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Exam 24: Investor Protection and Corporate Governance

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Question 41

True/False

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Corporate governance can be defined as the relationship between a corporation and its directors.

A) True
B) False

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verified

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Question 42

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State securities laws apply mainly to intrastate transactions.

A) True
B) False

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Question 43

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SEC Rule 10b-5 prohibits the commission of fraud in connection with the purchase or sale of any security.

Private offerings of securities in unlimited amounts can be exempt from the registration requirement of the Securities Act of 1933.

Fact Pattern 37-1?Fresh Cream, Inc., wants to make an initial public offering of securities.Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933. -Refer to Fact Pattern 37-1.If Fresh is exempt from the federal registration requirement, Fresh is

Players Video Game Centers, Inc., wants to issue stock of $1 million in a single offer-ing.Players must provide all investors with material in-forma-tion about itself, its business, and its securities if

Section 10(b) of the Securities Exchange Act of 1934 covers only corporate officers and directors.

In May 2013, National Biotech Corporation generally advertises that it will make a $4 million offering of stock in June.National makes the offering as advertised and, ten days after the first sale, notifies the Securities and Exchange Commission (SEC).All buyers of the stock are given material information about the company, its business, and the stock.Before the end of the year, the offering is completely sold out.The buyers include forty unaccredited investors and fifty accredited investors.National does not register the offering.The SEC files a suit against National, seeking civil sanctions on the ground that this offering was not exempt from registration.National argues that the applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that because of this exemption, any resale of the stock is also exempt.Who is correct?

Global Investments Corporation buys and sells securities.Section 10(b) of the Securities Ex-change Act of 1934 applies to

Lexy, a salesperson for My-T-Fine Corporation, learns that My-T-Fine will in-crease the dividend it pays to shareholders.Lexy buys 10,000 shares of My-T-Fine stock.When the price increases, Lexy sells the shares for a profit.Lexy would not be liable for insider trading if the information about the dividend was

Heavy Hauling, Inc., is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002, to ensure that Heavy Hauling's financial results are accurate and timely, the firm's senior officers must set up and maintain

Della, an officer for Energy Petrol Corporation (EPC) , buys 100 shares of EPC stock.One week later, EPC announces that it will merge with a competitor, Fuel Oil Company, and the price of EPC stock increases.One month later, Della sells her shares for a profit.Under Section 16(b) of the Securities Exchange Act of 1934, Della would not be liable if, after buying the stock, she had waited