Securities Fraud Flashcards
In some jurisdictions, self-regulatory organizations (SROs) play an important role in the resolution of disputes arising from securities transactions.
A. True
B. False
True
To be effective, securities regulation must balance the legitimate needs of businesses to raise capital against the need to reduce market risk.
A. True
B. False
False
In general, for a contract, transaction, or scheme to be classified as an investment contract, the instrument must be purchased by investors who display management activity in the instrument’s enterprise and have expectations of making profits that are to be generated from their own efforts.
A. True
B. False
False
To determine if a misrepresentation in the offer or sale of any securities is ________, the fraud examiner should answer the following question: “Would a reasonable investor want to know this information to make an informed decision?”
A. Material
B. Promotional
C. Privileged
D. Relevant
A. Material
One of the main objectives of the International Organization of Securities Commissions (IOSCO) is to assist its members in promoting high standards of regulation in order to maintain just, efficient, and sound markets.
A. True
B. False
True
All the following are red flags that might indicate that an entity is operating a security business without the proper license or registration EXCEPT:
A. Justified gaps in a promoter’s work history
B. Prior customer complaints
C. Agents with criminal records
D. A history of regulatory problems
A. Justified gaps in a promoter’s work history
The reduction of systemic risk is one of the objectives on which the International Organization of Securities Commissions Objectives and Principles of Securities Regulation (IOSCO Principles) is based.
A. True
B. False
True
Which of the following is NOT a purpose of securities regulation?
A. To provide protections for investors
B. To restrict market competition
C. To reduce the prevalence of financial crime
D. To discourage behavior that might harm the market
B. To restrict market competition
Which of the following is one of the objectives on which the International Organization of Securities Commissions Objectives and Principles of Securities Regulation (IOSCO Principles) is based?
A. Harmonizing securities laws and standards across the globe
B. Enhancing the financial system’s growth
C. Ensuring that markets are fair, efficient, and transparent
D. Eliminating market risk
C. Ensuring that markets are fair, efficient, and transparent
Which of the following statements about the International Organization of Securities Commissions (IOSCO) is TRUE?
A. One of IOSCO’s main objectives is to assist its members in promoting high standards of regulation in order to maintain just, efficient, and sound markets
B. IOSCO is comprised of securities commissioners and administrators responsible for securities regulation and the administration of securities laws in their respective countries
C. IOSCO is recognized as the international standard-setter for securities markets
D. All of the above
D. All of the above
All the following would violate rules that prohibit securities broker-dealers from making unsuitable recommendations on investments or investment strategies EXCEPT:
A. A broker-dealer makes an investment without obtaining approval to make the transaction.
B. A broker-dealer makes an investment that is inconsistent with the client’s objectives.
C. A broker-dealer recommends an investment without ascertaining relevant financial information about the client.
D. A broker-dealer recommends an investment strategy that is unsuitable for the client.
A. A broker-dealer makes an investment without obtaining approval to make the transaction.
To determine if a misrepresentation in the offer or sale of any securities is material, a fraud examiner should consider which of the following?
A. Whether a reasonable investor would want to know the information to make an informed decision
B. Whether the person who made the representation believed that it was suitable for potential investors
C. Whether the person who made the representation intended to mislead potential investors
D. Whether the person who made the representation had authorization to make the statements
A. Whether a reasonable investor would want to know the information to make an informed decision
Self-regulatory organizations (SROs) are nongovernmental entities that exercise some level of regulatory authority over the operations, standards of practice, and business conduct of an industry or profession.
A. True
B. False
True
If a broker who is subject to rules that prohibit securities broker-dealers from making unsuitable recommendations on investments or investment strategies recommends that their client make an investment that is inconsistent with their client’s objectives, then this recommendation would be considered a violation of the rules prohibiting unsuitable recommendations.
A. True
B. False
False
If a broker who is subject to rules that prohibit securities broker-dealers from making unsuitable recommendations on investments or investment strategies recommends that their client make an investment that is inconsistent with their client’s objectives, then this recommendation would be considered a violation of the rules prohibiting unsuitable recommendations.
A. True
B. False
True
