Transaction Exemption From The Registration Requirements of The 1933 Act MCQs

Rule _____ of the SEC prohibits insider trading on nonpublic corporate information. Group of answer choices B. 14e–3 C. 14a–8 D. 10c–7 A. 10b-5 Flag question:

Question 2 Question 20.4 pts The U.S. Supreme Court has held that the Howey test does not apply to a fixed rate of return leaseback and management agreement. Group of answer choices True False Flag question:

Question 3 Question 30.4 pts The 6th Circuit found that the issuer of an investment and suitability letter must ensure that investors meet suitability and sophistication requirements as required under Rule 506 of Regulation D. Group of answer choices True False Flag question:

Question 4 Question 40.4 pts Securities Act Rule 506 requires an issuer to sell to no more than 35 accredited investors. Group of answer choices True False Flag question:

Question 5 Question 50.4 pts Which of the following is an example of a transaction exemption from the registration requirements of the 1933 Act? Group of answer choices 1. Securities issued by municipal governments in the United States and offered solely to banks. 2. Securities issued by for-profit corporations and offered solely to intrastate investors. 3. Securities issued by nonprofit charitable organizations and offered solely to institutional investors. 4. Securities issued by banks and offered solely to investors sophisticated in investment matters. Flag question:

Question 6 Question 60.4 pts The following is an example of exempt securities never requiring registration. Group of answer choices Regulation D, Rule 505 Securities issued or guaranteed by any government in the U.S. and its territories Regulation D, Rule 506 Rule 147 Flag question:

Question 7 Question 70.4 pts Which court decided the SEC v. Edwards case? Group of answer choices 9th Circuit 2nd Circuit U.S. Supreme Court 6th Circuit Flag question:

Question 8 Question 80.4 pts A CEO of Go Plant, Inc., a company that created gardens on the roofs of skyscrapers, decided to offer 34 limited partnership interests in a 12 month period 34 shares worth $50,000 per share, in the Go Plant Limited Partnership to Jolene and Gary Smith, as well as other investors. A total of 34 investors were interested in the limited partnership interests in Go Plant Limited. Ten of the investors were either institutional investors or wealthy investors, while the others were people who wanted to invest in something good for the environment. The Go Plant, Inc. CEO told the investors that they could expect an 8% profit on their shares within 2 years, as skyscraper builders and owners were willing to pay a lot of money for the trendy gardens, which could only be seen from an airplane.

The shares were touted by the CEO as an investment for the environment. The CEO asks you to determine if she must register the interests as securities with the SEC, or if the securities are exempt from registration. You advise the CEO that: Group of answer choices 1. Rule 147 will work if the issuer organized and is doing business in the offerees’ and purchasers’ state and that the issuer has 20% of its assets in the state and that 20% of its gross revenues are generated from the state and that 20% of the offering’s proceeds are in the state.

2. Regulation A is the best choice because this exemption permitted unlimited amount of securities to be sold. 3. the securities may meet the registration exemption requirement of Rule 506, in part, if the issuer reasonably believes that there are no more than 35 purchasers of securities in any offering under Rule 506, and if the issuer shall reasonably believe immediately prior to making any sale that each purchaser who is not an accredited investor either alone or with his/her purchaser representative(s) has such knowledge and experience in financial and business matters that each unaccredited investor is capable of evaluating the merits and risks of the prospective investment. 4. the securities may meet the registration exemption requirement of Rule 506, in part, if the issuer reasonably believes that there are no more than 35 purchasers of securities in any offering under Rule 506, and if the issuer shall reasonably believe immediately prior to making any sale that each accredited investor either alone or with his/her purchaser representative(s) have such knowledge and experience in financial and business matters that each accredited purchaser is capable of evaluating the merits and risks of the prospective investment. Flag question:

Question 9 Question 90.4 pts Issuer’s exemptions from the registration requirements of securities under Rule 147 does not have any resale restrictions. Group of answer choices True False Flag question:

Question 10 Question 100.4 pts The court in Mark v. FSC Securities Corp. concluded that the Malaga limited-partnership offering _____ meet the registration exemption requirement of ________________. Group of answer choices did/Rule 147 did not/Rule 506 of Regulation D did not/Regulation A did/Rule 506 of Regulation D Flag question:

Question 11 Question 110.4 pts A Vice-President of a company may be found individually liable under the FTC Act only if she 1) participated directly in the deceptive practices or had authority to control those practices, and, 2) Group of answer choices 1. designed and implemented the deceptive practices. 2. had or should have had knowledge of the deceptive practices. 3. designed the deceptive practices. 4. hired some of the people involved in the deception whether she knew or not what they were doing Flag question:

