Question 1

Section 11 of the 1933 Act provides for criminal liability for damages when a registration statement on its effective date misstates or omits a material fact.

Accepted Answer

Section 11 of the 1933 Act provides for civil liability, not criminal liability, for damages when a registration statement contains a material misstatement or omission.

Question 2

All defendants except the issuer may assert a "due diligence" defense against the imposition of Section 11 liability.

Accepted Answer

This is true. Section 11 of the Securities Act of 1933 imposes liability on certain parties involved in the registration statement for a securities offering, including the issuer, underwriters, and directors. However, all defendants except for the issuer may assert a due diligence defense, which requires that they conducted a reasonable investigation and had reasonable grounds to believe that the statements in the registration statement were true and not misleading.

Question 3

The purchaser's remedy for violation of Section 12 of the Securities Act of 1933 is either to rescind the purchase or to sue for damages.

Accepted Answer

This is true. Section 12 of the Securities Act of 1933 provides a remedy for purchasers who have suffered from violations of the Act, allowing them to rescind the purchase or sue for damages.

Question 4

To establish a "due diligence" defense,the defendant must prove that after reasonable investigation,he or she had reasonable grounds to believe and did believe that,at the time the registration statement became effective,the statements contained therein were true and there was not omission of material facts.

Accepted Answer

This is the correct definition of a "due diligence" defense. The defendant must have conducted a reasonable investigation and believed the statements in the registration statement were true at the time it became effective.

Question 5

The Securities and Exchange Commission has no legal authority to bring an action to obtain an injunction.

Accepted Answer

The Securities and Exchange Commission has legal authority to bring an action to obtain an injunction under certain circumstances such as to prevent violations of securities laws, protect investors, and maintain fair and orderly markets.

Question 6

Section 12 of the Securities Act of 1933 imposes civil liability on any person who violates the provisions of Section 5 of the Act.

Accepted Answer

Section 12 of the Securities Act of 1933 does impose civil liability on any person who violates the provisions of Section 5 of the Act.

Question 7

One of the major responsibilities of the Securities and Exchange Commission is to investigate securities so that it can issue ratings on the quality and level of risk of investing in particular securities.

Accepted Answer

The Securities and Exchange Commission (SEC) is responsible for regulating the securities industry in the United States, enforcing federal securities laws, and protecting investors. While the SEC may investigate securities and take enforcement action against individuals and companies that violate securities laws, it does not issue ratings on securities. That responsibility falls to credit rating agencies such as Standard & Poor's or Moody's.

Question 8

A registration statement must be accompanied by financial statements certified by public accountants.

Accepted Answer

This is true according to the requirements of the Securities Act of 1933. The financial statements must be audited by a public accounting firm and included in the registration statement filed with the Securities and Exchange Commission.

Question 9

The prospectus provides expert analysis,from a duly-appointed representative of the Securities and Exchange Commission,of a particular security's potential for future value and growth.

Accepted Answer

The prospectus is a legal document that provides information about a security being offered for sale, but it does not provide expert analysis from a representative of the Securities and Exchange Commission. Rather, it is prepared by the issuer of the security or its underwriters, and includes information about the company's financials, business operations, risks, and other relevant details. Additionally, a prospectus typically does not make any predictions or guarantees about the security's future value or growth potential.

Question 10

All of the information in the prospectus must be printed in all-capital letters,and in boldface type.

Accepted Answer

The question states that "All of the information in the prospectus must be printed in all-capital letters, and in boldface type." This means that the information must be printed in both uppercase and bold letters.

Question 11

Securities and Exchange Commission rules require that original signatures be obtained for all securities-related documents,so issuing securities over the Internet is prohibited as a result.

Accepted Answer

The SEC allows for electronic signatures and electronic delivery of securities-related documents under certain conditions. Issuing securities over the Internet is allowed but must follow SEC guidelines and regulations.

Question 12

A person who willfully violates the Securities Act of 1933 Act may be fined or imprisoned for up to five years,or both.

Accepted Answer

The Securities Act of 1933 includes penalties for willful violations of up to $10,000 in fines and up to five years in prison, or both. Therefore, the statement is true.

Question 13

Contracts to purchase and sell securities are completed during the "post-effective" period.

Accepted Answer

Contracts to purchase and sell securities are typically completed during the post-effective period, which is the period after the Securities and Exchange Commission (SEC) has declared a registration statement effective. During this time, the securities can be legally marketed and traded.

Question 14

The business or party selling securities to the public is called the "issuee."

Accepted Answer

The correct term is "issuer", not "issuee".

Question 15

A prospectus is a written disclosure document that must be submitted to the Securities and Exchange Commission.

Accepted Answer

This statement is true. A prospectus is a legal document that must be filed with the Securities and Exchange Commission (SEC) in the United States and other regulatory agencies in other countries. Its purpose is to provide potential investors with information about the company and its securities, including its financials, management team, risks, and other key details.

Question 16

An issuer of securities must provide a copy of the registration statement and a copy of the prospectus to the Securities and Exchange Commission.

Accepted Answer

This statement is true. An issuer must file a registration statement with the SEC before it can offer securities for sale, and this statement must include a prospectus. The SEC reviews the registration statement and requires certain disclosures to be made in the prospectus before allowing the securities to be offered to investors.

Question 17

It is necessary to discuss the degree of competition in the issuer's industry in a registration statement.

Accepted Answer

According to SEC regulations, it is necessary for issuers to discuss the degree of competition in their industry in a registration statement so that investors can assess the competitive landscape and potential risks. This information helps investors make informed investment decisions.

Question 18

Private parties who have been injured by certain securities violations may bring a civil action against the violator under Section 12 of the Securities Act of 1933.

Accepted Answer

Private parties can bring civil actions against violators under Section 12 of the Securities Act of 1933, which provides remedies for certain securities violations.

Question 19

Violations of Section 12 of the Securities Act of 1933 include selling securities pursuant to an unwarranted exemption and making misrepresentations concerning the offer or sale of securities.

Accepted Answer

This statement is true. Section 12 of the Securities Act of 1933 prohibits the offer or sale of securities in violation of registration requirements or through an unwarranted exemption. It also prohibits making misrepresentations or omitting material facts in connection with the offer or sale of securities.

Question 20

The "pre-filing" period ends when the registration statement is filed.

Accepted Answer

The pre-filing period is the time leading up to the filing of a registration statement with the Securities and Exchange Commission (SEC). It begins when the company begins to prepare for a public offering and ends when the registration statement is filed with the SEC. Once the registration statement is filed, the SEC has a period of time to review it and either approve or reject it.

Quiz 32: Investor Protection,E-Securities Transactions,and Wall Street Reform