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Q:
Which of the following best defines short-swing profits?
A) profits made by an insider by selling shares of the corporation before the public disclosure of unfavorable information
B) profits made by an insider by personally purchasing shares of the corporation before the public release of favorable information
C) profits made by a statutory insider on trades involving equity securities of his or her corporation that occur within six months of each other
D) profits made by a tippee by personally purchasing shares of the corporation either before or after the public release of favorable information
Q:
The duty owed under the mitigation of damages doctrine depends on the situation.
Q:
Nominal damages normally establish that the defendant acted wrongly.
Q:
Of the following, who is considered a Section 16 statutory insider?
A) Sharon Muller, an editor who was tipped by her friend to buy shares of KYU Corp.
B) Robert Morgan, an employee who owns ten percent of all equity security of KYU Corp.
C) Jim Downey, a graphics engineer who quit KYU Corp. after five years of service.
D) Kate Harris, a legal consultant to KYU Corp.
Q:
Punitive damages are never awarded in breach of contract actions.
Q:
The ________ imposes liability under Section 10(b) and Rule 10b-5 on an outsider who misappropriates information about a company, in violation of his or her fiduciary duty, and then trades in the securities of that company.
A) Insider Trading Sanctions Act
B) Sarbanes-Oxley Act
C) tort of appropriation
D) misappropriation theory
Q:
A(n) ________ is a person who discloses material nonpublic information to another person.
A) issuer
B) tippee
C) grantor
D) tipper
Q:
Which of the following is an example of insider trading?
A) An employee uses material nonpublic information to make a profit by trading in the securities of the company.
B) A manager purchases all the shares of a corporation available to the public.
C) A director purchases enough shares of a public company to gain a majority stake in its management.
D) An employee sells his shares to another employee without notifying the company.
Q:
Punitive damages are almost never available in contract disputes.
Q:
Damages are awarded for whatever injury a nonbreaching party suffers, whether or not the breaching party could have foreseen the injury.
Q:
________ is a federal statute that permits the Securities and Exchange Commission (SEC) to obtain a civil penalty of up to three times the illegal benefits received from insider trading.
A) The Securities Act of 1933
B) The Securities Exchange Act of 1934
C) The Insider Trading Sanctions Act
D) SEC Rule 506
Q:
Consequential damages are foreseeable damages that arise from a party's breach of a contract.
Q:
Which of the following violates Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5?
A) nonexemption status
B) scienter
C) a lack of due care
D) negligence
Q:
Consequential damages are awarded to cover all of the remote conseÂquences of whatever injury a nonbreaching party suffers.
Q:
Distinguish between the nonissuer exemption, the intrastate offering exemption, and the private placement exemption.
Q:
On the breach of a contract involving the sale of land, money damages is alÂways the most approÂpriate remedy.
Q:
List the securities exempt from registration with the Securities and Exchange Commission (SEC).
Q:
The measure of damages for breach of a construction contract depends on which party breaches and when.
Q:
SEC Rule 506—known as the private placement exemption—allows issuers to raise capital from an unlimited number of ________ without having to register the offering with the SEC.
Q:
The measure of damages for the breach of a contract for a sale of land deÂpends on which party breaches and when.
Q:
The Securities Act of 1933 provides a(n) ________ exemption that permits local businesses to obtain from local investors capital to be used in the local economy without the need to register with the Securities and Exchange Commission (SEC).
Q:
In a contract for a sale of goods, the usual measure of compensatory damÂages is the difference between the contract price and the market price.
Q:
An exemption from registration which states that securities transactions not made by an issuer, an underwriter, or a dealer do not have to be registered with the Securities and Exchange Commission (SEC) is known as a(n) ________ exemption.
Q:
The injury suffered by a nonbreaching party due to the breach of a conÂtract may be remedied by payment of compensatory damages.
Q:
In order to be found guilty for violation of Rule 10b-5, intentional conduct (scienter) must be proven.
Q:
The measure of damages on a breach of contract is the amount that will imÂpress on the breaching party the harm that has been done.
Q:
Section 10(b) of the Securities Exchange Act prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC.
Q:
An accredited investor is defined as a person who does not understand the risks involved in securities investment and will suffer considerable financial damage if the investment fails.
Q:
Compensatory damages compensate the nonbreaching party for injuries or damages sustained by that party.
Q:
The nonissuer exemption permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.
Q:
Expenses that are caused directly by a breach of contractsuch as those inÂcurred to obtain performance from another sourceare inciÂdental damÂages.
Q:
Damages are designed to punish a breaching party and deter others from similar conduct.
Q:
Drafts that have a maturity date of six months are exempt from registration with the SEC.
Q:
Which of the following is true of the small offering exemption?
A) Securities coming under this exemption cannot be sold through general selling efforts to the public.
B) Securities coming under this exemption can only be sold to accredited investors.
C) Securities coming under this exemption can only be sold to nonaccredited investors.
