LENB 3135 Chapter 19 Study Questions
with Solutions
Bonner Industries, Ltd., a private company, is considering an initial public offering. If the
company goes public, it will be regulated by the:
a. DOJ
b. FCC
c. FTC
d. SEC Correct Ans-d. SEC
MegaGlobal is a company that wants to issue publicly traded securities. In the past three years,
it has issued over $2 billion in securities, and $1 billion of those securities are in the hands of
the public. This very large enterprise:
a. is considered a "well-known seasoned issuer" and is subject to a less restrictive registration
process than other firms
b. must undergo more stringent registration requirements due to its large size
c. is considered an "influential issuer of securities" and must register as such with the SEC
d. cannot issue additional securities until those that are now publicly traded return to private
ownership Correct Ans-a. is considered a "well-known seasoned issuer" and is subject to a
less restrictive registration process than other firms
Irene is a representative of Baroque Minerals, Inc., a publicly traded mining company. Irene
states publicly that Baroque has discovered a significant deposit of a rare mineral in China,
which promises to substantially increase the long-term revenue of the company. Unbeknownst
to Irene, an unexpected earthquake that same day destroys the mine in China and blocks access
to the rare mineral for years to come. The company's stock drops as a result. Baroque Minerals
will likely be:
a. not liable under SEC Rule 10b-5, because Irene did not have a wrongful state of mind
b. liable under SEC Rule 10b-5
c. not liable under SEC Rule 10b-5, because of the natural exigency defense to such claims
, d. not liable under SEC Rule 10b-5, because Irene did not make a material
misrepresentation Correct Ans-a. not liable under SEC Rule 10b-5, because Irene did not have
a wrongful state of mind
Marianne makes a false statement about the future earnings potential of her company,
DexaCom Co. Shareholders sue Marianne for securities fraud. These shareholders can file their
lawsuit pursuant to:
a. federal and state securities laws
b. federal laws only, as states generally do not have securities antifraud provisions
c. state laws only, as federal law generally does not have securities antifraud provisions
d. neither federal nor state securities laws, but rather through administrative agency
proceedings Correct Ans-a. federal and state securities laws
Blue sky laws are:
a. federal laws regulating mutual funds.
b. state laws regulating intrastate sales of securities.
c. interstate laws governing bond sales.
d. federal laws regulating the sale of securities in companies that have a record of flaunting
environmental regulations. Correct Ans-b. state laws regulating intrastate sales of securities.
Section 16(b) of the 1934 Securities Exchange Act provides for the:
a. exemption of accredited investors from registration requirements.
b. exemption of certain small companies from registration requirements.
c. solicitation of proxies from shareholders of Section 12 companies.
d. recapture by a corporation of short-swing profits resulting from insider trading. Correct
Ans-d. recapture by a corporation of short-swing profits resulting from insider trading.
Blue sky laws are state laws regulating:
a. the offer and sale of securities within the state.
with Solutions
Bonner Industries, Ltd., a private company, is considering an initial public offering. If the
company goes public, it will be regulated by the:
a. DOJ
b. FCC
c. FTC
d. SEC Correct Ans-d. SEC
MegaGlobal is a company that wants to issue publicly traded securities. In the past three years,
it has issued over $2 billion in securities, and $1 billion of those securities are in the hands of
the public. This very large enterprise:
a. is considered a "well-known seasoned issuer" and is subject to a less restrictive registration
process than other firms
b. must undergo more stringent registration requirements due to its large size
c. is considered an "influential issuer of securities" and must register as such with the SEC
d. cannot issue additional securities until those that are now publicly traded return to private
ownership Correct Ans-a. is considered a "well-known seasoned issuer" and is subject to a
less restrictive registration process than other firms
Irene is a representative of Baroque Minerals, Inc., a publicly traded mining company. Irene
states publicly that Baroque has discovered a significant deposit of a rare mineral in China,
which promises to substantially increase the long-term revenue of the company. Unbeknownst
to Irene, an unexpected earthquake that same day destroys the mine in China and blocks access
to the rare mineral for years to come. The company's stock drops as a result. Baroque Minerals
will likely be:
a. not liable under SEC Rule 10b-5, because Irene did not have a wrongful state of mind
b. liable under SEC Rule 10b-5
c. not liable under SEC Rule 10b-5, because of the natural exigency defense to such claims
, d. not liable under SEC Rule 10b-5, because Irene did not make a material
misrepresentation Correct Ans-a. not liable under SEC Rule 10b-5, because Irene did not have
a wrongful state of mind
Marianne makes a false statement about the future earnings potential of her company,
DexaCom Co. Shareholders sue Marianne for securities fraud. These shareholders can file their
lawsuit pursuant to:
a. federal and state securities laws
b. federal laws only, as states generally do not have securities antifraud provisions
c. state laws only, as federal law generally does not have securities antifraud provisions
d. neither federal nor state securities laws, but rather through administrative agency
proceedings Correct Ans-a. federal and state securities laws
Blue sky laws are:
a. federal laws regulating mutual funds.
b. state laws regulating intrastate sales of securities.
c. interstate laws governing bond sales.
d. federal laws regulating the sale of securities in companies that have a record of flaunting
environmental regulations. Correct Ans-b. state laws regulating intrastate sales of securities.
Section 16(b) of the 1934 Securities Exchange Act provides for the:
a. exemption of accredited investors from registration requirements.
b. exemption of certain small companies from registration requirements.
c. solicitation of proxies from shareholders of Section 12 companies.
d. recapture by a corporation of short-swing profits resulting from insider trading. Correct
Ans-d. recapture by a corporation of short-swing profits resulting from insider trading.
Blue sky laws are state laws regulating:
a. the offer and sale of securities within the state.
