Question 1

Accountants have to sign a written consent before their audited report can be included in a registration statement.

Accepted Answer

A) True 
 B)False

Question 2

Temporary insiders are persons not directly employed by the corporation,but who acquire confidential information through the performance of professional services.

Accepted Answer

A) True 
 B)False

Question 3

Under Section 16(b) pertaining to short-swing profits,a person will be considered a(n) __________ of any securities held by his or her immediate family or any other relative living in his or her household.

Accepted Answer

A)   family owner
B)   beneficial owner
C)   actual owner
D)   imputed ownerE) A) and C)
F) B) and C)

Question 4

When analyzing insider trading,the person giving the tip is the __________,the person receiving the tip is the __________,officers and directors are __________,and persons working with the issuer are __________.

Accepted Answer

A)   tipper, remote tippee, temporary insider, permanent insider.
B)   tipper, remote tippee, traditional insider, temporary insider.
C)   tippee, tipper, temporary insider, traditional insider.
D)   tipper, tippee, traditional insider, temporary insider.E) None of the above
F) B) and C)

Question 5

Section 16(b) of the 1934 Act governs __________ by officers,directors,and greater-than-10% shareholders of equity securities of a public company.

Accepted Answer

A)   fraud
B)   deceptive practices
C)   short-swing profits
D)   unorthodox transactionsE) B) and D)
F) B) and C)

Question 6

In the case of a(n) __________,the U.S.Supreme Court has ruled that the reliance will be presumed under Rule 10b-5 if the fact was material.

Accepted Answer

A)   public statement
B)   misstatement
C)   omission
D)   tipE) A) and D)
F) B) and D) C

Question 7

The requirement that the defendant in a 10b-5 action have used interstate commerce,the mails,or a national securities exchange gives Congress the power to regulate the defendant's conduct under:

Accepted Answer

A)   the due process clause of the U.S.Constitution.
B)   the Commerce Clause of the U.S.Constitution.
C)   the fifth amendment to the U.S.Constitution.
D)   executive order 90210.E) All of the above
F) A) and C)

Question 8

The SEC itself has criminal enforcement power.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following represents the general rule under rule 10b-5 in regard to the duty of a company to reveal corporate developments?

Accepted Answer

A)   A company has no general duty under Rule 10b-5 to reveal corporate developments unless the company or its insiders (1)  trade in securities or (2)  recommend trading to someone else.
B)   A company has no general duty under Rule 10b-5 to reveal corporate developments unless the company or its insiders (1)  trade in securities, (2)  recommend trading to someone else, or (3)  disclose the information as a tip while withholding it from the general public.
C)   A company has a general duty under Rule 10b-5 to reveal corporate developments that are material.
D)   A company had a general duty under Rule 10b-5 to reveal corporate developments if it appears (1)  that developments are material and (2)  that the material developments will have a negative effect on the company's financial reports.E) All of the above
F) B) and D)

Question 10

Under Rule 10b-5 a company may not have a "no comment" policy,and must act to dispel untrue rumors.

Accepted Answer

A) True 
 B)False  False

Question 11

A buyer or seller of stock can only recover damages if a material fact is misrepresented or omitted from company communications.All of the following are considered material facts,EXCEPT:

Accepted Answer

A)   statements about corporate earnings.
B)   compensation of corporate officers.
C)   statement of corporate optimism.
D)   statements about corporate assets.E) A) and D)
F) A) and C)

Question 12

An employee who trades or tips using confidential information belonging to his or her employer can be liable under the Mail and Wire Fraud Acts.

Accepted Answer

A) True 
 B)False

Question 13

In theUnited States v.O'Hagan case referenced in the text,O'Hagan was a partner in the law firm of Dorsey & Whitney who represented Grand Met.Grand Met revealed to O'Hagan that Grand Met intended to make a tender offer to Pillsbury.Based on this confidential material information form his client O'Hagan purchased stock and options in Pillsbury prior to a public announcement of Grand Met's tender offer for Pillsbury.O'Hagan realized over $4million in profits but was later convicted of insider trading.The U.S.Supreme Court upheld O'Hagans criminal conviction based on the:

Accepted Answer

A)   Derivative Insider Theory of Insider Trading.
B)   Classical Theory of Insider Trading.
C)   Missappropriation Theory of Insider Trading.
D)   Bespeaks Doctrine of Insider Trading.E) A) and D)
F) B) and C)

Question 14

Lawsuits under Section 10(b) must be brought within __________ of the date the plaintiff discovered or should have discovered the facts constituting the violation or within __________ of the date of the violation,whichever is earlier.

