FEDE

Question 1

Under the Securities Act of 1933, an accountant may be held liable for any materially false or misleading financial statements, including an omission of material fact therefrom, provided the purchaser

Answer 1

Proves false statement or omission existed and the specific securities were the ones offered through the registration statement.

Question 2

Pete Corp. is offering $3 million of its securities solely to accredited investors pursuant to Regulation D of the Securities Act of 1933. Under Regulation D, Pate is

Answer 2

Not required to provide any specified information to the accredited investors.

Question 3

Under Section 12 of the Securities Exchange Act of 1934, in addition to companies whose securities are traded on national exchange, what class of companies is subject to the SEC’s continuous disclosure system?

Answer 3

Companies with assets in excess of $10 million and 500 or more shareholders.

Question 4

A requirement of private action to recover damages for violation of the registration requirements of the Securities Act of 1933 is that

Answer 4

The plaintiff has acquired the securities in question.

Question 5

Under the Securities Act of 1933, the registration of securities which are offered to the public in interstate commerce is

Answer 5

Required unless there is an applicable exemption.

Question 6

Securities available under private placement made pursuant to Regulation D of the Securities Act of 1933

Answer 6

Cannot be the subject of an immediate reoffering to the public.

Question 7

With regard to an offering of common stock requiring registration under the Securities Act of 1933,

Answer 7

The issuer would act unlawfully if it were to sell the common stock without providing the investor with a prospectus.

Question 8

One of the elements necessary to recover damages if there has been material misstatement in registration statement filed pursuant to the Securities Act of 1933 is that the

Answer 8

Plaintiff suffered a loss.

Question 9

Wells Corp., an established manufacturer, has decided to make an offering of $4.5 million of its securities pursuant to Regulation D of the Securities Act of 1933. The sale will be made to accredited and nonaccredited investors. Which of the following is a correct statement with regard to such an offering?

a. The offering limit is $10 million within 2-year period.
b. Since there are nonaccredited investors who are purchasing securities, at least an audited balance sheet must be provided.
c. No more than 35 accredited investors may purchase securities.
d. A general solicitation of potential investors is permitted.

Answer 9

Since there are nonaccredited investors who are purchasing securities, at least an audited balance sheet must be provided.

Question 10

If securities are registered under the Securities Exchange Act of 1934, which of the following disclosure provisions apply?

a. Proxy material for the registered securities must be filed with the SEC.
b. Notice of sales of the registered securities by the corporation’s officers must be filed with the SEC.
c. Both
d. Neither

Answer 10

Both

Question 11

Which of the following are exempt from the registration requirements of the Securities Act of 1933?

a. All industrial development bonds issued by municipalities.
b. Participation interests in money market funds that consist wholly of short-term commercial paper.

c Bankers’ acceptances with maturities at the time of issue ranging from I to 2 years.

d. Corporate stock offered and sold only to residents of the state in which the issuer was incorporated and is doing all of its business.

Answer 11

Corporate stock offered and sold only to residents of the state in which the issuer was incorporated and is doing all of its business.

Question 12

Hamilton Corp. is making securities offering under Rule 505 of Regulation D of the Securities Act of 1933. Under this regulation, Hamilton is

Answer 12

Limited to selling to no more than 35 nonaccredited investors.

Question 13

Under the Securities Act of 1933, which of the following statements is(are) correct regarding the purpose of registration?

I. The purpose of registration is to allow for the detection of management fraud and prevent a public offering of securities when management fraud is suspected.

Il. The purpose of registration is to adequately and accurately disclose financial and other information upon which investors may determine the merits of securities.

Answer 13

II only

Question 14

Which of the following provisions of the Securities Exchange Act of 1934 applies despite the fact that corporation’s securities are exempt from registration?

a. The provisions dealing with the filing of periodic and annual reports.
b. The antifraud provisions.
c. The provisions imposing internal accounting controls.
d. The proxy provisions.

Answer 14

The antifraud provisions.

Question 15

Regulation D of the Securities Act of 1933 is available to issuers without regard to the dollar amount of an offering only when the

Answer 15

Number of purchasers who are nonaccredited is 35 or less.

Question 16

Rey Corp.’s management intends to solicit proxies relating to its annual meeting at which directors will be elected. Rey is subject to the registration and reporting requirements of the Securities Exchange Act of 1934. As a result, Rey must furnish its shareholders with

Answer 16

An annual report containing its audited balance sheets for the 2 most recent years.

Question 17

Which of the following statements is correct with respect to the registration requirements of the Securities Exchange Act of 1934?

a. They require issuers of nonexempt securities traded on a national securities exchange to register with the SEC.
b. They permit issuers Who comply with the Securities Act of 1933 to avoid the registration requirements of the Securities Exchange Act of 1934.
c. They permit issuers Who comply with those requirements to avoid the registration requirements of the Securities Act of 1933.
d. They permit issuers who comply with those requirements to avoid state registration requirements.

