Stock Lawyer Securities Regulation and Compliance 2

Question 1

What is 'Regulation FD' and what conduct does it prohibit?

Accepted Answer

Prevents selective disclosure of material nonpublic information by public companies

Answer

Regulation FD (Fair Disclosure) prohibits public companies from selectively disclosing material nonpublic information to certain investors without simultaneously disclosing it to the public.

Question 2

Under the Securities Exchange Act of 1934, which section requires periodic reporting by public companies?

Accepted Answer

Section 13

Answer

Section 13 of the Securities Exchange Act of 1934 requires registered companies to file periodic reports, including annual 10-K and quarterly 10-Q forms, with the SEC.

Question 3

What standard of liability applies to a company's auditors in a Section 11 claim under the Securities Act of 1933?

Accepted Answer

Due diligence defense available

Answer

Auditors and other experts in a Section 11 claim may assert a due diligence defense by showing they had reasonable grounds to believe the statements were true after reasonable investigation.

Question 4

Which FINRA rule governs suitability obligations of broker-dealers when recommending securities to customers?

Accepted Answer

FINRA Rule 2111

Answer

FINRA Rule 2111 (Suitability) requires broker-dealers to have a reasonable basis for believing a recommended security or strategy is suitable for the customer based on their profile.

Question 5

What is a 'prospectus' in securities law?

Accepted Answer

A formal document disclosing details of a securities offering to potential investors

Answer

A prospectus is a formal legal document that provides details about an investment offering to potential investors, including financials, risk factors, and management information.

Stock Lawyer Practice Test

Stock Lawyer Practice Test

Stock Lawyer Securities Regulation and Compliance 2