Accepted Answer

A)   two years; five years
B)   six months; one year
C)   two years; three years
D)   one year; two yearsE) B) and C)
F) A) and D)

Question 15

A securities fraud claim can be used as a predicate act in a civil case under the Racketeer Influenced and Corrupt Organizations Act regardless of whether the defendant has been criminally convicted in connection with the fraud.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true regarding Section 16(c) 's restriction on selling stock short?

Accepted Answer

A)   Section 16(c)  prohibits officers, but not directors, from selling any of their company's equity securities short.
B)   Section 16(c)  prohibits directors, but not officers, from selling any of their company's equity securities short.
C)   Section 16(c)  prohibits officers or directors from selling any of their company's equity securities short.
D)   Section 16(c)  allows both officers and directors to sell their company's equity securities short so long as the equities are obtained and delivered within twenty days after the short sale.E) A) and B)
F) A) and C)

Question 17

A controlling shareholder is traditionally considered an insider.

Accepted Answer

A) True 
 B)False  True

Question 18

Scienter requires more than mere negligence or lack of due care.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true regarding who can sue under Rule 10b-5?

Accepted Answer

A)   Only those who purchased the securities at issue may sue.
B)   Only those who sold the securities at issue may sue.
C)   Only those who have actually purchased or sold the securities at issue may sue.
D)   Anyone who either actually purchased or sold the securities at issue, and also anyone who can prove that he or she would have purchased or sold the securities at issue had they known the true facts may sue.E) A) and D)
F) B) and C)

Question 20

Which of the following is NOT a part of the safe harbor provision for forward-looking statements under the 1934 Act?

Accepted Answer

A)   A statement containing a projection of revenues, income, or other financial items.
B)   A statement of the plans and objectives of management for future operations.
C)   A statement of future economic performance.
D)   A statement in a financial statement prepared in accordance with generally accepted accounting principles.E) A) and B)
F) C) and D)

Exam 22: Securities Fraud and Insider Trading.

Accountants have to sign a written consent before their audited report can be included in a registration statement.

Correct Answer
verified

Temporary insiders are persons not directly employed by the corporation,but who acquire confidential information through the performance of professional services.

Correct Answer
verified

Under Section 16(b) pertaining to short-swing profits,a person will be considered a(n) __________ of any securities held by his or her immediate family or any other relative living in his or her household.

Correct Answer
verified

When analyzing insider trading,the person giving the tip is the ,the person receiving the tip is the ,officers and directors are ,and persons working with the issuer are .

Correct Answer
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Section 16(b) of the 1934 Act governs __________ by officers,directors,and greater-than-10% shareholders of equity securities of a public company.

Correct Answer
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In the case of a(n) __________,the U.S.Supreme Court has ruled that the reliance will be presumed under Rule 10b-5 if the fact was material.

Correct Answer
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C

The requirement that the defendant in a 10b-5 action have used interstate commerce,the mails,or a national securities exchange gives Congress the power to regulate the defendant's conduct under:

Correct Answer
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The SEC itself has criminal enforcement power.

Correct Answer
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Which of the following represents the general rule under rule 10b-5 in regard to the duty of a company to reveal corporate developments?

Correct Answer
verified

Under Rule 10b-5 a company may not have a "no comment" policy,and must act to dispel untrue rumors.

Correct Answer
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False

A buyer or seller of stock can only recover damages if a material fact is misrepresented or omitted from company communications.All of the following are considered material facts,EXCEPT:

Correct Answer
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An employee who trades or tips using confidential information belonging to his or her employer can be liable under the Mail and Wire Fraud Acts.