Answer 17

They require issuers of nonexempt securities traded on a national securities exchange to register with the SEC

Question 18

The Securities Act of 1933 imposes the requirement that issuers of securities are required to file with the SEC registration statement before securities are offered or sold to the public. Which of the following statements is correct?

a. The issuer would prefer to file Forms S-2 or S-3 over Form S-I.
b. If the issuer files Form S-I with the SEC, it must also file either Form S-2 or Form S-3.
c. If the issuer has a choice to file any one of Forms S-I, S-2, or S-3 with the SEC, it will prefer Form S-I if it is small business.
d. If the issuer files Form S-I with the SEC, it must seek an exemption from registration.

Answer 18

The issuer would prefer to file Forms S-2 or S-3 over Form S-I.

Question 19

Unless an exemption applies to an offering of securities, the Securities Act of 1933 requires preparation and filing of a

a. Registration statement and Prospectus
b. Registration statement
c. Prospectus
d. Neither

Answer 19

Registration statement and Prospectus

Question 20

The Securities Exchange Act of 1934 requires that certain persons register and that the securities of certain issuers be registered. In respect to such registration under the 1934 Act, which of the following statements is incorrect?

a. The equity securities of issuers having in excess of $10 million in assets and 500 or more stockholders which are traded in interstate commerce must be registered.
b. All securities offered under the Securities Act of 1933 also must be registered under the 1934 Act.
c. National securities exchanges must register.
d. The equity securities of issuers, which are traded on national securities exchange, must be registered.

Answer 20

All securities offered under the Securities Act of 1933 also must be registered under the 1934 Act.

Question 21

Harp Corp. is offering to issue $450,000 of its securities pursuant to Regulation D of the Securities Act of 1933. Harp is not required to deliver disclosure document in the states where the offering is being conducted. The exemption for small issues of or less (Rule 504) under Regulation D

Answer 21

Does not require that any specific information be furnished to investors.

Question 22

Under Regulation D of the Securities Act of 1933, what is the maximum time period during which an exempt offering may be made?

Answer 22

Twelve months.

Question 23

Wane Corporation has issued securities that are traded on national securities exchange. Wane just had a significant change in its assets due to large acquisition of real paperty. Which of the following is true?

a. Wane must file Form 8-K with the SEC within 4 days.
b. Wane must file Form 10-K with the SEC within 4 days.
c. Wane need not file any additional reports with the SEC if Wane consistently files with the SEC on timely basis its annual report.
d. Wane need not disclose this material event separately to the SEC if it is covered in sufficient detail in the quarterly financial statements.

Answer 23

Wane must file Form 8-K with the SEC within 4 days.

Question 24

The Securities Act of 1933 specifically exempts from registration, securities offered by any person

Answer 24

Other than an issuer, underwriter, or dealer.

Question 25

Under the Securities Exchange Act of 1934, which of the following penalties could be assessed against CPA who intentionally violated the provisions of Section IO(b), Rule 10b-5 of the Act?

a. Civil liability of monetary damages and Criminal liability of a fine
b. Civil liability of monetary damages
c. Criminal liability of a fine
d. Neither

Answer 25

Civil liability of monetary damages and Criminal liability of a fine

Question 26

Exemption from registration under the Securities Act of 1933 would be available for

Answer 26

Securities of a bank.

Question 27

Under the provisions of the Securities Exchange Act of 1934, corporation whose common stock is listed on national stock exchange

Answer 27

Is subject to having the registration of its securities suspended or revoked.

Question 28

Imperial Corp. is offering $450,000 of its securities under Rule 504 of Regulation D of the Securities Act of 1933. Under Rule 504, Imperial is required to

Answer 28

Notify the SEC within IS days after the first sale of the securities.

Question 29

Bowman Corporation has decided to issue $8,000,000 in securities during the next year. Bowman wishes to be exempt from the registration requirements of the Securities Act of 1933. Which rule applies to this exemption?

a. Rule 504 of Regulation D.
b. Rule 505 of Regulation D.
c. Rule 506 of Regulation D.
d. None of the above.

Answer 29

Rule 506 of Regulation D.

Question 30

The registration requirements of the Securities Act of 1933 are intended to provide information to the SEC to enable it to

Answer 30

Ensure that investors are provided with adequate information on which to base investment decisions.

