Module 22 Federal Securities Acts and Antitrust Law: A. Securities Act of

116 MODULE 22 FEDERAL SECURITIES ACTS AND ANTITRUST LAW
MULTIPLE·CHOICE ANSWERS
l. d - - 11. b - - 2l. c - - 3l. a - - 4l. c - -

2. d - - 12. d - - 22. b - - 32. c - - 42. b - -
3. d - - 13. a - - 23. a - - 33. b - - 43. c - -
4. b - - 14. c - - 24. b - - 34. a - - 44. b - -
5. a - - 15. c - - 25. b - - 35. c - -
6. a - - 16. d - - 26. d - - 36. b - -
7. d - - 17. d - - 27. c - - 37. a - -
s. d - - 18. a - - 28. b - - 38. a - -
9. b - - 19. c - - 29. c - - 39. a - - 1st: _/44= - %
10. d - - 20. b - - 30. b - - 40. c - - 2nd: _/44= - %
MULTIPLE-CHOICE ANSWER EXPLANATIONS

A. Securities Act of 1933 are not a factor. The notes described in IT are not exempt for
1. (d) A preliminary prospectus is usually called a two reasons; they have a maturity of two years and are used
for investment purposes. The notes inIII are not exempt
"red-herring" prospectus. The preliminary prospectus indi-
because the maturity is two years even though they are for
cates that a registration statement has been filed but has not
commercial- purposes.
become effective.
7. (d) Whether the securities are exempt from registra-
2. (d) Securities include debentures, stocks, bonds,
, tion or not, they are still subject to the antifraud provisions
some notes, and investment contracts. The main idea is that
of the Securities Act of 1933.
the investor intends to make a profit on the investment
through the efforts of others. A certificate of deposit is a 8. (d) The definition of a security is very broad under
type of commercial paper, not a security. the Securities Act of 1933. The basic idea is that the inves-
3. (d) A tombstone advertisement is allowed to inform tor intends to make a profit through the efforts of others
rather than through hislher own efforts. Notes, bond certifi-
potential investors that a prospectus for the given company
cates of interest, and debentures are all considered securi-
is available. It is not an offer to sell or the solicitation of an
ties.
offer to buy the securities. Answer (a) is incorrect because
the tombstone ad informs potential purchasers of the pro- 9. (b) If an issuer of securities wants to make an offer-
spectus and cannot be used as a substitute for the prospectus. ing by using shelf registration, the actual issuance takes
Answer (b) is incorrect because it informs of the availability place over potentially a long period of time. Therefore, s/he
of the prospectus and cannot be construed as an offer to sell must keep the original registration statement updated. There
securities. Answer (c) is incorrect because the tombstone ad is no requirement that the offeror must be a first-time issuer
notifies potential purchasers of the prospectus. It does not of securities.
notify that the securities have been withdrawn from the mar-
ket. 10. (d) Under the 1933 Act, certain securities are ex-
empt. Although insurance and annuity contracts are exempt,
4. (b) The registration of securities under the Securities securities issued by the insurance companies are not. An-
Act of 1933 has as its purpose to provide potential investors swer (a) is incorrect because securities of nonprofit organi-
with full and fair disclosure of all material information re- zations are exempt. Answer (b) is incorrect because
lating to the issuance of securities, including such informa- ' securities issued by or guaranteed by domestic government
tion as the principal purposes for which the offering's organizations are exempt. Answer (c) is incorrect because
proceeds will be used. Answer (a) is incorrect because securities issued by savings and loan associations are ex-
information on the stockholders of the offefing corporation empt.
is not required to be reported. Answer (c) is incorrect
because the SEC does not guarantee the accuracy of the 11. (b) Securities exchanged for other securities by the
registration statements. Answer (d) is incorrect because issuer exclusively with its existing shareholders are exempt
although the SEC does seek to compel full and fair from registration under the 1933 Act as long as no commis-
disclosure, it does not evaluate the securities on merit or sion is paid and both sets of securities are issued by the same
value, or give any assurances against loss. issuer. Answer (a) is incorrect because nonvoting common
stock is not exempted under the Act. The amount of the par
5. (a) If no exemption is applicable under the Securi- value is irrelevant. Answer (c) is incorrect because although'
ties Act of 1933, public offerings must be registered with the the securities of governments are themselves exempt, the
SEC accompanied by a prospectus. Answer (b) is incorrect limited partnership interests are not. Answer (d) is incorrect
because the SEC does not pass on nor rate the securities. because no such exemption is allowed.
Answer (c) is incorrect because the prospectus is given to
prospective purchasers of the securities. Answer (d) is in- 12. (d) Even though the issuer may comply with the
correct because the SEC does not pass on the merits or accu- Federal Securities Act of 1933, it must also comply with any
racy of the prospectus. applicable state "blue-sky" laws that regulate the securities
at the state level. Answer (a) is incorrect because it is
6. (a) Notes are exempt securities under the Securities unlawful for the company to offer or sell the securities prior
, Act of 1933 if they have a maturity of nine months or.less to the effective registration date. Answer (b) is incorrect
and if they are also used for commercial purposes rather because registration becomes effective on the twentieth day
than investments. The actual dollar amounts in the question after filing unless the SEC issues a stop order. Answer (c) is

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116 MODULE 22 FEDERAL SECURITIES ACTS AND ANTITRUST LAW

l. d - - 11. b - - 2l. c - - 3l. a - - 4l. c - -

MULTIPLE-CHOICE ANSWER EXPLANATIONS

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