Chapter 28 Quiz Flashcards
As part of a stock offering for Design Studio Corporation, the firm’s accountant Eve intentionally misrepresents material facts in the prospectus. Fred buys the stock unaware of the misrepresentation and suffers a loss. Eve may be subject to
a. job termination but no other sanctions, penalties, or liability.
b. professional censure but no criminal sanctions or civil liability.
c. none of the choices.
d. a fine, imprisonment, and damages.
Bernie is the chief executive officer of Cooking Network, Inc., which is required to file certain financial reports with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Bernie must
a. do nothing.
b. designate a corporate official to assume liability for inaccuracies.
c. read the reports and be prepared to answer questions about them.
d. certify that the reports are complete and accurate.
Boats & Ships Corporation is a public company, which Colorado regulates and in which Dennis invests. The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to
a. private investors.
b. public companies.
c. the Securities and Exchange Commission.
d. state regulators.
Bonds & Stocks Corporation, and its officers, directors, and shareholders, buy and sell securities. SEC Rule 10b-5 applies to the purchase or sale of
a. a security involving a corporate insider only.
b. a security involving short-swing profits only.
c. a security by a financial corporation only.
d. any security.
Brian, the chief executive officer of Chairs & Tables, Inc., intentionally understates the amount of the firm’s debts in information provided to investors as part of an issue of stock. Darla buys the stock and suffers a loss. Brian may be subject to
a. only the private investor’s suit.
b. only government prosecution.
c. negative publicity but no criminal prosecution or civil suit.
d. government prosecution and a private investor’s suit.
Cattle Ranch Company offers its stock for sale only in a single state. The law in the company’s state is like the law in most states. Thus, the firm’s offer is subject to state securities statutes that include
a. antifraud and disclosure provisions.
b. neither antifraud nor disclosure provisions.
c. antifraud provisions only.
d. disclosure provisions only.
Flo, a salesperson for Gear Oil Corporation, learns that the firm will increase the dividend it pays to shareholders. She buys 10,000 shares of company stock. When the dividend is announced to the public and the price of the stock increases, she sells her shares for a profit. She would not be liable for insider trading if the information about the dividend was
a. available to the public before she bought the stock.
b. forward-looking when she bought the stock.
c. available to the public after she bought the stock.
d. material when she sold the stock.
Household Products Corporation wants to make an offering of securities to the public. The offering is not exempt from registration under the Securities Act of 1933. Before the firm sells its securities, it must provide investors with
a. samples of its products.
b. a prospectus.
c. a forward-looking financial forecast.
d. an investment contract.
Leo is the chief financial officer of Moneysworth Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Leo must personally
a. certify that the statements are accurate.
b. delegate the responsibility for preparing the statements.
c. deliver the statements to the appropriate SEC officer.
d. prepare the statements.
Media Marketing Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain
a. a description of securities being offered for sale.
b. all of the choices.
c. a record of pre-registration sales in securities.
d. a copy of prospectuses to be provided to investors.
