Chapter 2 Part 2

Question 1

Congress passed the Securities Act of 1933 to regulate the

Answer 1

interstate sales of securities and also make it illegal to offer or sell securities in a state without complying with state law.

Question 2

The Securities Act of 1933 is designed to provide

Answer 2

purchasers of new issues of securities with full and fair disclosure regarding the issuer, and to prevent fraud in the sale of securities.

Question 3

The Securities Act of 1933 The SEC requires issuers to file a

Answer 3

registration statement if the mail or other channels of interstate commerce are used to sell the security.

Question 4

“The Securities Act of 1933 In addition to registration, the Act requires issuers of securities to provide potential purchasers with

Answer 4

a prospectus that gives detailed information about the issuer and the securities.

Question 5

If an individual sells a security based on untruthful statements, or the omission of material facts, he may be held liable to

Answer 5

the purchaser for any monetary damages sustained.

Question 6

However, the seller will not be held liable if

Answer 6

if he can demonstrate that reasonable care was used and that they were not aware of untruthful statements or omissions.

Question 7

The SEC may exempt an issuer from providing any part of the required information if it finds that

Answer 7

1. if certain info doesn’t apply.
2. if into discolsed is adequate
3. at filing, issuer must include filing fee

Question 8

cooling-off period

Answer 8

This 20-day cooling-off period the SEC has to review documentation

Question 9

red herring is

Answer 9

a preliminary prospectus. Provided before price has been set and before the issuer’s registration statement has been deemed effective by the SEC

Question 10

red herring may be distributed to

Answer 10

potential purchasers during the cooling-off period.