MGMT 200 PURDUE FINAL EXAM ACTUAL QUESTIONS
AND SOLUTIONS RATED A+
✔✔What is the goal of SEC Rule 10b-5? - ✔✔-Prevent insider trading
-Applies to anyone who has access to or receives information of a nonpublic nature on
which trading is based (not just corporate "insiders")
-Includes: tippees who receive tips from insiders and individuals who wrongfully obtain
(misappropriate) inside info
✔✔What is insider trading? - ✔✔Occurs when persons buy or sell securities on the
basis of material information that is not available to the public
✔✔What is material information? - ✔✔Information that is significant enough that it would
likely affect an investor's decision to purchase or sell the company's stock
✔✔What do you have to show in order for sanctions to be imposed in violation of the
1934 Act? - ✔✔Scienter: violators must have had intent to defraud or knowledge of
misconduct
✔✔Once you can show scienter, what criminal penalties can be attached? - ✔✔1.
Individual fines up to $5 million and/or imprisonment up to 20 years
2. Partnership/corporate fines up to $25 million
3. Willful violations can bring imprisonment up to 25 years under the Sarbanes-Oxley
Act of 2002
✔✔Once you can show scienter, what civil penalties can the SEC impose? - ✔✔1.
Sanctions
2. Request injunctions or orders for refunds
✔✔What is corporate governance? - ✔✔-The relationship between a corporation and its
shareholders
-The Sarbanes-Oxley Act was an effort of this
✔✔Sarbanes-Oxley Act of 2002 ("SOX") - ✔✔Mandated a number of reforms to
enhance corporate responsibility, enhance financial disclosures and combat corporate
and accounting fraud by imposing harsh penalties (penalties under violations of 1933
and 1934 Act) for violations
✔✔Dodd-Frank Wall Street Reform and Consumer Protection Act - ✔✔-Designed to
promote financial stability and transparency to protect consumers
-Created the Consumer Financial Protection Bureau (CFPB) to oversee financial
products (credit cards, mortgages, etc)
✔✔What is a tort? - ✔✔-Breach of duty that causes injury or damage to a person or
property
, -Tort law: designed to compensate those who have suffered a loss/injury
✔✔What are the different kinds of torts? - ✔✔1. Intentional Torts
2. Defamation, Invasion of Privacy, Business Torts
3. Unintentional Torts (Negligence)
4. Strict Liability, Products Liability
✔✔What types of damages are available? (remedy you are trying to get if you have
suffered a civil wrong) - ✔✔1. Compensatory damages (special and general damages)
2. Punitive damages
3. Nominal damages
✔✔Compensatory damages - ✔✔-Designed to compensate a plaintiff for the harm that
somebody has suffered
-Must be foreseeable, certain, and unavoidable
✔✔What are special compensatory damages (the ones with the receipt)? - ✔✔-
Quantifiable dollar loss suffered (proven at trial)
-Includes economic losses such as medical bills, lost wages/profits, and property
damage
✔✔What are general compensatory damages? - ✔✔-Damages not quantified in
monetary terms
-Include pain and suffering, emotional distress
✔✔Punitive damages ("exemplary damages") - ✔✔-Purpose is to punish defendant,
rather than compensate plaintiff's
-Most jurisdictions: punitive damages are recoverable in negligence, but only if plaintiff
can show defendant's conduct was more than ordinary negligence (someone was
speeding and rear-ended you rather than just rear-ending you)
✔✔What is the "due-process" limit attached to punitive damages? - ✔✔Cannot be
grossly excessive when compared to compensatory amount (because punitive
damages are often larger than compensatory damages)
✔✔Nominal damages (symbolic) - ✔✔-Plaintiff proves only minimal loss or damage, or
the court or jury is unable to quantify the losses
-Can be as low as $1
✔✔What is intent? - ✔✔Desire that a result will occur or knowledge to a substantial
certainty that a result will occur
✔✔What are the intentional torts to person? - ✔✔1. Assault
2. Battery
3. False Imprisonment
AND SOLUTIONS RATED A+
✔✔What is the goal of SEC Rule 10b-5? - ✔✔-Prevent insider trading
-Applies to anyone who has access to or receives information of a nonpublic nature on
which trading is based (not just corporate "insiders")
-Includes: tippees who receive tips from insiders and individuals who wrongfully obtain
(misappropriate) inside info
✔✔What is insider trading? - ✔✔Occurs when persons buy or sell securities on the
basis of material information that is not available to the public
✔✔What is material information? - ✔✔Information that is significant enough that it would
likely affect an investor's decision to purchase or sell the company's stock
✔✔What do you have to show in order for sanctions to be imposed in violation of the
1934 Act? - ✔✔Scienter: violators must have had intent to defraud or knowledge of
misconduct
✔✔Once you can show scienter, what criminal penalties can be attached? - ✔✔1.
