Response to the following multiple choice questions and True & False:
1. A prospective issuer of securities must hire which of the following:
a. A publicity agency
b. An advertising agency
c. A printer for the prospectus
d. An insurance broker
2. A red herring:
a. Is also known as an 8-K report
b. Is also called a prospectus
c. Represents an offer to sell a security
d. Is a preliminary version of a prospectus
3. A share of stock represents the right to:
a. Receive cash from the issuing company equal to the market value of the stock
b. An equal share of the assets of a firm
c. Participate in active management decisions of a firm
d. A share of future profits of a firm
4. Bonds issued by a company to raise money:
a. Mean that the company has incurred debt that is to be repaid to the holders of the bonds
b. Can be traded on the securities market
c. Are securities
d. All of the above
5. Credit bureaus are regulated by:
a. The Fair Credit Reporting Act
b. The Legitimate Credit Reporting Act
c. The Credit CARD Act
d. Congress
6. Equity instruments, like stock, specify the amount of money, the time period it is to be held, and the rate of return to be paid.
a. True
b. False
7. Insider trading is:
a. Legal if no profit is made
b. Legal if the insider gets an outsider to buy or sell
c. Illegal because insiders are strictly prohibited from stock trading under SEC Rule 10b-5
d. Illegal when insiders trade based on information they have a fiduciary duty not to trade on
8. Nutritional supplements are:
a. Subject to the same regulations as drugs
b. Subject to stricter regulations than drugs
c. Subject to fewer regulations than drugs
d. More expensive than drugs
9. Regulation Fair Disclosure requires that public companies must file reports with the SEC to report significant financial developments whenever they happen.
a. True
b. False
10. The Consumer Leasing Act would apply to which of the following leases:
a. Living room furniture for three months
b. An apartment for a year
c. A car for a week
d. A big-screen television for a year
11. The Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) states that gift cards may not expire for at least five years.
a. True
b. False
12. The FDA may seize shipments of products that are falsely labeled.
a. True
b. False
13. The Federal Trade Commission regulates:
a. Deceptive business practices
b. False advertising claims
c. Unfair business practices
d. All of the above
14. The Investment Company Act (ICA):
a. Holds investment companies liable to private parties for violations of the Act
b. Holds investment companies liable to the SEC for violations of the Act
c. Makes the activities of investment companies subject to regulation
d. All of the above
15. The Mail Order Rule requires goods to be delivered by mail to arrive within clearly set time or allow the customer out of the deal.
a. True
b. False
16. The most heavily controlled medical devices are:
a. Class I
b. Class II
c. Class III
d. Restricted class
17. The R-value Rule is:
a. A FTC trade regulation rule regarding insulation
b. A FTC standard for measuring a business's profits
c. A FTC standard for advertising carpet thickness
d. A FTC standard regarding vitamin levels in cereals
18. The Securities Act of 1933 concerns truth in disclosure at the time securities are first sold; the 1934 Securities Exchange Act concerns regulation of securities already in the market.
a. True
b. False
19. The Securities Act of 1933 regulates:
a. Private offerings of securities
b. Public offerings of securities when they are first sold
c. Corporations with more than $100,000 in securities
d. Banks
20. The Truth-in-Lending Act does NOT apply to which of the following:
a. A $5,000 loan to a friend
b. A $25,000 loan to a friend
c. A transaction with no finance charge and fewer than 4 installment payments
d. All of the above
21. What is not an element in the Supreme Court's SEC v. Howey definition of securities:
a. An investment of money
b. In a common enterprise
c. Where profits are earned
d. Enterprise is managed by others
22. When one company wants to take over another, one way it may be done is by proxy.
a. True
b. False
23. Which of the following agencies has primary responsibility for sanitation of meat, poultry, and eggs:
a. U.S. Chemistry Bureau
b. U.S. Food Bureau
c. U.S. Department of Agriculture
d. U.S. Department of Food and Drugs
24. Which of the following is not a function of the Food and Drug Administration?
a. Inspections of food and drug producing establishments
b. Drug evaluation studies
c. Food additives studies
d. All of the above are functions of the FDA