CFL Securities Law & Regulatory Compliance

Question 1

Under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, a private plaintiff must prove scienter, which means:

Accepted Answer

Intent to deceive or reckless disregard for the truth

Answer

Negligent misrepresentation only

Answer

Knowledge of materiality at time of sale

Answer

Willful violation of SEC disclosure rules

Question 2

The Private Securities Litigation Reform Act (PSLRA) of 1995 requires plaintiffs alleging securities fraud to:

Accepted Answer

Plead with particularity the facts giving rise to a strong inference of scienter

Answer

File within 90 days of the alleged misstatement

Answer

Obtain SEC approval before filing suit

Answer

Post a bond equal to estimated defense costs

Question 3

In a securities class action, the 'fraud on the market' theory presumes reliance because:

Accepted Answer

Material misstatements are reflected in the stock's market price

Answer

All investors read SEC filings before trading

Answer

Institutional investors dominate all public markets

Answer

The SEC has certified the market as efficient

Question 4

The statute of limitations for a private Section 10(b) securities fraud claim under 28 U.S.C. § 1658(b) is:

Accepted Answer

2 years from discovery, no more than 5 years from violation

Answer

1 year from discovery, no more than 3 years from violation

Answer

4 years from the date of purchase or sale

Answer

3 years from the date of the alleged misstatement

Question 5

Under the Securities Act of 1933, Section 11 imposes liability on issuers and underwriters for material misstatements in a registration statement. Unlike Rule 10b-5 claims, Section 11 does NOT require plaintiffs to prove:

Accepted Answer

Scienter or reliance

Answer

Materiality of the misstatement

Answer

That the security was purchased pursuant to the registration statement

Answer

That the defendant was named in the registration statement

Question 6

A company's CFO selectively discloses material non-public information to a hedge fund before a public announcement. This most likely violates:

Accepted Answer

SEC Regulation FD (Fair Disclosure)

Answer

Section 16(b) short-swing profit rules

Answer

FINRA Rule 4512 customer account requirements

Answer

SOX Section 302 certification requirements