Quiz 46: Securities Regulation


Securities Act of 1933 - regulates the offer and sales of security. Securities are defined in the section 2 of the act which includes investment contracts, stocks, bonds, etc. a) A stock option is an option contract to purchase a stock, this is an investment. This is likely to be considered a security. b) Warrants are an option contract that allows a purchaser to buy a stock at a certain price before expiration date. This is explicitly stated as a security in section 2 of the Securities Act of 1933. This is considered a security. c) General partnership interests, gives a person a right to control and profit of a partnership business. This is unlikely a security because the right to become a partner is granted by others and general partners will have to manage the business themselves. This is unlikely to be a security. d) Limited liability partnership interest can be transferred as the limited partner doesn't need to have control of a firm but is entitled to the partnership's profits. This can be considered a security.

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a) A registration statement is not automatically effective when filed. Statement is false. b) Issuer of the stock needs to provide investors with a prospectus, which include the material financial information of the corporation, before the stock can be sold. Statement is true. c) The SEC is not responsible for determining the investment value of a stock. Statement is false. d) Filing a registration statement doesn't enable the issuer to sell the stock yet. Statement is false.

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