Regulation Contracts UCC

Question 1

Private Securities Litigation Reform Act:

Answer 1

Audit must detect material illegal acts, identify related party transactions, and going concern opinion

Question 2

Estimated Tax Payments

Answer 2

Each installment must be 25% of least of 
	
-100% PY tax return 
-90% current years tax
-90% annualized current years’ tax

Penalty imposed if, by quarterly payment date, total amount of estimated payments income tax withheld

Question 3

Tips

Answer 3

Tips: An employee who receives $20 or more in tips in a month (as a result of working for one employer, and not combined from several jobs) must report the total tips to the employer by the 10th day of the next month. These tips are treated as paid when the report is made to the employer

Question 4

Sherman Act of 1890

Answer 4

Part I: Illegal to restraint trade Per se violations (price-fixing , division of markets, group boycotts, tying arrangements)

Part 2: Prohibits monopolies

Question 5

Clayton Act of 1914

Answer 5

Prohibits mergers/stock acquisition to lessen competition/monopolize, Justice dept can prevent mergers before they occur

Mergers:

Horizontal: merger between competitors, closely scrutinized, greatest tendency to lessen competition.

Vertical: Merger between supplier and purchaser

Conglomerate: Companies in different industries or areas of business.

Question 6

Robinson Patman Act

Answer 6

Amended Clayton Act prohibits price discrimination for both buyers and sellers.

Question 7

Federal Trade Commission Act of 1914

Answer 7

• Prohibits unfair competition, unfair/deceptive acts in/affecting interstate commerce
• Created the FTC

Exempt Industries

Intrastate commerce, most labor unions. Utility companies, reasonable non-competition clauses, patents, copyrights, financial institutions, transport inductries, MLB, failing companies;.

Question 8

Assignment

Answer 8

Most contracts can be assigned but CANNOT materially increase the risk or duty of the other party

Question 9

Revocation

Answer 9

An offeror has the power to revoke (cancel) an offer at any time prior to acceptance.

Exception to this is option contracts

Question 10

Orders to Pay

Answer 10

These are checks or drafts. They are 3 party instruments that have a drawer who orders a drawee to pay a payee. When you write a check to someone, you are the drawer, and you are ordering the bank (the drawee) to pay the person you wrote the check to (the payee)

A draft is basically a type of check for merchants in a sale of goods agreement

Question 11

Promises to Pay

Answer 11

1. ) These are notes or certificates of deposit These can be installment notes as well.
2. These are two party instruments. There is a maker, who promises to pay a payee

Question 12

Negotiable Instrument Requirements

Answer 12

The instrument must be in writing

The instrument must be signed by the maker or drawer

Must contain an unconditional promise or order to pay

The amount payable must be a certain and definite amount

Payable on demand or at a definite time

Question 13

Order vs. Bearer

Answer 13

Must contain words of negotiability

1. This means it needs to be either payable to order or payable to the bearer
2. “order” means it’s specific such as “pay to the order of John Smith”
3. “bearer” means the person who has the instrument. Bearer can be a specified person or the bearer, such as “Pay to John Smith or bearer”. Sometimes it will say “pay to cash” which just means pay to the bearer of the instrument

Question 14

Blank Endorsement

Answer 14

Blank: If you simply signed your name with no other words, that is a blank, nonrestrictive, and unqualified indorsement, and turns the order paper into bearer paper and can be transferred by anyone at anytime simply by having possession of the instrument

Question 15

Special Endorsement

Answer 15

these specify a person to whom payment is to be made. Example is when a check is written to you, and you add “pay to John Smith” to assign the check to your friend John Smith

Question 16

Qualified Endorsement

Answer 16

Qualified endprsements: usually includes the words “without recourse” which means the endorser disclaims any liability

Question 17

Restrictive Endorsement

Answer 17

Conditional: Payment is conditional upon an event
.
Prohibitive: to prohibit the further transfer of the instrument

For deposit or collection: this makes the indorsee bank a collection agent of the indorser

These restrictive indorsements do NOT prevent further negotiation of the instrument

Question 18

Creating a Security Interest vs Perfecting a Security Interest

Answer 18

The creditor must give value, the debtor must have rights in the collateral (you can’t offer your friend’s car as collateral), and the creditor must take possession of the collateral or obtain an agreement with the debtor

These 3 things CREATE a security interest, and to PERFECT a security interest, a financing statement must be filed

Question 19

Surety Rules

Answer 19

When two people act as a cosurety, neither can be held liable for an entire debt. Once the debtor defaults, if one cosurety pays more than their share of the debt, they can recover the amount paid in excess of their share from the other cosurety.

