Question 1

Which of the following is true of state securities laws?
A)They are also referred to as "clear sky" laws.
B)They require that securities be registered with federal authorities only.
C)Securities are only regulated by state laws.
D)They regulate securities purchased and sold in intrastate commerce.

Accepted Answer

State securities laws, often known as "blue sky" laws, regulate the offering and sale of securities to protect investors from fraud. They complement federal regulations by covering securities transactions within a state's borders, hence the correct answer is D, as they regulate securities purchased and sold in intrastate commerce. Choices A, B, and C are incorrect because state securities laws are known as "blue sky" laws, not "clear sky" laws, and they require registration or exemption at the state level in addition to any federal requirements, not solely with federal authorities. Furthermore, securities are regulated by both state and federal laws, not solely by state laws.

Question 2

Supreme Motors, a car manufacturer in the U.S., decides to move to Delaware to avoid a hostile takeover bid. Delaware is known to have strong antitakeover laws. Which of the following defense strategies is Supreme Motors using?
A)scorched-earth policy
B)porcupine provision
C)white knight
D)shark repellent

Accepted Answer

Supreme Motors is using "shark repellent" as a defense strategy by moving to a state with strong antitakeover laws, making it less attractive or more difficult for a hostile takeover to occur.

Question 3

Which of the following Internet activities has particularly affected the development of securities fraud online?
A)e-mail
B)private blogs
C)chat rooms
D)browsing

Accepted Answer

Chat rooms have particularly affected the development of securities fraud online because they provide a platform for individuals to share potentially false or misleading information about companies or stocks with a large audience. This can lead to individuals making investment decisions based on fraudulent information, resulting in financial harm.

Question 4

The Dodd-Frank Act did not deal with executive compensation.

Accepted Answer

The Dodd-Frank Act included provisions related to executive compensation, such as requiring public companies to disclose the ratio of the CEO's pay to that of the median employee and empowering shareholders to vote on executive pay packages.

Question 5

The Fed, with the approval of the Financial Stability Oversight Council, has the power to break up large firms and require such firms to increase their reserves against future losses.

Accepted Answer

This statement is true. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 gave the Federal Reserve and the Financial Stability Oversight Council new powers to oversee and regulate large financial institutions in order to avoid another financial crisis. One of these powers includes the ability to break up firms that pose a systemic risk to the financial system and to require such firms to increase their reserves against potential future losses.

Question 6

The Securities and Exchange Commission (SEC) was created under the Securities Investor Protection Act (SIPA) of 1970.

Accepted Answer

The Securities and Exchange Commission (SEC) was actually created under the Securities Exchange Act of 1934. The Securities Investor Protection Act (SIPA) of 1970 established the Securities Investor Protection Corporation (SIPC), which provides insurance protection for investors' brokerage accounts in case their broker-dealer goes bankrupt.

Question 7

The 1990 Remedies Act allows the federal courts to bar anyone who has violated the fraud provisions of the federal securities laws from ever serving as an officer or director of a publicly held firm.

Accepted Answer

The statement accurately reflects the provisions of the 1990 Remedies Act.

Question 8

The Securities Investor Protection Act of 1970 gives the Securities and Exchange Commission authority to regulate the finances of public investment companies that invest in and trade in securities.

Accepted Answer

The Securities Investor Protection Act of 1970 establishes a fund to protect investors in the event of the failure of a broker-dealer, but it does not give the SEC authority to regulate the finances of public investment companies. That authority is granted to the Investment Company Act of 1940.

Question 9

Diane is the CEO of a U.S.-based pharmaceutical firm. Over the years, she has been purchasing significant amounts of stock in the company. The rejection of the company's new drug, by the FDA, resulted in a huge drop in the company's stock value. Diane knew of the rejection before it was made public and sold her stock. Diane is guilty of ________.
A)false accounting
B)black marketeering
C)insider trading
D)influence peddling

Accepted Answer

Diane is guilty of insider trading as she used non-public information to make her stock transaction, which is illegal according to SEC regulations. False accounting refers to manipulating financial statements. Black marketeering is selling goods or services illegally outside of official channels. Influence peddling refers to using one's position of power to gain favors or benefits.

Question 10

Which of the following defensive strategies refers to bankrupting a company?
A)porcupine provision
B)scorched-earth policy
C)shark repellent
D)white knight

Accepted Answer

The scorched-earth policy refers to a defensive strategy that involves destroying or selling off assets of a company in order to prevent them from falling into the hands of a hostile bidder, often resulting in bankruptcy. The porcupine provision and shark repellent are types of anti-takeover measures, while a white knight is a potential friendly bidder who can save a company from a hostile takeover.

Question 11

Under the Securities Act of 1933, commerce between any foreign country and the United States is referred to as ________.
A)domestic commerce
B)intrastate commerce
C)interstate commerce
D)international commerce

Accepted Answer

The answer of Under the Securities Act of 1933, commerce...

Question 12

The ________ provides for giving foreign regulators U.S. government documents and information needed to trace laundered money and those suspected of doing the laundering.
A)Uniform Securities Act
B)Freedom of Information Act
C)Foreign Corrupt Practices Act
D)International Securities Enforcement Cooperation Act

Accepted Answer

The International Securities Enforcement Cooperation Act allows for the sharing of information and documents between foreign and U.S. regulators to aid in the investigation and prosecution of individuals suspected of money laundering.