D) Securities coming under this exemption have no resale restrictions imposed on them.
Q:
Ellen contracts to buy six cases of vintage Fertile Valley wine from Grapes & Vines Winery for $1,200. The contract states that delivery is to be made at Ellen's residence "on or before May 1, to be used for daughter's wedding reception on May 2." On May 1, Grapes & Vines's delivery van is involved in an accident, no wine is delivered that day, and no one from Grapes & Vines tells Ellen. On the morning of May 2, Ellen buys the wine from Happy Hill Winery. That afternoon, just before the reception, Grapes & Vines tenders delivery of the wine at Ellen's residence. She refuses tender. Grapes & Vines sues her for breach of contract. How is the court most likely to rule?
Q:
SEC Rule 506 is known as the ________ exemption.
A) nonissuer
B) intrastate offering
C) private placement
D) interstate offering
Q:
Shade Tree Landscaping Company enters into a contract with Jill to landscape Jack's yard, using Fertile Nursery to supply trees and bushes. Maria owns the lot next to Jack's property. The landscaping is a gift from Jill to Jack, who is Jill's friend, but they are not related. What type of beneficiary is Jack? What type of beneficiary is Maria? What type of beneÂficiary is Fertile Nursery? If Shade Tree refuses to do the job, who can enÂforce the contract against it?
Q:
Evergreen Landscapers, Inc., owes Friendly Finance Company $5,000. Evergreen enters into a contract with Suburban Office Park under which Evergreen promises to maintain the landscaping on Suburban's property. Under the contract, Suburban promises to pay Friendly Finance the amount that will be due Evergreen until Evergreen's debt to Friendly Finance is paid. Evergreen performs as promised, but Suburban does not pay Friendly Finance. Can Friendly Finance succeed in a suit against Suburban? Why or why not?
Q:
The ________ is a registration exemption that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the Securities and Exchange Commission (SEC).
A) intrastate offering exemption
B) Regulation A offering
C) private placement exemption
D) nonissuer exemption
Q:
The ________ is a registration exemption which states that securities transactions not made by an issuer, an underwriter, or a dealer do not have to be registered with the Securities and Exchange Commission (SEC).
A) intrastate offering exemption
B) private placement exemption
C) Regulation A offering
D) nonissuer exemption
Q:
Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam does not pay the loan or return the car, Quality wants to transfers the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Pam's consent? If so, and Quality committed fraud in the deal with Pam, could Pam legitiÂmately refuse to pay Rapid? Explain.
Q:
Superb Construction, Inc., contracts to build a store for Tasty Confection Company, with Tasty's payment due on June 1. On June 1, Tasty's bank is closed, and for this reason, Tasty claims it cannot pay Superb on time. In this situation
a. Tasty's bank is in breach of contract.
b. Tasty is in breach of contract.
c. the contract is discharged.
d. the contract is suspended.
Q:
Exempt securities include ________.
A) stock dividends and stock splits
B) IPOs made by multinational corporations
C) securities that have been held by a single investor for longer than a year
D) securities worth $1 million or more
Q:
Which of the following is true of exempt securities?
A) Only the federal government can issue exempt securities.
B) Once a security is exempt, it is exempt forever.
C) An exemption notice must be filed with SEC each time the exempt security is transferred.
D) Exempt securities cannot be traded publicly.
Q:
Haruko, who owns and operates Garden Orchard, agrees to sell Fresh Produce Cooperative ten bushÂels of apples.
When the market price for apples exceeds the price in the contract with Fresh Produce, Haruko decides not to deliver the apples. This
a. breaches the contract.
b. discharges the contract.
c. has no effect on the contract.
d. suspends the contract.
Q:
How does a company sell its shares to the public for the first time? Explain the contents of a registration statement.
Q:
Haruko, who owns and operates Garden Orchard, agrees to sell Fresh Produce Cooperative ten bushÂels of apples.
When bad weather destroys Garden Orchard's apple crop, Haruko's obligaÂtion to deliver apples to Fresh Produce is
a. breached.
b. discharged.
c. not affected.
d. suspended.
Q:
________ allows small companies to raise capital from many small-dollar investors through Web-based platforms.
Q:
Flo agrees to work as Gary's personal accountant for one year but dies in the sixth month of the contract. Flo's estate
a. is discharged from any contractual liability.
b. must find a competent accountant to fulfill the contract.
c. must pay liquidated damages.
d. must refund any money paid to Flo on the contract.
Q:
A company that is issuing securities to the public must file a written ________ with the Securities and Exchange Commission (SEC).
Q:
On April 1, OK Contractors, Inc., contracts to build a store for Lo-Cost Jewelers at a specific location in Metro City. On May 1, Metro changes its zoning laws to prohibit the construction of a commercial building at that location. When the store is not built, Lo-Cost files a suit against OK. In this situation
a. OK is in breach of contract.
b. Metro is in breach of contract.
c. the contract is discharged.
d. the contract is suspended.
