Chapter 19 Questions Key 1 Hudsucker Corp is a public company whose securities are traded among investors Under the Securities Act of 1933 a security is a Almost any stake in the ownership or debt of a company b An investment that is guaranteed to make a profit c Only such common forms of debt and equity as stocks and bonds d Whatever a company represents to the public as a security 2 Jimmy the CEO of McNulty Inc intentionally understates the amount of McNulty s debts in information provided to investors as part of an issue of McNulty s stock Rhonda buys the stock and suffers a loss Jimmy may be subject to a Government prosecution and Rhonda s suit b Neither government prosecution nor Rhonda s suit c Only government prosecution d Only Rhonda s suit 3 Gonzo s Plumbing Corporation is poised to issue securities that under the Securities Act of 1933 are exempt This means that the securities can be sold a On the basis of a material omission or misrepresentation b On the basis of nonpublic information c Within any six month period by certain insiders d Without being registered 4 Cooper an engineer for the Douglas Fir Seed Corporation learns that Douglas Fir has developed a hybrid to triple the output of any farm Cooper buys 20 000 shares of Douglas Fir stock He tells Truman who buys 15 000 shares After the new hybrid is announced publicly the price of Douglas Fir stock increases Cooper and Truman sell their shares for a profit Under the Securities Exchange Act of 1934 liability may be imposed on a None of these parties b Cooper and Truman only c Cooper only d Cooper Douglas Fir and Truman 5 Nadine an officer for Silent Drape Runner SDR Corporation buys 100 shares of SDR stock One week later SDR announces that it will merge with a competitor Noiseless Curtains Inc and the price of SDR stock increases One month later Nadine sells her shares for a profit Under Section 16 b of the Securities Exchange Act of 1934 Nadine would NOT be liable if after buying the stock she had waited a Less than fourteen days to sell it b More than six months to sell it c Ninety days to sell it d Two months to sell it 6 To raise 12 million to expand operations Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated but unaccredited investors Star plans to notify the SEC of sales Under the Securities Act of 1933 this issue may qualify as an exempt transaction a As is b If the offspring is also made available to the public c If all of the investors are also given certain material information d Under no circumstances 7 New Discoveries Corporation and its officers directors and shareholders buy and sell securities Section 10 b of the Securities Exchange Act of 1934 applies to a Only the purchase or sale of a security by an investment company b Only the purchase or sale of a security involving short swing profits c Only the purchase or sale of a security involving a tipper and tippee d The purchase or sale of any security 8 Celfone Corporation is required to file a registration statement with the Securities and Exchange Commission This statement must contain a A copy of prospectuses to be provided to investors b A description of securities being offered for sale c A record of pre registration sales in securities d A sample of advertising to be used to attract investments in Celfone