TBCh23F - CHAPTER 23 Securities Fraud and Insider Trading...

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C H A P T E R 2 3 Securities Fraud and Insider Trading T RUE -F ALSE Q UESTIONS 1. Section 10(b) of the 1934 Act regulates only the purchase and sale of registered securities. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 2. More suits are brought under Section 16(b) of the 1934 Act than under any other provision of that statute. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 3. Rule 10b-5 does not result in any private rights of action. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 4. Accountants have to sign a written consent before their audited report can be included in a registration statement. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 5. Secondary actors (such as an accountant, lawyer, or bank) can be held liable in private suits alleging violations of Section 10(b) if their conduct satisfies the requirements for primary liability. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 6. A prediction about the future cannot be a misstatement for purposes of the 1933 Act, even if the person making the prediction does not believe it at the time. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 7. Under Rule 10b-5, any use of the mails is sufficient to satisfy the interstate commerce condition even if the mail does not leave the state. 91
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MANAGERS AND THE LEGAL ENVIRONMENT ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 8. Under the London Stock Exchange rules, if a listed company’s share price moves significantly on the basis of rumor and the rumor is true, the company must disclose the existence of the rumored event. ANSWER: True SKILL LEVEL: AACSB Diversity OBJECTIVE: AICPA Legal 9. The U.S. Supreme Court has adopted a bright-line rule for determining whether a statement is material. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 10. Scienter requires more than mere negligence or lack of due care. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 11. The safe harbor provision applies to forward-looking statements in connection with an initial public offering. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 12. All instances of trading on inside information constitute a securities act violation. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 13. Under the efficient market theory, in an open and developed securities market, the market price of a company’s stock equals its true value. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 14. Under the Sarbanes-Oxley Act of 2002, it is a misdemeanor to knowingly execute a scheme to defraud any person in connection with any security of a publicly traded company. ANSWER:
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TBCh23F - CHAPTER 23 Securities Fraud and Insider Trading...

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