Misc

Question 1

What is considered the biggest change to financial regulation since the Great Depression of the 1930s?

Answer 1

The Dodd-Frank Wall Street Reform Act of 2010

Question 2

What is the goal of the Volcker Rule?

Answer 2

Banking Institutions maintain healthy capitalization ratios

Question 3

How does the Volcker Rule limit banking institutions?

Answer 3

Limits banking institutions from owning more than 3% of a hedge fund’s total ownership interest

Limits banking institutions from owning interests in hedge funds that exceed 3% of their Tier 1 Capital (Common Stock + Retained Earnings + non-redeemable; non-cumulative Preferred Stock)

Question 4

What does the Volcker Rule require banking institutions to disclose?

Answer 4

Relationships with hedge funds must be fully disclosed to regulators

Question 5

Describe the Federal Unemployment Tax Act

Answer 5

An employer-paid tax. Must file return and pay even if only one employee works there. Deductible to company - Not deductible by the employee. Allows employers to credit the FUTA liability by the amount of State Unemployment Tax (SUTA) they pay.

Question 6

What are the major aspects of FICA and Social Security taxes?

Answer 6

Paid by Employer AND Employee - Employer withholds from employee’s paycheck and must pay tax matching employee’s withholding

If employer under-withholds; they are required to make up the difference

Self-employed individuals must pay both the employer and the employee share; which is Self Employment Tax

People drawing Social Security may have their benefits reduced if they go back to work and earn an income

Question 7

When is an employee covered by Workman’s Compensation?

Answer 7

Employees injured on the job get protection; even if they messed up and caused the injury themselves

Exception: If the employee intentionally harmed themselves; there is no Workman’s Compensation

Question 8

What age group is protected under Age Discrimination Laws?

Answer 8

They protect people ages 40 and above at companies where at least 20 people are employed

Question 9

What are the tenets of the Occupational Safety and Health Act (OSHA)?

Answer 9

Employers should promote a safe workplace and environment for their employees to work in

Injury records must be kept
Penalties can be both
o Civil - $1;000 fine per day
o Criminal - Could include imprisonment

Employer can require a search warrant for OSHA to investigate their facilities

Question 10

What types of discrimination are prohibited for employers based on civil rights laws?

Answer 10

Sex

Race

Religion

National Origin

Question 11

What are the powers granted under the Environmental Protection Act?

Answer 11

EPA has the power to assess civil penalties for violating environmental laws like the Clean Air Act
The EPA can sue violators
Citizens can sue violators
States can sue violators
Citizens can even sue the EPA to force enforcement
For hazardous waste sites: owners; operators; transporters; and lenders associated with the site can
be held liable

Question 12

What are the key points of the 1933 Securities Act?

Answer 12

Governs Initial Public Offerings (not subsequent sales). Covers registration statements and accompanying information filed with SEC. Information must include audited financial statements & a prospectus. Note: Even if a company is exempt from registering under the 1934 Act; they still must adhere to the anti-fraud provisions of the Act

Question 13

What entities are exempt from filing registration statements under the 1933 Securities Act?

Answer 13

Banks; Commercial Paper; Farmers; Co-ops; Charities; Governments

Also exempt: Securities sold in ONE state; where investors are residents; 80% of business done in one state; and resales can’t occur within 9 months to interstate parties.

Question 14

What are the key points of the 1933 Securities Act; Regulation A?

Answer 14

Issuer can issue $50M of securities per year and be exempt if they file a notice with the SEC

Non-issuers (AKA a private individual) can sell $1.5M per year and be exempt

Question 15

Under the 1933 Securities Act; Regulation D; what are Rules 504; 505 and 506?

Answer 15

Rule 504- Max Amount per year: $1M; Max Investors: Unlimited

Rule 505 - Max Amount per year: $5M; Max Investors: 35 Unaccredited or Unlimited Accredited

Rule 506 - Max Amount per year: Unlimited; Same as 505; but Unaccredited investors must be sophisticated

Question 16

What are the registration form options under the 1933 Securities Act?

Answer 16

S-1 - Long Form or

S-2 and S-3 - Less Detailed and preferred by issuers

Question 17

Name the securities registered under the Securities Act of 1933.

Answer 17

Stocks
Stock Options
Stock Warrants
Limited Partnership Interests - General Partnerships not allowed
Bonds

Question 18

Who can sue under the Securities Act of 1933?

Answer 18

Purchasers of securities only

Question 19

Name the Requirements for Accountant to be liable under the Securities Act of 1933.

Answer 19

Damages & Material Misstatements Only

o Reliance on financial statements are not a requirement unless purchased more than a year after the security is registered

Proving negligence is not a requirement

Question 20

Name the Defenses of an Accountant under the Securities Act of 1933.

Answer 20

Accountant used Due Diligence

Accountant followed GAAP

Damages weren’t caused by accountant’s work

Plaintiff knew of the material misstatements

Question 21

What does the Securities Act of 1934 govern?

Answer 21

The trading/selling of securities after the IPO

Question 22

What reports must be filed under the Securities Act of 1934?

Answer 22

Form 10-K Annual Report - Must be audited

Form 10-Q Quarterly Report - Must be reviewed; but not audited

Form 8-K - A notice of a material event; Must be filed within 4 days of event

Question 23

Who can sue under the Securities Act of 1934?

Answer 23

Purchases and Sellers of Securities

Question 24

Name the Requirements for an Accountant to be liable for fraud under the Securities Act of 1934.

Answer 24

Damages

Material Misstatements

Reliance on financial statements

Scienter or reckless disregard for the truth

Question 25

What procedures must an Accountant have in place under the Securities Act of 1934?

Answer 25

Accountant must have procedures in place to:
Determine if Going Concern is an issue
Determine if any material related party transactions occurred

Determine if material illegal acts occurred

Question 26

Insider trading rules under the Securities Act of 1934 apply to which individuals?

Answer 26

Officers; Directors and 10% Owners

Question 27

What are the Proxy Solicitation Requirements under the Securities Act of 1934?

Answer 27

Proxy must give shareholders audited balance sheets from 2 most recent years

o Requirement holds true even if one class of stock

Question 28

What is the revenue limit for an Emerging Growth Company IPO?

Answer 28

$1 Billion

Question 29

For an Emerging Growth Company IPO, how many years of audited financial statements are required?

Answer 29

2 years

Question 30

How did Reg D, Rule 506 change under the JOBS Act?

Answer 30

General Solicitation and Advertising now allowed

Question 31

Under the JOBS Act, what is the capital ceiling under Regulation A?

Answer 31

Reg. A Capital ceiling raised from $5M to $50M

Question 32

Under the JOBS Act Title V - Private Company Flexibility and Growth, what is the shareholder limit if there are less than 500 non-accredited shareholders?

Answer 32

2,000