Question

In: Economics

As a matter of law, what is an “investment security”? Question 1 options: a) Any asset...

  1. As a matter of law, what is an “investment security”?

Question 1 options:

a)

Any asset held for its capital appreciation potential.

b)

Investment in a common venture, premised upon a reasonable expectation of profit, and with all profits derived from efforts of others (a “passive income only” test).

c)

Crypto currency, like Bitcoin.

d)

Only gold; everything else is credit.

Question 2 (5 points)

2. If your firm only occasionally issues securities for purchase by the public, the 1933 Securities Act does not require registration with the Securities and Exchange Commission and disclosure of material financial information.

Question 2 options:

a) True
b) False

Question 3 (5 points)

3. “Shelf registration” under the 1933 Act:

Question 3 options:

a)

Allows an issuer to wait up to 5 years for actual issuance of securities once required registrations and disclosures are filed with the SEC.

b)

Requires actual issuance of securities but immediate purchase at a discounted price by the corporate treasury, with the securities being held in the treasury until a more propitious time for resale to the public.

c)

Permits seasoned and well-known seasoned issuers to register unlimited amounts of securities that are to be offered and sold “off the shelf” in a delayed or continuous basis.

d)

Is all of the above.

Question 4 (5 points)

4. Most municipal bond issuance is required to be registered with the SEC.

Question 4 options:

a)

True.

b)

Always False.

c)

As long as all sales are to residents of the same state as the issuer, there is no problem, and no registration or disclosure is required.

Question 5 (5 points)

5. The antifraud provisions of the 1934 Act (Securities Exchange Act of 1934)(Rule 10b-5):

Question 5 options:

a)

Apply to all issuers of securities, without exception.

b)

Do not apply to private issuers/private offerings (i.e., by definition excluding securities not sold to the public).

Question 6 (5 points)

6. Persons who may violate Rule 10b-5 include:

Question 6 options:

a)

“Insiders” who are liable under Rule 10b–5 for failing to disclose material, nonpublic information before trading on the information.

b)

People who hold insider information and who trade first but then immediately disclose both the information and the trade.

c)

People who donate appreciated securities to charities upon learning insider information.

d)

All of the above (a, b, and c).

e)

None of the above.

Question 7 (5 points)

7. The punishment for violations of Rule 10b-5 (up to ten years of federal imprisonment and up to a $1 million fine) is among the harshest in the federal criminal code (18 U.S.C.) for nonviolent felonies that do not involve the sale of illegal drugs.

Question 7 options:

a) True
b) False

Question 8 (5 points)

8. In a trademark infringement case, a court presumably would give great weight to the facts that the first manufacturer had registered his trademark and that a subsequent competitor manufactured products in the same style and color and using an emblem with the same shape as the emblem on the first manufacturer’s products.

Question 8 options:

a) True
b) False

Question 9 (5 points)

9. How long does standard copyright protection under federal law last now?

Question 9 options:

a)

21 years.

b)

28 years.

c)

95 years.

d)

120 years.

e)

Life of the author plus 70 years.

Question 10 (5 points)

10. What is the life of a design patent registered with the U.S. Patent and Trademark Office? Assume that a design patent is the diagram of a machine that accomplishes a task. For machines, scale models have to be submitted, also.

Question 10 options:

a)

28 years.

b)

20 years from application.

c)

14 years from grant.

d)

21 years from first commercial use.


Solutions

Expert Solution

1. Option b Investment in a common venture, premised upon a reasonable expectation of profit, and with all profits derived from efforts of others (a “passive income only” test).Investment securities are securities (tradable financial assets, such as equities or fixed income instruments) that are purchased in order to be held for investment. It helps in earning passive income in the form of interests, gains from stock and capital gains.

2. Option b False According to Securities act 1933 the companies for better disclosure should register with the Securities and Exchange Commission (SEC,) Registration ensures that companies provide the SEC and potential investors with all relevant information by means of a prospectus and registration statement.Some exceptions include Intrastate offerings, Offerings of limited size,
Securities issued by municipal, state, and federal governments and Private offerings to a limited number of persons or institutions

3 Option c Permits seasoned and well-known seasoned issuers to register unlimited amounts of securities that are to be offered and sold “off the shelf” in a delayed or continuous basis. Shelf registration is a method for publicly traded companies to register new stock offerings without having to issue them immediately. Instead, the securities can be issued at any time within a two-year period, allowing a company to adjust the timing of the sales to take advantage of more favorable market conditions should they arise.

4 Option b Always False. Most municipal securities offerings are exempt from the registration provisions of the federal securities laws. That means municipal issuers do not have to file a registration statement with the SEC. But you can still obtain information about municipal securities from the Municipal Securities Rulemaking Board (MSRB), through its Electronic Municipal Market Access (EMMA) website at www.emma.msrb.org.


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