BLAW 3310 CH.18 REVIEW UPDATED
ACTUAL Questions and CORRECT
Answers
Corporate finance - CORRECT ANSWER - the business function of obtaining funds for a
company and managing them to accomplish the company's objectives
blue sky laws - CORRECT ANSWER - State laws that regulate the offering and sale of
securities for the protection of the public.
equity financing - CORRECT ANSWER - Raising funds through the sale of company
stock. a purchaser of shares of stock gains an ownership interest in the corporation.
debt financing - CORRECT ANSWER - obtained by borrowing money from large lenders,
such as banks and insurance companies
securities - CORRECT ANSWER - stocks and bonds
Securities and Exchange Commission (SEC) - CORRECT ANSWER - the agency charged
with enforcing and administering federal securities laws. An independent agency that has five
members appointed by the president for five-year terms.
Howey test - CORRECT ANSWER - a test to determine when an investment is a security
for the purposes of federal regulation.
Howey test elements: - CORRECT ANSWER - An investment is classified as a security
for purpose
of federal regulation if it contains four basic elements:
1. An investment of money
2. In a common enterprise
, 3. With an expectation of profits
4. Generated by the efforts of persons other than the investors
SEC disclosure requirements - CORRECT ANSWER - Filing a registration statement with
the SEC
registration statement for a new security offering requires: - CORRECT ANSWER -
prospectus and detailed information required by the SEC.
prospectus - CORRECT ANSWER - (called Schedule A) condenses the longer registration
statement provided to the SEC and helps investors evaluate a security.
SEC review and approval - CORRECT ANSWER - The SEC does not rule on the merit of
an offering; that is, it does not give any opinion about the likelihood of success of a proposed
business. Registration comes into effect 20 days after it is filed.
exemptions from registration - CORRECT ANSWER - - private placement
- rule 144A
- regulation D
- WKSI's
- crowdfunding
private placement - CORRECT ANSWER - primary offerings in which shares are sold
directly to a small group of institutional or wealthy investors
rule 144A - CORRECT ANSWER - exempts U.S. and foreign security issuers from
registration requirements for the sale of bonds and stocks to institutions with a portfolio of at
least $100 million in securities
regulation D - CORRECT ANSWER - explain what qualifies as a private placement
exemption; Such offerings may be made only to accredited investors; most common = Small
ACTUAL Questions and CORRECT
Answers
Corporate finance - CORRECT ANSWER - the business function of obtaining funds for a
company and managing them to accomplish the company's objectives
blue sky laws - CORRECT ANSWER - State laws that regulate the offering and sale of
securities for the protection of the public.
equity financing - CORRECT ANSWER - Raising funds through the sale of company
stock. a purchaser of shares of stock gains an ownership interest in the corporation.
debt financing - CORRECT ANSWER - obtained by borrowing money from large lenders,
such as banks and insurance companies
securities - CORRECT ANSWER - stocks and bonds
Securities and Exchange Commission (SEC) - CORRECT ANSWER - the agency charged
with enforcing and administering federal securities laws. An independent agency that has five
members appointed by the president for five-year terms.
Howey test - CORRECT ANSWER - a test to determine when an investment is a security
for the purposes of federal regulation.
Howey test elements: - CORRECT ANSWER - An investment is classified as a security
for purpose
of federal regulation if it contains four basic elements:
1. An investment of money
2. In a common enterprise
, 3. With an expectation of profits
4. Generated by the efforts of persons other than the investors
SEC disclosure requirements - CORRECT ANSWER - Filing a registration statement with
the SEC
registration statement for a new security offering requires: - CORRECT ANSWER -
prospectus and detailed information required by the SEC.
prospectus - CORRECT ANSWER - (called Schedule A) condenses the longer registration
statement provided to the SEC and helps investors evaluate a security.
SEC review and approval - CORRECT ANSWER - The SEC does not rule on the merit of
an offering; that is, it does not give any opinion about the likelihood of success of a proposed
business. Registration comes into effect 20 days after it is filed.
exemptions from registration - CORRECT ANSWER - - private placement
- rule 144A
- regulation D
- WKSI's
- crowdfunding
private placement - CORRECT ANSWER - primary offerings in which shares are sold
directly to a small group of institutional or wealthy investors
rule 144A - CORRECT ANSWER - exempts U.S. and foreign security issuers from
registration requirements for the sale of bonds and stocks to institutions with a portfolio of at
least $100 million in securities
regulation D - CORRECT ANSWER - explain what qualifies as a private placement
exemption; Such offerings may be made only to accredited investors; most common = Small
