + Answers Graded A+
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Course
LENB 3135
Institution
LENB 3135
The [Flexibility, Compensation, Historical, Beneficial] Committee of the board of
directors assesses performance and designs a system that better aligns the officers'
interests with that of the shareholders. - ️️Compensation
True/False: SEC Rule 10b-5 applies only to cases that involve the t...
LENB 3135 Chapter 19 Study Questions
The [Flexibility, Compensation, Historical, Beneficial] Committee of the board of
directors assesses performance and designs a system that better aligns the officers'
interests with that of the shareholders. - ✔️✔️Compensation
True/False: SEC Rule 10b-5 applies only to cases that involve the trading of securities
on organized exchanges, such as the New York Stock Exchange - ✔️✔️False
Insider trading involves individuals who are:
a. inside prison at the time the allegedly illegal trade occurred
b. inside the SEC and have employment in a position of trust and confidence
c. insiders within publicly traded companies, including officers, directors, and majority
shareholders - ✔️✔️c. insiders within publicly traded companies, including officers,
directors, and majority shareholders
Under which theories may outsiders be held liable for insider trading? Choose two:
a. Negligence theory
b. Misappropriation theory
c. Managerial theory
d. Tipper/tippee theory
e. Constant information theory - ✔️✔️b. Misappropriation theory
d. Tipper/tippee theory
The Securities Act of 1933 was designed to:
a. require disclosure of all relevant information concerning the issuance of securities to
the public
b. regulate the operations of national stock exchanges
c. oversee and regulate national security contracts
d. promote the use of proxies by shareholders - ✔️✔️a. require disclosure of all
relevant information concerning the issuance of securities to the public
The Howey test is a test:
a. invented by Martha Howey
b. involving the definitions of an investment contract
c. outlining exemptions from securities laws
d. that is no longer used today - ✔️✔️b. involving the definitions of an investment
contract
A typical registration statement filed with the SEC includes: (select all that apply)
a. The corporation's properties and businesses
b. How the corporation intends to use the proceeds of the sale
c. Any pending lawsuits or special risk factors
d. The securities offered for sale
, e. Any past settlement offers
f. The management of the corporation, including managerial compensation and benefits
g. The past financial records of the corporation - ✔️✔️a. The corporation's properties
and businesses
b. How the corporation intends to use the proceeds of the sale
c. Any pending lawsuits or special risk factors
d. The securities offered for sale
f. The management of the corporation,
Examples of exempt securities under the Securities Act of 1933 are
a. bonds issued by the American Red Cross
b. shares of Apple
c. bonds issued by Google
d. investment contracts in condominiums - ✔️✔️a. bonds issued by the American Red
Cross
The Rule 504 exemption is used by most small businesses and provides that
noninvestment offerings up to [$500,000, $750,000, $2,000,000, $5,000,000] in any
twelve-month period are exempt. - ✔️✔️$5,000,000
True/False: The 1934 Securities Exchange Act provides for the regulation and
registration of securities exchanges, brokers, dealers, and national securities
associations, such as the National Association of Securities Dealers (NASD) -
✔️✔️True
c. The 1933 act is a one-time disclosure law, whereas the 1934 act provides for
continuous periodic disclosures by publicly held corporations - ✔️✔️c. The 1933 act is
a one-time disclosure law, whereas the 1934 act provides for continuous periodic
disclosures by publicly held corporations
The Securities Exchange Act applies to companies that have assets in excess of and
[$1 million, $5 million, $10 million, $20 million] five hundred or more shareholders. -
✔️✔️$10 million
Section 16(b) of the Securities Exchange Act of 1934 provides for the:
a. recapture by a corporation of short-swing profits resulting from insider trading
b. exemption of certain small companies from registration requirements
c. exemption of credited investors from registration requirements - ✔️✔️a. recapture by
a corporation of short-swing profits resulting from insider trading
Liability under Section 16(b) is strict liability, which means that:
a. scienter is not required
b. neither scienter nor negligence is required
c. negligence is not required - ✔️✔️b. neither scienter nor negligence is required
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