Correct Answer
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Correct Answer
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Lawsuits under Section 10(b) must be brought within of the date the plaintiff discovered or should have discovered the facts constituting the violation or within of the date of the violation,whichever is earlier.

Correct Answer
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A securities fraud claim can be used as a predicate act in a civil case under the Racketeer Influenced and Corrupt Organizations Act regardless of whether the defendant has been criminally convicted in connection with the fraud.

Correct Answer
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Which of the following is true regarding Section 16(c) 's restriction on selling stock short?

Correct Answer
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A controlling shareholder is traditionally considered an insider.

Correct Answer
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True

Scienter requires more than mere negligence or lack of due care.

Correct Answer
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Which of the following is true regarding who can sue under Rule 10b-5?

Correct Answer
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Which of the following is NOT a part of the safe harbor provision for forward-looking statements under the 1934 Act?

Correct Answer
verified

Exam 22: Securities Fraud and Insider Trading.

Accountants have to sign a written consent before their audited report can be included in a registration statement.

Correct AnswerverifiedShow Answer

Temporary insiders are persons not directly employed by the corporation,but who acquire confidential information through the performance of professional services.

Correct AnswerverifiedShow Answer

Under Section 16(b) pertaining to short-swing profits,a person will be considered a(n) __________ of any securities held by his or her immediate family or any other relative living in his or her household.

Correct AnswerverifiedShow Answer

When analyzing insider trading,the person giving the tip is the __________,the person receiving the tip is the __________,officers and directors are __________,and persons working with the issuer are __________.

Correct AnswerverifiedShow Answer

Section 16(b) of the 1934 Act governs __________ by officers,directors,and greater-than-10% shareholders of equity securities of a public company.

Correct AnswerverifiedShow Answer

In the case of a(n) __________,the U.S.Supreme Court has ruled that the reliance will be presumed under Rule 10b-5 if the fact was material.

Correct AnswerverifiedC

The requirement that the defendant in a 10b-5 action have used interstate commerce,the mails,or a national securities exchange gives Congress the power to regulate the defendant's conduct under:

Correct AnswerverifiedShow Answer

The SEC itself has criminal enforcement power.

Correct AnswerverifiedShow Answer

Which of the following represents the general rule under rule 10b-5 in regard to the duty of a company to reveal corporate developments?

Correct AnswerverifiedShow Answer

Under Rule 10b-5 a company may not have a "no comment" policy,and must act to dispel untrue rumors.

Correct AnswerverifiedFalse

A buyer or seller of stock can only recover damages if a material fact is misrepresented or omitted from company communications.All of the following are considered material facts,EXCEPT:

Correct AnswerverifiedShow Answer

An employee who trades or tips using confidential information belonging to his or her employer can be liable under the Mail and Wire Fraud Acts.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Lawsuits under Section 10(b) must be brought within __________ of the date the plaintiff discovered or should have discovered the facts constituting the violation or within __________ of the date of the violation,whichever is earlier.

Correct AnswerverifiedShow Answer

A securities fraud claim can be used as a predicate act in a civil case under the Racketeer Influenced and Corrupt Organizations Act regardless of whether the defendant has been criminally convicted in connection with the fraud.

Correct AnswerverifiedShow Answer

Which of the following is true regarding Section 16(c) 's restriction on selling stock short?

Correct AnswerverifiedShow Answer

A controlling shareholder is traditionally considered an insider.

Correct AnswerverifiedTrue

Scienter requires more than mere negligence or lack of due care.

Correct AnswerverifiedShow Answer

Which of the following is true regarding who can sue under Rule 10b-5?

Correct AnswerverifiedShow Answer

Which of the following is NOT a part of the safe harbor provision for forward-looking statements under the 1934 Act?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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When analyzing insider trading,the person giving the tip is the ,the person receiving the tip is the ,officers and directors are ,and persons working with the issuer are .

Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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Lawsuits under Section 10(b) must be brought within of the date the plaintiff discovered or should have discovered the facts constituting the violation or within of the date of the violation,whichever is earlier.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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