Question 13

Hedge funds larger than $250 million must register with the Securities and Exchange Commission and provide some information as to trades and their individual portfolios.

Accepted Answer

The answer of Hedge funds larger than $250 million must...

Question 14

The Division of Corporation Regulation administers the Public Utility Holding Company Act of 1935.

Accepted Answer

The Division of Corporation Regulation does indeed administer the Public Utility Holding Company Act of 1935.

Question 15

Atlas Consultancies, a financial consulting firm, has received a tender offer for a takeover from a rival firm. In order to retain the goodwill of its management, Atlas gave its employees large bonus packages and other forms of compensation. Which of the following defensive strategies is Atlas using?
A)porcupine provision
B)golden parachute
C)white knight
D)greenmail

Accepted Answer

Atlas is using the golden parachute defensive strategy to retain the goodwill of its management. This involves offering large bonus packages and other forms of compensation to key employees in the event of a takeover, in an attempt to discourage the acquiring company from replacing or dismissing them.

Question 16

The Foreign Corrupt Practices Act of 1977 is aimed at ________.
A)U.S. companies attempting to bribe foreign officials
B)foreign companies attempting to bribe U.S. officials
C)foreign companies engaging in insider trading
D)U.S. companies conspiring with foreign companies to engage in insider trading

Accepted Answer

The Foreign Corrupt Practices Act of 1977 is a U.S. law that prohibits U.S. companies from bribing foreign officials in order to obtain or retain business. It was enacted to address the issue of corruption in international business transactions and to promote transparency and ethical behavior in such transactions. It does not apply to foreign companies attempting to bribe U.S. officials or to insider trading.

Question 17

The Securities Act of 1933 regulates the initial offering of securities by public corporations by prohibiting an offer or sale of securities not registered with the Securities and Exchange Commission.

Accepted Answer

The Securities Act of 1933 does indeed regulate the initial offering of securities by public corporations by requiring that the securities be registered with the Securities and Exchange Commission.

Question 18

The Private Securities Litigation Reform Act of 1995 gives the Securities and Exchange Commission cease-and-desist powers and the power to impose substantial monetary penalties in administrative proceedings.

Accepted Answer

The answer of The Private Securities Litigation Reform Act of...

Question 19

Which of the following terms refers to buying out a hostile shareholder at a price far above the current price of the target company's stock in exchange for the hostile shareholder's agreement not to buy more shares for a period of time?
A)golden parachute
B)poison pill
C)porcupine provision
D)greenmail

Accepted Answer

Greenmail refers to buying out a hostile shareholder at a price far above the current price of the target company's stock in exchange for the hostile shareholder's agreement not to buy more shares for a period of time. A golden parachute is a compensation agreement that provides financial benefits to executives in the event of a merger or acquisition. A poison pill is a defense mechanism used by a company to make its stock unattractive to an acquiring company. A porcupine provision requires the acquiring company to take on a certain amount of debt.

Question 20

The Securities and Exchange Commission is not charged with evaluating the worth of a public offering of securities by a corporation.

Accepted Answer

The SEC's role is to ensure that the offering is made in compliance with securities laws and regulations, not to determine the value or worth of the securities being offered.

Quiz 23: Rules Governing the Issuance and Trading of Securities

Which of the following is true of state securities laws?

Supreme Motors, a car manufacturer in the U.S., decides to move to Delaware to avoid a hostile takeover bid. Delaware is known to have strong antitakeover laws. Which of the following defense strategies is Supreme Motors using?

Which of the following Internet activities has particularly affected the development of securities fraud online?

The Dodd-Frank Act did not deal with executive compensation.

The Fed, with the approval of the Financial Stability Oversight Council, has the power to break up large firms and require such firms to increase their reserves against future losses.

The Securities and Exchange Commission (SEC) was created under the Securities Investor Protection Act (SIPA) of 1970.

The 1990 Remedies Act allows the federal courts to bar anyone who has violated the fraud provisions of the federal securities laws from ever serving as an officer or director of a publicly held firm.

The Securities Investor Protection Act of 1970 gives the Securities and Exchange Commission authority to regulate the finances of public investment companies that invest in and trade in securities.

Which of the following defensive strategies refers to bankrupting a company?

Under the Securities Act of 1933, commerce between any foreign country and the United States is referred to as ________.

The ________ provides for giving foreign regulators U.S. government documents and information needed to trace laundered money and those suspected of doing the laundering.

Hedge funds larger than $250 million must register with the Securities and Exchange Commission and provide some information as to trades and their individual portfolios.

The Division of Corporation Regulation administers the Public Utility Holding Company Act of 1935.

The Foreign Corrupt Practices Act of 1977 is aimed at ________.

The Securities Act of 1933 regulates the initial offering of securities by public corporations by prohibiting an offer or sale of securities not registered with the Securities and Exchange Commission.

The Private Securities Litigation Reform Act of 1995 gives the Securities and Exchange Commission cease-and-desist powers and the power to impose substantial monetary penalties in administrative proceedings.

Which of the following terms refers to buying out a hostile shareholder at a price far above the current price of the target company's stock in exchange for the hostile shareholder's agreement not to buy more shares for a period of time?

The Securities and Exchange Commission is not charged with evaluating the worth of a public offering of securities by a corporation.