Question 31

According to the Securities Act of 1933, which of the following statements is correct regarding an issuer of securities?

a. If an issuer sells a security and fails to meet certain disclosure requirements, the purchaser may sell it back to the issuer and recover the price paid.
b. An issuer is permitted to advertise an initial offering of securities only through distribution of the prospectus.
c. All securities issuers must register the securities offering with the Securities and Exchange Commission (SEC).
d. All securities issuers must provide potential investors with a prospectus containing specified information.

Answer 31

If an issuer sells a security and fails to meet certain disclosure requirements, the purchaser may sell it back to the issuer and recover the price paid.

Question 32

Winslow, Inc. intends to make $450,000 common stock offering under Rule 504 of Regulation D of the Securities Act of 1933. Winslow

Answer 32

May sell the stock to an unlimited number of investors.

Question 33

Which of the following transactions is subject to registration requirements of the Securities Act of 1933?

a. The public sale by a charitable organization of 10-year bearer bonds.
b. The sale across state lines of municipal bonds issued by a city.
c. Issuance of stock by a publicly traded corporation to its shareholders because of stock split.
d. The public sale by a corporation of its negotiable 10-year notes.

Answer 33

The public sale by a corporation of its negotiable 10-year notes.

Question 34

Which of the following persons is not an insider of corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements?

a. The president.
b. An owner of 15% of the total face value of the corporation’s outstanding debentures.
c. A member of the board of directors.
d. A shareholder who owns of the outstanding common stock and whose wife owns 4% of the outstanding common stock.

Answer 34

An owner of 15% of the total face value of the corporation’s outstanding debentures.

Question 35

Acme Corp. intends to make public offering in several states of 250,000 shares of its common stock. Under the Securities Act of 1933,

Answer 35

Acme may make an oral offer to sell the common stock to a prospective investor after registration statement has been filed but before it becomes effective.

Question 36

Donn & Co. is considering the sale of $11 million of its common stock to the public in interstate commerce. In this connection, Donn has been correctly advised that registration of the securities with the SEC is

Answer 36

Required and must include audited financial statements as an integral part of its registration.

Question 37

To be successful in civil action under Section 11 of the Securities Act of 1933 concerning liability for misleading registration statement, the plaintiff must prove

a. Defendent’s intent to deceive and Plaintiff’s reliance on the registration statement.
b. Defendent’s intent ot deceive.
c. Plaintiff’s reliance on the registration statement.
d. Neither

Answer 37

Neither

Question 38

Which of the following is least likely to be considered security under the Securities Act of 1933?

a. Limited partnership interests.
b. Warrants.
c. Stock options.
d. General partnership interests.

Answer 38

General partnership interests.

Question 39

Which of the following is security which is exempt from the registration requirements of the Securities Act of 1933?

a. Common stock with a par value of less than $1.00.
b. Convertible, subordinated debentures issued by manufacturing company.
c. Warrants to purchase preferred stock.
d. Bonds issued by charitable foundation.

Answer 39

Bonds issued by charitable foundation.

Question 40

Dice, Inc. is a reporting company under the Securities Exchange Act of 1934. The only security Dice issued is voting common stock. With regard to Dice’s proxy solicitation requirements, which of the following statements is correct?

a. Dice must file its paxy statements with the SEC even though it has only one class of stock outstanding.
b. Dice’s current unaudited financial statements must be sent to each shareholder with every proxy solicitation.
c. Shareholder proposals need not be included in the proxy statements unless consented to by a majority of Dice’s board of directors.
d. Dice need not provide any particular information to its shareholders unless Dice is soliciting proxies from them.

Answer 40

Dice must file its paxy statements with the SEC even though it has only one class of stock outstanding.

Question 41

Which of the following securities is exempt from registration under the Securities Act of 1933?

a. One-year notes issued to raise working capital.
b. Securities sold by a discount broker.
c. Municipal bonds.
d. Preincorporation stock subscriptions.

Answer 41

Municipal bonds.

Question 42

Which of the following statements is(are) correct concerning issuers of securities registered under the Securities Exchange Act of 1934?

I. The issuers must have each Form 10-K audited by an independent public accountant.

II. The issuers must have each Form 10-Q audited by an independent public accountant.

III. The issuers must have each Form 10-Q audited by an independent public accountant except for the fourth fiscal quarter of each of its fiscal years.

Answer 42

I only

Question 43

The registration requirements of the Securities Act of 1933 apply to

Answer 43

The issuance of stock warrants.

Question 44

Which of the following statements is correct with respect to the Securities Exchange Act of 1934?

a. The Act applies only to issuers whose securities are traded on a national securities exchange.
b. Issuers whose securities are registered under the Act are required to comply with its reporting requirements.
c. The antifraud provisions of the Act dc not apply to issuers of securities that are exempt from the Act’s registration requirements.
d. The Act subjects all issuers of securities to its registration requirements if the issuer has more than $2.5 million of assets or more than 250 shareholders.

