Question: Blair & Chanel own common stock, a residual position, meaning…
Answer Choices:
a. last to receive returns
b. guaranteed more than their investment
c. must reside in the state
d. have priority if insolvent
Answer: a. last to receive returns
Question: Eve is a director at Fab Style Corp. Without telling Fab, she competes via Gro Trend. Liability for breach of…
Answer Choices:
a. the duty of care
b. the business judgment rule
c. none of the choices
d. the duty of loyalty
Answer: d. the duty of loyalty
Question: Elise is a director for Fro-Yo and Gelato Ice. When Fro-Yo’s board considers a contract with Gelato, Elise must…
Answer Choices:
a. use business judgment on the deal
b. resign from Fro-Yo or Gelato
c. resign from both
d. fully disclose any conflict of interest
Answer: d. make a full disclosure of any conflict of interest
Question: Ron is both a director of Start-Up Inc. and a chief officer, getting compensation. He is…
Answer Choices:
a. an outside director
b. a well-rounded participant
c. in violation of the law
d. an inside director
Answer: d. an inside director
Question: Home Mortgage Corp’s shares are publicly traded. It is…
Answer Choices:
a. a publicly held corporation
b. a close corporation
c. a privately held corporation
d. a public corporation
Answer: a. a publicly held corporation
Question: Paper Products Co. can pay dividends if…
Answer Choices:
a. paying causes insolvency
b. paid from unauthorized account
c. paid while insolvent
d. payment allows firm to remain solvent
Answer: d. payment allows the firm to remain solvent
Question: Pat owns one share of Quik-Stop stock. Stock is intangible property, so ownership…
Answer Choices:
a. cannot exist without the original certificate
b. cannot transfer without the certificate
c. exists independently of the certificate
d. cannot exist without a tangible certificate
Answer: c. exists independently of the stock certificate
Question: Flo buys stock before a public dividend announcement, then sells after price rises. She is not liable if info was…
Answer Choices:
a. available to the public before she bought the stock
b. forward-looking when she bought the stock
c. available to the public after purchase
d. material when she sold
Answer: a. available to the public before she bought the stock
Question: Karin, an officer, buys stock and sells at a profit 1 month later— under Section 16(b) she would not be liable if she waited…
Answer Choices:
a. less than fourteen days
b. two months
c. more than six months
d. ninety days
Answer: c. more than six months
Question: If College Bound is exempt from federal registration under Regulation A, then it is…
Answer Choices:
a. automatically exempt from state registration
b. automatically subject to all state registration
c. not subject to any state securities laws
d. not necessarily exempt under a state requirement
Answer: d. not necessarily exempt under a state registration requirement
Question: Orbital Flights must register under Section 12 of the 1934 Act. Section 16(b) covers…
Answer Choices:
a. proxy solicitations
b. the board’s declaration of dividends
c. re-registration of securities
d. short-swing activities of insiders
Answer: d. the short-swing activities of Orbital’s insiders
Question: Rico, a non-employee, misappropriates inside info to trade for personal gain. SEC’s argument is…
Answer Choices:
a. free-writing prospectus theory
b. blue-sky theory
c. the misappropriation theory
d. the tipper/tippee theory
Answer: c. the misappropriation theory
Question: Accountant Eve intentionally misrepresents material facts in the prospectus; Fred buys and suffers loss. Eve may be subject to…
Answer Choices:
a. none of the choices
b. only job termination
c. professional censure but no civil liability
d. fine, imprisonment, and damages
Answer: d. a fine, imprisonment, and damages
Question: Brad is a shareholder with sufficient shares to exercise de facto control. He then…
Answer Choices:
a. can participate in cumulative voting
b. owes a fiduciary duty to the minority shareholders
c. can bring a derivative suit
d. can assert the business judgment rule
Answer: b. owes a fiduciary duty to minority shareholders
Question: Hawaiian Shirts Inc. wants a $4 million offering under Rule 505— must provide disclosure to…
Answer Choices:
a. all investors and the SEC
b. the Securities and Exchange Commission
c. any unaccredited investors
d. any accredited investors
Answer: c. any unaccredited investors
Question: Carlo is a director. He opposes a tender offer that benefits the company, fearing personal loss. This is a breach of…
Answer Choices:
a. none of the choices
b. the duty of care
c. the duty of loyalty
d. the business judgment rule
Answer: c. the duty of loyalty
Question: Sheila is a shareholder of Travels & Trips Inc. She may inspect corporate books…
Answer Choices:
a. only if she is also a director
b. under no circumstances
c. for a proper purpose
d. without restrictions
Answer: c. for a proper purpose