Question 12 Question 120.4 pts Martha Stewart was found guilty by a jury of of four counts of insider trading because she sold 3,928 (almost 4,000) ImClone shares one day before that firm’s stock price plummeted. Group of answer choices True False Flag question:

Question 13 Question 130.4 pts The 7th Circuit in Kraft, Inc. v. FTC stated that Kraft was not liable for deceptive advertising regarding its individually wrapped Kraft ‘Singles’ because Kraft merely advertised that each slice of cheese contained 5 ounces of milk, and this was literally true and therefore could not have misleading implications. Group of answer choices True False Flag question:

Question 14 Question 140.4 pts The _____ case is an example of litigation initiated by commercial telemarketers questioning the legal validity of the do-not-call registry. Group of answer choices 1. Kraft 2. Mainstream Marketing 3. Central Hudson 4. Ross Flag question:

Question 15 Question 150.4 pts The government has been supported by the federal court to uphold the Do-Not-Call legislation against First Amendment challenges because it has undisputedly shown that _________________ are substantial governmental interests and that the legislation bears a reasonable fit to achieve these objectives. Group of answer choices1. protecting the privacy of charitable and political callers, and helping consumers to become involved in the political process. 2. protecting the privacy of individuals in their homes, and protecting consumers against the risks of fraudulent and abusive solicitation. 3. protecting the privacy of telemarketing corporations, and protecting telemarketers business interests in a highly competitive market. 4. protecting the privacy of telemarketers at work when they make business calls to consumers Flag question:

Question 16 Question 160.4 pts To be considered deceptive under the FTC’s Policy Statement on Deception, an activity must: Group of answer choices 1.involve any misrepresentation, omission or practice; that is likely to mislead a consumer, who acts reasonably under the circumstances. 2. involve a material misrepresentation, omission, or practice; even if unlikely to mislead a consumer because it the misrepresentation is obvious to the reasonable consumer under the circumstances 3. involve a material misrepresentation, omission, or practice; that is likely to mislead a consumer; who acts reasonably under the circumstances. 4. involve any misrepresentation, omission, or practice; that may mislead a consumer even in an unreasonable circumstance. Flag question:

Question 17 Question 170.4 pts The Do-not-call registry was argued by telemarketers (in front of the 10th Circuit) to be unconstitutional because it discriminates under the First Amendment and is underinclusive. Regarding the “underinclusive” argument, what best explains the telemarketers’ position? Group of answer choices 1.The do-not-call rules do not apply to charitable and political callers. 2.The do-not-call law gave priority to privacy over speech. 3.The registry was an opt-in; instead of opt-out. 4.The telemarketers argued that the FTC did not have statutory authority to create the donot-call registry. Flag question:

Question 18 Question 180.4 pts The 4th Circuit in FTC v. Ross held that a Vice-President of a marketing corporation could not be found individually liable for consumer redress if the amount exceeded $25 million dollars. Group of answer choices True False Flag question:

Question 19 Question 190.4 pts The following is an example of exempt securities, as opposed to transaction exemptions, which do not require registration. Group of answer choices 1.Nonpublic issuer, Regulation A 2.Intrastate Offering, Rule 147 3.Private Offering, Rule 506 4.An insurance policy or an annuity contract Flag question:

Question 20 Question 200.4 pts The sale of 1,000 plots in an orange grove along with a “management” contract was offered for sale by Cassie Lange to 10 purchasers. Each purchaser bought 100 plots at 1,000 dollars/plot. The purchasers were enticed by profits that were guaranteed to be at least 5%, but limited to 10%, of Cassie’s overall annual profits on all 1,000 plots each year for 5 years. Thereafter, Cassie would buy back the plots at $1,000/plot.

The investors provided the capital to finance Cassie’s orange grove business. Cassie did all of the work. Cassie’s idea fell apart when a freeze destroyed all of the crops during the first winter, and she was unable to pay the investors anything. One of the investors wanted her money back immediately and notified the SEC about the scheme. If a court were to hear this case, it would find: 1- that Cassie did not have to register her scheme with the SEC because the oranges were not considered financial instruments. 2- That Cassie did have to register her scheme because it was an investment contract per the Howey test. 3- that Cassie did have to register her scheme because even though it was an investment contract, which is generally not a security, it involved accredited purchasers. 4- that Cassie did not have to register her scheme with the SEC because there was no investment of money as defined by the 1933 Act.

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