Chapter 8 Part 5 Flashcards

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1
Q

The Securities Exchange Act of 1934 defines an insider as

A

any officer, director, or owner of more than 10% or more of a company’s stock. An insider’s immediate family is also included

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2
Q

Anyone inappropriately using

A

material, nonpublic information may be charged with insider trading, where the penalties may include fines, imprisonment, and expulsion from the industry

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3
Q

The maximum civil penalty is

A

three times the profit gained or loss avoided (treble damages)

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4
Q

The maximum criminal penalty is a fine of

A

of $5 million for an individual and $25 million for a corporation or other entity. An individual may also be sentenced to prison for a period up to 20 years

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5
Q

By the nature of their position, certain people have access to nonpublic information, but may not take advantage ofil to earn a profit or to avoid a loss on a securities transaction. An insider is also not allowed to make a

A

short-swing profit (i.e., a profit earned on stock held less than six months) on the company’s stock. Any short-swing profit must be returned to the company. If not, the owner may be sued for disgorgement of all profits

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6
Q

Your exam may include an example of an individual who possesses insider information (the tipper} and provides the information to another individual (the tippee} who ultimately profits with the information. Both parties would be

A

in violation under the Act

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7
Q

The Municipal Securities Rulemaking Board was created by Congress in

A

1975 as part of an amendment to the Securities Exchange Act of 1934

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8
Q

As with FINRA, the MSrB is a

A

self-regulatory organization that is subject to oversight by the Securities and Exchange Commission. The purpose of the MSRB is to oversee practices within the municipal securities industry

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9
Q

The MSrB requires every broker or dealer of municipal secmities to comply with its rules. The MSRB is concerned mainly with the standards of

A

professional practice, including qualifications of brokerdealers, rules of fair practice, and record keeping

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10
Q

MSRB rules do not apply to

A

issuers of municipal securities

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11
Q

Municipal securities are exempt from the registration requirements of

A

the Securities Act of 1933, but issuers remain subject to the antifraud provisions set forth in the federal securities acts

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