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  1. The Securities Exchange Act of 1934 holds certain insiders liable under Section 16(b) of the Act. Which of the following classes of people would not be insiders in relation to the corporation in which they own securities?

    a major debenture holder.

    an executive vice president.

    an 11% shareholder.

    a director who owns less than 10% of the shares of the corp.

  2. Under the Securities Act of 1933, subject to some exemptions and limitations, it is unlawful to use the mails or instruments of interstate commerce to sell or offer to sell a security to the public unless

    the SEC approves of the financial merit of the offering.

    the offer is made through underwriters qualified to offer the securities on a nationwide basis.

    a surety bond sufficient to cover potential liability to investors is obtained and filed with the SEC.

    a registration statement has been properly filed with the SEC, and has been found to be acceptable and is in effect.

  3. The 1934 Securities Exchange Act requires certain disclosure during a “tender offer.” Which of the following best describes this requirement?

    whenever 10 percent of a target corporation’s stock is acquired.

    whenever stock is acquired with intent to effect a takeover.

    whenever the acquiring company acquires a “controlling interest” in the target.

    whenever an offer for more than 5 percent of a class of registered equity securities is made.

  4. Young owns 200 shares of stock of Victory Manufacturing Company. Victory is listed on a national stock exchange and has in excess of one million shares outstanding. Young claims that Truegood, a Victory director, has purchased and sold shares in violation of Section 16 of the Securities Exchange Act of 1934. Young has threatened legal action. Which of the following statements is correct?

    Truegood will have a valid defense if he can show he did not have any insider information which influenced his purchase or sales.

    Young can sue Truegood personally, but his recovery will be limited to his proportionate share of Truegood’s profits plus legal expenses.

    Since Young’s stock ownership is less than 1%, his only recourse is to file a complaint with the SEC or obtain a sufficient number of other shareholders to join him so that the 1% requirement is met.

    In order to prevail, Young must sue for and on behalf of the corporation and establish that the transactions in question occurred within less than six months of each other and at a profit to Truegood.

  5. Marge wishes to raise some money to begin mass producing her prize-winning jellies and jams. She offers her neighbors a piece of her profits if they will each invest $2,000. Is the investment a “security?”

    Yes, since Marge will do all the work.

    No, since the neighbors are putting no effort into it.

    No, because Marge is not issuing stock certificates.

    Yes, because her neighbors will have a security interest in the jelly.
 
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