Securities Acts

Question 1

List the 9 types of securities exempt from the registration requirements of the Securities Act of 1933.

Answer 1

1. commercial paper
2. securities of the government ex: bonds
3. securities of banks
4. securities of non-profit organizations
5. securities of savings and loans associations
6. securities of common carriers or contract carriers
7. insurance, annuity and endowment policies
8. exchange securities issued in bankruptcy reorganizations
9. securities exchange with existing security holders

Question 2

What defense must an accountant establish to be absolved from civil liability under section 18 of the Securities Act of 1934 for false or misleading statements made in reports or documents filed under the act?

Answer 2

good faith and lack of knowledge of the statement’s falsity

Question 3

Under the liability provisions of Section 18 of the Securities Act of 1934, what action would the accountant generally be liable?

Answer 3

Intentionally preparing and filing with the SEC a reporting corporation’s incorrectly quarterly reports

Question 4

The Securities Act of 1933 imposes liability on a cpa who prepares materially misleading financial statements issued in conjunction with the initial offering of securities. This liability can be avoided if the CPA can demonstrate what?

Answer 4

due diligence

Question 5

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

1. Civil liability of money damages
2. Criminal liability of a fine

Answer 5

Both are correct

Question 6

Which of the following statement(s) is/are correct regarding the common law elements that must be proven to support a finding of constructive fraud against a CPA?

1. Plaintiff has justifiably relied on the CPA’s misrepresentation
2. CPA has acted in a grossly negligent manner

Answer 6

Both are correct

Question 7

A CPA who fraudulently performs an audit of a corporation’s financial statements will probably be liable to who?

Answer 7

any person who suffered a loss as a result of the fraud

Question 8

Under which act does a plaintiff need only show that misstated material information was contained in the prospectus to succeed in a lawsuit?

Answer 8

Securities Act of 1933, Section 11

Question 9

Under which act does a plaintiff need to show reliance and knowledge of the falsity (scienter) of the CPA to succeed in a lawsuit?

Answer 9

Securities Act of 1933, Section 10(b)/Rule 10b-5