REG - R8

Question 1

Surety

Answer 1

A surety is one who is LIABLE for the DEBT or obligation of another.

A suretyship undertaking NOT evidenced by a written memorandum is unenforceable.

A surety is DIRECTLY liable and does NOT have the right to compel the creditor to collect from the debtor; A surety does NOT have the right to compel the creditor to proceed against the principal debtor’s collateral.

Question 2

Surety vs. Guarantor

Answer 2

Surety: DIRECTLY LIABLE

Guarantor: Liable to the CREDITOR ONLY if the debtor does not perform his duty to the creditor; Guaranty must be in WRITING.

Question 3

Gratuitous Surety vs. Compensated Surety

Answer 3

Gratuitous Surety: NOT compensated (e.g. parent signing a loan for their child)

Compensated Surety: PAID Surety (e.g. a bonding company); a compensated surety is bound to perform regardless of the timing of the promise.

Question 4

Co-Sureties

Answer 4

Co-sureties are two or more sureties of the SAME obligation

Co-sureties are jointly severally liable (e.g. any one or more may be liable for the entire obligation)

If the contract does NOT specify the liability of each surety, each surety is liable for a pro rata share determined by the number of SOLVENT sureties.

Question 5

Defenses of Surety

CPRs Mnemonic

Answer 5

C - Creditor acted in bad faith

P - Payment has already been made

R - The creditor RELEASED the debtor

S - Surety’s incapacity, Bankrupt

Question 6

Fair Debt Collection Practices Act (FDCPA)

Answer 6

FDCPA curbs abuses by COLLECTION AGENCIES in collecting consumer debts.

Does not apply to creditor attempting to collect its own debts; just to services that collect consumer debts for others.

Question 7

Official Bond

Answer 7

An official bond is a type of SURETY BOND. Many states require public officials to obtain bonds from a surety for faithful performance of their duties. Such bonds obligate a surety for all losses that the public official causes by negligence or nonperformance of required duties.

Question 8

Agency

Answer 8

Agency is a legal relatioship in which one person or entity (the principal) appoints another person or entity (the agent) to act on his behalf.

Principal MUST HAVE capacity

Agent NEED NOT have capacity (minors can be agents)

Question 9

Agency power can arise through…

Answer 9

1) a grant of ACTUAL authority (power & right)
2) apparent authority or estoppel (power but no right)
3) ratification (power but no right)

Question 10

Ratification

Answer 10

Ratification allows a principal to choose to become bound by a previously unauthorized act of his agent.

Question 11

Constructive Trust

Answer 11

If the agent obtained SECRET PROFIT, the principal can recover the secret profit, usually by imposing a CONSTRUCTIVE TRUST on the profit.

Question 12

Respondeat Superior

Answer 12

Under the doctrine of respondeat superior, a principal, including a corporation, can be held liable for an employee’s tort committed within the scope of employment.

Question 13

The Bank Secrecy Act (BSA)

Answer 13

The Bank Secrecy Act was enacted in 1970 and is one of the primary tools used to fight money laundering.

Sometimes called an anti-money-laundering law (AML)

Question 14

Money Laundering - BSA Regulations Required REPORTING

Answer 14

Currency Transaction Report (CTR) - Transactions of more than $10,000, file within 15 DAYS after transaction

Suspicious Activity Report (SAR) - Transactions of more than $10,000, file within 30 DAYS after transaction

Question 15

Money Laundering - BSA Regulations Required RECORDS

Answer 15

5 Years - maintain records

$3,000 - monetary records

Question 16

Money Laundering Penalties

Answer 16

Criminal - 20 years’ imprisonment or a fine up to $500,000 or 2x the value of the money laundered, whichever is greater (Department of JUSTICE)

Civil - forfeiture of any property involved in money laundering transaction (FinCEN pursues civil sanctions)

Other - Banks risk losing charter, and bank employees risk being removed/barred from banking (FinCEN pursues civil sanctions)

Question 17

Antitrust Laws

Answer 17

Antitrust Laws prohibit businesses from engaging in conduct that could stifle free competition

Question 18

Sherman Act

Answer 18

Sherman Act (federal law applies)

1) Prohibits Restraints of Trade
- Balance anti competitive and competitive effects
- “Per Se” violations - inherently illegal and without legal justification

2) Monopolies

Question 19

Restraints of Trade under Sherman Act (Section 1)

Answer 19

Most horizontal restraints are illegal per se (e.g., price fixing, market allocation and boycotts designed to eliminate a competitor or coerce compliance)

Most vertical restraints are judged by the rule of reason (vertical price fixing in all likelihood, vertical market allocation and vertical boycotts)

**To see if an activity is illegal per se, it is beneficial to first check to see if it is a horizontal or vertical restraint.

Question 20

Clayton Act

Answer 20

The Clayton Act was aimed at anticompetitive behavior NOT covered by the Sherman Act.

It was intended to stop such activities in their incipiency (e.g., stop them before they become violations of the Sherman Act)

Question 21

Robinson-Patman Act

Answer 21

The Robinson-Patman Act of 1936 amended and strengthened “Section 2” of the Clayton act that prohibited price discrimination.

Applies only to price discrimination of commodities of like grade and quality.

**Civil ONLY (no criminal penalties)

Question 22

Federal Trade Commission Act

Answer 22

FTC Act

Prohibits misleading ads

Prohibits ads without a reasonable basis for their claims

**NO Private-Party Suits Permitted

Question 23

Dodd-Frank Act of 2010

Answer 23

Dodd-Frank act is a conglomeration of a number of acts adopted to promote the financial stability of the United States by improving accountability and transparency in the financial system, ending the idea of “too big to fail,” protecting the American taxpayer by ending bailouts, and protecting consumers from abusive financial services practices.