LGS FINAL EXAM STUDY GUIDE
Entrepreneurs / Importance of choosing the right business organization - Answer -a
person who organizes and operates a business or businesses, taking on greater than
normal financial risks in order to do so
Due diligence / business judgment rule - Answer -If you acquired appropriate
information, took an action you believe was right for the company, and the outcome
turned out to be bad, the business judgment rule can protect you from being held
accountable for losses and damages that resulted. you are expected only to make
reasonable inquiry.
Electronic data record storage system - Answer -a system that manages electronic
records
Securities Act of 1933 / purpose of laws - Answer -was created and passed into law to
protect investors after the stock market crash of 19291. The primary purpose of the act
is to ensure that buyers of securities receive complete and accurate information before
they invest in securities. The act aims to create transparency in the financial statements
of corporations and establish laws against misrepresentation and fraudulent activities in
the securities markets
Securities Exchange Act 1934 - Answer -a law that regulates the secondary trading of
securities (stocks, bonds, and debentures) in the united states
IPO - Answer -refers to the process of offering shares of a private corporation to the
public in a new stock issuance for the first time. allows a company to raise equity capital
from public investors.
Registration statement - Answer -a disclosure statement that a business files with the
Securities and Exchange Commission (SEC) when it wants to sell equity securities to
the public.
Prospectus - Answer -a printed document that advertises or describes a school,
commercial enterprise, forthcoming book, etc., in order to attract or inform clients,
members, buyers, or investors.
SEC (Securities Exchange Commission) - Answer -an independent federal regulatory
agency that oversees the stock market and proposes and enforces federal securities
laws
Short swing profits - Answer -regulation that requires company insiders to return any
profits made from the purchase and sale of company stock if both transactions occur
within a six-month period
, Insider trading (Sec. 10(b)(5) - Answer -The "manipulative or deceptive device [s] or
contrivance [s]" prohibited
Misappropriation theory - Answer -a legal principle that outlaws trading based on
nonpublic information received and used by a corporate outsider
"Material" information - Answer -information for which there is a substantial likelihood
that a reasonable investor would consider it important in making investment decisions,
or information that is reasonably certain to have a substantial effect on the price of a
company's securities.
U.S. v. Baghat (2006) - Answer -Defendant's convictions for insider trading, for
securities tipping, and for obstructing the course of an SEC investigation is affirmed
over claims of error regarding constructive amendment or material variance, jury
instruction, and sufficiency of the evidence.
Vicarious liability - Answer -a legal rule that holds a person or company responsible for
actions committed by others or by their employees
Agency - how formed, types of, characteristics of relationship - Answer -a legal
arrangement where one party (the agent) acts on behalf of another party (the
principal)1. The elements and characteristics of an agency relationship include234:
Consent by the principal and the agent to the relationship
Action by the agent on behalf of the principal
Control by the principal over the agent's actions
Honesty, clear and measurable assessments, and a customized experience for the
principal
A spirit of collaboration and continual evolution of the customer story
Employer-employee relationship - Answer -is a legal link between employers and
employees. It is through this relationship that reciprocal rights and obligations are
created between the employee and the employer
Employer - independent contractors - Answer -Generally, someone is self-employed if
any of the following apply to them. They carry on a trade or business as a sole
proprietor
Respondeat superior - Answer -A legal doctrine, most commonly used in tort, that holds
an employer or principal legally responsible for the wrongful acts of an employee or
agent, if such acts occur within the scope of the employment or agency
Liability for intentional torts/ fraud - Answer -intentional tort based on someone's lies or
misrepresentations
Entrepreneurs / Importance of choosing the right business organization - Answer -a
person who organizes and operates a business or businesses, taking on greater than
normal financial risks in order to do so
Due diligence / business judgment rule - Answer -If you acquired appropriate
information, took an action you believe was right for the company, and the outcome
turned out to be bad, the business judgment rule can protect you from being held
accountable for losses and damages that resulted. you are expected only to make
reasonable inquiry.
Electronic data record storage system - Answer -a system that manages electronic
records
Securities Act of 1933 / purpose of laws - Answer -was created and passed into law to
protect investors after the stock market crash of 19291. The primary purpose of the act
is to ensure that buyers of securities receive complete and accurate information before
they invest in securities. The act aims to create transparency in the financial statements
of corporations and establish laws against misrepresentation and fraudulent activities in
the securities markets
Securities Exchange Act 1934 - Answer -a law that regulates the secondary trading of
securities (stocks, bonds, and debentures) in the united states
IPO - Answer -refers to the process of offering shares of a private corporation to the
public in a new stock issuance for the first time. allows a company to raise equity capital
from public investors.
Registration statement - Answer -a disclosure statement that a business files with the
Securities and Exchange Commission (SEC) when it wants to sell equity securities to
the public.
Prospectus - Answer -a printed document that advertises or describes a school,
commercial enterprise, forthcoming book, etc., in order to attract or inform clients,
members, buyers, or investors.
SEC (Securities Exchange Commission) - Answer -an independent federal regulatory
agency that oversees the stock market and proposes and enforces federal securities
laws
Short swing profits - Answer -regulation that requires company insiders to return any
profits made from the purchase and sale of company stock if both transactions occur
within a six-month period
, Insider trading (Sec. 10(b)(5) - Answer -The "manipulative or deceptive device [s] or
contrivance [s]" prohibited
Misappropriation theory - Answer -a legal principle that outlaws trading based on
nonpublic information received and used by a corporate outsider
"Material" information - Answer -information for which there is a substantial likelihood
that a reasonable investor would consider it important in making investment decisions,
or information that is reasonably certain to have a substantial effect on the price of a
company's securities.
U.S. v. Baghat (2006) - Answer -Defendant's convictions for insider trading, for
securities tipping, and for obstructing the course of an SEC investigation is affirmed
over claims of error regarding constructive amendment or material variance, jury
instruction, and sufficiency of the evidence.
Vicarious liability - Answer -a legal rule that holds a person or company responsible for
actions committed by others or by their employees
Agency - how formed, types of, characteristics of relationship - Answer -a legal
arrangement where one party (the agent) acts on behalf of another party (the
principal)1. The elements and characteristics of an agency relationship include234:
Consent by the principal and the agent to the relationship
Action by the agent on behalf of the principal
Control by the principal over the agent's actions
Honesty, clear and measurable assessments, and a customized experience for the
principal
A spirit of collaboration and continual evolution of the customer story
Employer-employee relationship - Answer -is a legal link between employers and
employees. It is through this relationship that reciprocal rights and obligations are
created between the employee and the employer
Employer - independent contractors - Answer -Generally, someone is self-employed if
any of the following apply to them. They carry on a trade or business as a sole
proprietor
Respondeat superior - Answer -A legal doctrine, most commonly used in tort, that holds
an employer or principal legally responsible for the wrongful acts of an employee or
agent, if such acts occur within the scope of the employment or agency
Liability for intentional torts/ fraud - Answer -intentional tort based on someone's lies or
misrepresentations