Answer 44

Issuers whose securities are registered under the Act are required to comply with its reporting requirements.

Question 45

A preliminary prospectus, permitted under SEC Regulations, is known as the

Answer 45

“Red-herring” prospectus.

Question 46

The Securities Act of 1933 provides an exemption from registration for

a. Neither
b. Bonds issued by a municipality for governmental purposes
c. Securities issued by a not-for-profit charitable organization
d. Bonds issued by a municipality for govenmental purposes and Securities issued by a not-for-profit charitable organization.

Answer 46

Bonds issued by a municipality for govenmental purposes and Securities issued by a not-for-profit charitable organization.

Question 47

Tweed Manufacturing, Inc. plans to issue $10 million of common stock to the public in interstate commerce after its registration statement with the SEC becomes effective. What, if anything, must Tweed do in respect to those states in which the securities are to be sold?

Answer 47

Make a filing in those states which have laws governing such offerings and obtain their approval.

Question 48

Which of the following is(are) true of all three Rules 504, 505, and 506 of Regulation D under the Securities Act of 1933?

I. No general offerings or solicitation is permitted within 12-month period.

Il. The issuer must restrict the purchasers’ right to resell the securities.

Ill. The Securities Exchange Commission must be notified within 15 days of the first sale of the securities.

Answer 48

III only

Question 49

Which of the following statements concerning the scope of Section IO(b) of the Securities Exchange Act of 1934 is correct?

a. It applies exclusively to securities of corporations registered under the Securities Exchange Act of 1934.
b. There is an exemption from its application for securities registered under the Securities Act of 1933.
c. It applies to purchases as well as sales of securities in interstate commerce.
d. In order to come within its scope, a transaction must have taken place on national stock exchange.

Answer 49

It applies to purchases as well as sales of securities in interstate commerce.

Question 50

Which of the following is required under the Securities Exchange Act of 1934 or the SEC’s reporting requirements issued pursuant thereto?

a. Annual filing of audited financial reports by all corporations engaged in interstate commerce.
b. Current reporting by issuers of registered securities of certain specified corporate and financial events within 4 days of occurrence.
c. Reporting by issuers of securities which are traded over-the-counter, but only if the securities are actively traded.
d. Quarterly audited financial reports and statements by those corporations listed on national exchange.

Answer 50

Current reporting by issuers of registered securities of certain specified corporate and financial events within 4 days of occurrence.

Question 51

One of the clients of Sherman & Pryor, CPAs, plans to form a limited partnership and offer to the public in interstate commerce 2,000 limited partnership units at $5,000 per unit. Which of the following is correct?

a. The dollar amount in question is sufficiently small so as to provide an absolute exemption from the Securities Act of 1933.
b. Under the Securities Act of 1933, Sherman & Pryor has no responsibility for financial statements since the limited partnership is new entity.
c. Sherman & Pryor may disclaim any liability under the federal securities acts by an unambiguous, bold-faced disclaimer of liability on its audit report.
d. The Securities Act of 1933 requires registration despite the fact that the client is not selling stock and the purchasers have limited liability.

Answer 51

The Securities Act of 1933 requires registration despite the fact that the client is not selling stock and the purchasers have limited liability.

Question 52

A $10,000 offering of corporate stock intended to be made pursuant to the provisions of Rule 506 of Regulation D of the Securities Act of 1933 would not be exempt under Rule 506 if

Answer 52

The offering was made through a general solicitation or advertising.

Question 53

Regulation D of the Securities Act of 1933

Answer 53

Permits an exempt offering to be sold to both accredited and nonaccredited investors.

Question 54

The provisions of the Securities Exchange Act of 1934

Answer 54

Require the distribution of financial statements prior to or concurrent with a proxy solicitation.

Question 55

Under the Securities Act of 1933, subject to some exceptions and limitations, it is unlawful to use the mails or instruments of interstate commerce to sell or offer to sell a security to the public unless

Answer 55

A registration statement has been properly filed with the Securities and Exchange Commission, has been found to be acceptable and is in effect.

Question 56

Tulip Corp. is registered and reporting corporation under the Securities Exchange Act of 1934. As such it

Answer 56

Must file annual reports (Form 10-K) with the SEC.

Question 57

What is the standard that must be established to prove violation of the antifraud provisions of Rule10b-5 of the Securities Exchange Act of 1934?

Answer 57

Intentional misconduct.

Question 58

After the filing of the registration statement with the SEC but prior to the effective date, the underwriter is allowed to do which of the following?

I. Make oral offers to sell the security

Il. Issue a preliminary prospectus (“red herring”)

Answer 58

I and II