CIRO Regulatory Compliance & Governance 2 — Questions and Answers
Question 1: Under SEC Regulation FD, what must a company do if it unintentionally discloses material nonpublic information to a select group of investors?
- File an 8-K or issue a press release promptly to disclose the information publicly (Correct answer)
- Immediately notify the SEC of the breach and await guidance
- Retract the statement within 24 hours through a corrective disclosure
- Disclose the information only to other major institutional investors to equalize access
Correct answer: File an 8-K or issue a press release promptly to disclose the information publicly
Reg FD requires the company to make prompt public disclosure — via a Form 8-K or press release — when material nonpublic information is unintentionally disclosed.
Question 2: Which SEC form must a public company file within four business days of a material triggering event such as a change in auditors or a departure of a principal officer?
- Form 10-Q
- Form 8-K (Correct answer)
- Form DEF 14A
- Form S-1
Correct answer: Form 8-K
Form 8-K is the current report used to disclose material corporate events to the public within four business days.
Question 3: A company's board audit committee is best described under corporate governance standards as responsible for:
- Setting executive compensation and approving equity awards
- Overseeing the company's financial reporting process and external auditor relationship (Correct answer)
- Approving major M&A transactions above a board-set threshold
- Managing day-to-day investor relations communications
Correct answer: Overseeing the company's financial reporting process and external auditor relationship
The audit committee oversees financial reporting integrity, internal controls, and the relationship with external auditors.
Question 4: NYSE and Nasdaq listing standards generally require that the majority of a listed company's board of directors be:
- Executive directors with operating experience
- Independent directors (Correct answer)
- Directors nominated by institutional shareholders
- Directors who hold at least 1% of outstanding shares
Correct answer: Independent directors
Both NYSE and Nasdaq require that a majority of the board consist of independent directors to protect shareholder interests.
Question 5: Under Sarbanes-Oxley Section 302, corporate officers who certify financial reports and later discover a material misstatement are required to:
- Immediately resign and notify the SEC
- Disclose the error and cooperate in a restatement (Correct answer)
- File a personal affidavit with the PCAOB
- Suspend trading in company securities pending correction
Correct answer: Disclose the error and cooperate in a restatement
SOX 302 certifications create personal accountability, and officers must support accurate disclosure including correcting any known misstatements.
Question 6: Which of the following is NOT a required element of a company's proxy statement (DEF 14A)?
- Executive compensation disclosures
- Board nominee biographies and independence determinations
- A forecast of next year's earnings per share (Correct answer)
- Say-on-pay advisory vote proposal
Correct answer: A forecast of next year's earnings per share
Earnings forecasts are not required in proxy statements; forward guidance is disclosed separately and voluntarily.
Question 7: The EDGAR system maintained by the SEC is primarily used by investor relations professionals to:
- File and retrieve public company regulatory filings electronically (Correct answer)
- Monitor real-time stock trading activity for unusual volume
- Submit requests for no-action letters and SEC guidance
- Register new securities offerings with state regulators
Correct answer: File and retrieve public company regulatory filings electronically
EDGAR (Electronic Data Gathering, Analysis, and Retrieval) is the SEC's online system for submitting and accessing public company filings.
CIRO Regulatory Compliance & Governance 2
Under SEC Regulation FD, what must a company do if it unintentionally discloses material nonpublic information to a select group of investors?