Individual fines up to $5 million and/or imprisonment up to 20 years
2. Partnership/corporate fines up to $25 million
3. Willful violations can bring imprisonment up to 25 years under the Sarbanes-Oxley
Act of 2002
✔✔Once you can show scienter, what civil penalties can the SEC impose? - ✔✔1.
Sanctions
2. Request injunctions or orders for refunds
✔✔What is corporate governance? - ✔✔-The relationship between a corporation and its
shareholders
-The Sarbanes-Oxley Act was an effort of this
✔✔Sarbanes-Oxley Act of 2002 ("SOX") - ✔✔Mandated a number of reforms to
enhance corporate responsibility, enhance financial disclosures and combat corporate
and accounting fraud by imposing harsh penalties (penalties under violations of 1933
and 1934 Act) for violations
✔✔Dodd-Frank Wall Street Reform and Consumer Protection Act - ✔✔-Designed to
promote financial stability and transparency to protect consumers
-Created the Consumer Financial Protection Bureau (CFPB) to oversee financial
products (credit cards, mortgages, etc)
✔✔What is a tort? - ✔✔-Breach of duty that causes injury or damage to a person or
property
, -Tort law: designed to compensate those who have suffered a loss/injury
✔✔What are the different kinds of torts? - ✔✔1. Intentional Torts
2. Defamation, Invasion of Privacy, Business Torts
3. Unintentional Torts (Negligence)
4. Strict Liability, Products Liability
✔✔What types of damages are available? (remedy you are trying to get if you have
suffered a civil wrong) - ✔✔1. Compensatory damages (special and general damages)
2. Punitive damages
3. Nominal damages
✔✔Compensatory damages - ✔✔-Designed to compensate a plaintiff for the harm that
somebody has suffered
-Must be foreseeable, certain, and unavoidable
✔✔What are special compensatory damages (the ones with the receipt)? - ✔✔-
Quantifiable dollar loss suffered (proven at trial)
-Includes economic losses such as medical bills, lost wages/profits, and property
damage
✔✔What are general compensatory damages? - ✔✔-Damages not quantified in
monetary terms
-Include pain and suffering, emotional distress
✔✔Punitive damages ("exemplary damages") - ✔✔-Purpose is to punish defendant,
rather than compensate plaintiff's
-Most jurisdictions: punitive damages are recoverable in negligence, but only if plaintiff
can show defendant's conduct was more than ordinary negligence (someone was
speeding and rear-ended you rather than just rear-ending you)
✔✔What is the "due-process" limit attached to punitive damages? - ✔✔Cannot be
grossly excessive when compared to compensatory amount (because punitive
damages are often larger than compensatory damages)
✔✔Nominal damages (symbolic) - ✔✔-Plaintiff proves only minimal loss or damage, or
the court or jury is unable to quantify the losses
-Can be as low as $1
✔✔What is intent? - ✔✔Desire that a result will occur or knowledge to a substantial
certainty that a result will occur
✔✔What are the intentional torts to person? - ✔✔1. Assault
2. Battery
3. False Imprisonment