If the creditor releases one cosurety without the consent of the debtor or the other cosurety, then the remaining cosurety is only liable for half of the debt

On a “guaranty of collection”, the surety is only liable if collection against the primary debtor fails first

Question 20

Chapter 7 bankruptcy

Answer 20

-this is a liquidation bankruptcy. It allows voluntary or involuntary petitions. Normally a trustee.

A debtor does NOT need to be insolvent or have a certain number of creditors to file chapter 7. Almost
anyone can file a petition for chapter 7 relief, BUT, there will be the test for “bankruptcy abuse”

If a business is being petitioned into bankruptcy by a creditor, and the business challenges the petition, the challenge will fail if the business has not been paying their bills as they become due

If the debtor fails to attend (unless excused) the creditor’s meeting, it’s considered a failure to co-operate and grounds for denial of the debtor’s discharge

Question 21

Chapter 11 Bankruptcy

Answer 21

This allows for a reorganization of a debtor to pay their debts. Chapter 11 also allows voluntary and involuntary petitions. There is generally no trustee

Question 22

Chapter 13

Answer 22

Chapter 13: This type allows for the adjustment of debts of an individual with regular income. Chapter 13 allows only voluntary petitions. There is always a trustee with Chapter 13. A 3-5 year plan is made as a result of the bankruptcy

Question 23

Order of priority in Bankrupcty liquidation

Answer 23

1. Perfected secured parties
2. Claims for domestic support: this includes child support AND alimony
3. Administration costs: includes costs and expenses related to the bankruptcy proceedings. Includes attorney fees, accounting fees, appraisals, and trustee fees
4. Employee wages: employee wages are limited to those earned in within 90 days of the filing up to a maximum of $12,475. Anything above the $12,475 is put in the same category as “general creditors”
5. Contributions to employee benefit plans: any claims for contributions to an employee benefit plan from services performed within 180 days before the filing up to $12,475 per employee
6. Claims of farm producers and fisherman: up to $6,150 per creditor
7. Consumer creditors: up to $2,775 per creditor. Any amount above that is treated as a general creditor claim
8. Claims of governmental units for taxes
9. Claims for death or personal injury
10. All general unsecured creditors
11. If anything is left, this goes back to the debtor

Question 24

Dodd Frank Act

Answer 24

After 2008 crisis

Created FSOC and CFFB

It authorized the PCAOB to regulate accountants who audit non-public broker-dealers

It implemented a major reward system for whistleblowing on financial fraud, and also protection laws for whistleblowers

Question 25

Rule 506 under Regulation D of the Securities Act of 1933.

Answer 25

The offering may be purchased by an unlimited number of accredited investors. If no general solicitation or advertising is made, up to 35 purchasers who are not accredited investors also may purchase.

Question 26

Federal Insurance Contributions Act (FICA)

Answer 26

Imposes social security tax on employers, employees, and the self-employed

Under FICA, contingent fees, bonuses, and commissions are all considered wages. Reimbursed travel expenses are NOT considered wages for FICA

If an employer pays both the employer and employee portions of FICA, but fails to collect the employee portion from the employee, the employer has the right to be reimbursed by the employees for the employees’ share

Question 27

FUTA

Answer 27

These are taxes paid by employers which go into federal and state pools to compensate workers who have lost their jobs and can’t find new ones

Unemployment benefits are given to people who lose their jobs and are not fired for a reason. When a business “down sizes”, the laid off workers will receive unemployment benefits

An employer can take credits against Federal unemployment taxes if they have paid into a state unemployment fund first

Taxes paid to the Federal Unemployment Tax are deductible by the employer as a business expense for federal income taxes