Corporate Governance Regulatory Compliance & Disclosure 2

Question 1

What is the purpose of the SEC's EDGAR database?

Accepted Answer

A public system where companies electronically file and investors can access all SEC filings

Answer

EDGAR (Electronic Data Gathering, Analysis, and Retrieval) is the SEC's public filing system where all required SEC reports are submitted and made freely available to investors.

Question 2

What does the 'proxy statement' (DEF 14A) contain?

Accepted Answer

Information about matters to be voted on at the annual meeting, including director nominees and executive compensation

Answer

The proxy statement (DEF 14A) provides shareholders with information needed to vote on annual meeting items including director elections, say on pay, and shareholder proposals.

Question 3

What is 'insider trading' under US securities law?

Accepted Answer

Trading securities based on material nonpublic information in breach of a duty of trust or confidence

Answer

Insider trading is illegal when a person trades based on material nonpublic information while owing a duty of trust or confidence to the company or source of the information.

Question 4

What is a 'trading blackout period'?

Accepted Answer

A company-imposed window prohibiting insiders from trading company securities around earnings announcements or other material events

Answer

Blackout periods are company-imposed trading restrictions on insiders during sensitive periods (e.g., the weeks before quarterly earnings) to reduce insider trading risk.

Question 5

What is a '10b5-1 trading plan'?

Accepted Answer

A pre-established trading plan that allows insiders to sell shares on a set schedule, providing an affirmative defense against insider trading claims

Answer

A 10b5-1 plan lets insiders pre-schedule share sales at a time when they lack MNPI, creating a safe harbor from insider trading allegations on later trades.

Corporate Governance Practice Test

Corporate Governance Practice Test

Corporate Governance Regulatory Compliance & Disclosure 2