Q:
The issuance of securities by an issuer to the public is known as a(n) ________.
Q:
Mona and Nero want to discharge their contract by executing and perÂforming a new agreement. They can best accomplish this by
a. accord and satisfaction.
b. novation.
c. reinvention.
d. specific performance.
Q:
Roy and Sheila are parties to a contract. They subseÂquently agree that Tony should take Roy's place and assume all of his rights and duties under the contract. This is
a. a novation.
b. an accord and satisfaction.
c. an assignment.
d. a modification.
Q:
Crowd funding offerings are subject to the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Q:
An issuer who plans on raising $1 million or less from the public must answer the questions on Form U-7, which doubles as a prospectus and must be made available to prospective investors.
Q:
Super Toolmakers, Inc., contracts to sell its business to True Hardware CorpoÂration. Before either party has performed, rescission of this conÂtract requires
a. a mutual agreement to rescind.
b. consideration.
c. performance by all of the parties.
d. an accord and satisfaction.
Q:
There are no resale restrictions on securities that come under Regulation A.
Q:
Bell Medical Education Service enters into a contract to employ Chris as an instructor for two years to begin May 1. One month before the term begins, Bell is underbid by a competitor and loses a major client, Delta Hospital Center. Bell now refuses to hire Chris.
Bell's repudiation is most likely
a. a material breach.
b. a minor breach.
c. Chris's breach.
d. no breach.
Q:
An offering circular must be provided to the investors immediately after the purchase of a Regulation A offering.
Q:
Bell Medical Education Service enters into a contract to employ Chris as an instructor for two years to begin May 1. One month before the term begins, Bell is underbid by a competitor and loses a major client, Delta Hospital Center. Bell now refuses to hire Chris.
. Under the circumstances, with respect to damages, Chris can
a. bring an action immediately.
b. bring an action only after the contract's two-year term begins.
c. bring an action only after the contract's two-year term ends.
d. do nothing.
Q:
Building Restoration, Inc. (BRI), enters into a contract to refurbish an old train depot for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract, its performance will be
a. absolute.
b. complete.
c. material.
d. substantial.
Q:
An offering statement requires less disclosure compared to a registration statement.
Q:
Safe-T Guard Services enters into a contract to secure Taylor's Business Park from vandalism and theft between 6 p.m. and 6 a.m. nightly for six months. At the end of the term, if there has been no vandalism or theft in the Park, Safe-T's performance will have been
a. absolute.
b. complete.
c. conditional.
d. substantial.
Q:
Regulation A offerings can be sold without registration with the SEC provided that an offering statement is provided prior to the purchase of the securities.
Q:
Xavier enters into a contract to operate a Yummy Yogurt franchise, which Yummy agrees to support as long as Xavier maintains his business license. Yummy's duty to perform is
a. absolute.
b. conditional.
c. licentious.
d. operational.
Q:
According to Regulation A, securities of up to $50 million can only be sold to accredited investors.
Q:
Lon enters into a contract to mine limestone in Mica's quarry, sell it, and share the profits on its sale with Mica. If the duties under this contract are discharged like those under most contracts, the duties will be
a. assigned.
b. breached.
c. performed.
d. rescinded.
Q:
An investor who has purchased an unregistered security can rescind their purchase, but not recover damages.
Q:
Ron makes a contract with Stu that indirectly benefits Tim, although neiÂther Ron nor Stu intended that result. Tim is
a. a delegatee.
b. an assignee.
c. an incidental beneficiary.
d. an intended beneficiary.
Q:
A prospectus is a written disclosure provided with the registration statement that helps the SEC to evaluate the financial risk of an investment.
Q:
Nick and Roberta contract for the sale of computer equipment, reserving the right to alÂter a particular provision in the contract. The rights of any third party beneficiary of that contract are
a. not affected by the reservation.
b. limited to the extent of the reservation.
c. limited only if the beneficiary agrees to the reservation.
d. none of the choices.
Q:
During the review of a registration statement, the SEC does not pass judgment on the merits of the securities offered.
Q:
A registration statement need not contain details on how the proceeds from the offering will be used.
Q:
Jen is a third party beneficiary under a contract between Kyla and Leo. Kyla and Leo can modify or rescind their contract without Jen's consent
a. at any time.
b. at no time.
c. only after Jen's rights have vested.
d. only before Jen's rights have vested.
Q:
Esther and Faisal agree that Esther will fix Faisal's car in exchange for his paying a preexisting debt owed by Esther to Gladys. Gladys is
a. an assignee.
b. an intended beneficiary.
c. an incidental beneficiary.
d. a delegatee.
Q:
Only an established company is permitted to sell new securities to the public.
Q:
Vicky contracts with Warren for the delivery of hospice services to benefit Xavier. This is
a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. a novation.
Q:
The sale of securities by an issuer to the public is known as an initial public offering.
Q:
Section 5 of the Securities Act of 1933 requires an issuer to register its securities with the SEC prior to selling them to the public.