Chapter 7: The SEC and Securities Act of 1933

Question 1

The Securities Act of 1933 was designed to:

Answer 1

require disclosure of all relevant info concerning the issuance of securites to the public

Question 2

The SEC is not responible for

Answer 2

issuing GOVT. bonds

Question 3

The Howey test is a test

Answer 3

that involves the definition of an investment contract

Question 4

An example of an exempt security under the Securities Act of 1933 is

Answer 4

a bond issued by the american red cross

Question 5

The exemption to the Securities Act of 1933 that is most important to firms wishing to issue securities without registering them, also known as the private placement exemption, is found in

Answer 5

Rule 506

Question 6

When the Internet is used for the delivery of a prospectus:

Answer 6

the same rules apply that apply to the delivery of a paper prospectus

Question 7

The Rule 504 exemption is used by most small businesses and provides that noninvestment offerings up to ——- in any 12-month period are exempt.

Answer 7

1,000,000

Question 8

When Craig sells securities in his company, he deliberately overstates the value of the company in the prospectus and begins selling the shares one week before the effective date of the registration. Craig is subject to:

Answer 8

prosecution by the Department of Justice and liable for fines and damages if investors are harmed by his acts.