Stock Lawyer Cheat Sheet 2026

The 30 highest-yield Stock Lawyer facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. What is a 'short squeeze' in equity markets? → A surge in a stock's price forcing short sellers to buy shares to cover losses
2. What variables impact the stock market? → All of the above
3. What does 'loss causation' require a plaintiff to prove in a securities fraud case? → The misrepresentation directly caused the investor's economic loss
4. What is the criminal penalty for insider trading conviction under federal law? → Up to 20 years imprisonment and $5 million fine per violation
5. Under the 'classical theory' of insider trading, who owes a duty that prohibits trading on material nonpublic information? → Corporate insiders who owe a fiduciary duty to shareholders
6. Which practice involves artificially inflating a stock's price through false statements and then selling shares at the peak before the price collapses? → Pump and dump
7. The first step in filing a claim against a broker is to determine which securities are at risk. → True
8. What is 'say on pay' under the Dodd-Frank Act? → A mandatory shareholder advisory vote on executive compensation at least every three years
9. Under the Dodd-Frank Act's whistleblower program, what percentage of sanctions can a qualifying SEC whistleblower receive? → 10% to 30% of sanctions over $1 million collected
10. The PSLRA's 'safe harbor' provision protects which type of statements from securities fraud liability? → Forward-looking statements accompanied by meaningful cautionary language
11. What does a stock fraud attorney examine when evaluating a broker's trading history? → Turnover rate, cost-to-equity ratio, and in-and-out trading patterns
12. Under the Securities Exchange Act of 1934, what is the statute of limitations for private SEC Rule 10b-5 fraud claims? → 2 years from discovery of the fraud, but no more than 5 years after the violation
13. Which section of the Securities Act of 1933 provides a private right of action for material misstatements in a registration statement? → Section 11
14. Which organization regulates stockbroker and brokerage firm conduct? → United States Securities and Exchange Commission (SEC) and FINRA
15. Under Regulation D, which exemption allows companies to raise unlimited capital from accredited investors without SEC registration? → Rule 506(b)
16. Which of the following is NOT a duty of an investment advisor? → making accurate predictions about the future of the stock market
17. Which type of stockbroker misconduct involves a broker placing client funds in investments that benefit the broker's related parties at the client's expense? → Self-dealing
18. What does 'material misrepresentation' mean in securities law? → A false or misleading statement that a reasonable investor would consider important
19. Which of the following is true regarding blue chip stocks? → The stocks are consistently profitable with a dividend payment
20. What is a 'gray market' in the context of IPO shares? → When-issued trading of IPO shares before the official listing date
21. Under the Private Securities Litigation Reform Act (PSLRA), who typically leads a securities class action lawsuit? → The investor with the largest financial loss
22. What must a plaintiff prove to establish 'loss causation' in a securities fraud case under Rule 10b-5? → That the alleged fraud actually caused the plaintiff's economic loss
23. Which regulation allows large institutional investors to trade restricted and control securities among themselves without SEC registration? → Rule 144A
24. What civil penalty can the SEC impose on a person found liable for insider trading? → Up to three times the profit gained or loss avoided
25. What is a 'Ponzi scheme' and which famous case is considered the largest in U.S. history? → Using new investor funds to pay existing investors; Bernie Madoff
26. Which of the following is NOT a required element in a private Rule 10b-5 securities fraud claim? → A prior criminal conviction of the defendant
27. What is a 'pump and dump' scheme in the context of stock fraud? → Artificially inflating a stock's price then selling before it collapses
28. In a securities class action lawsuit, the 'lead plaintiff' is presumed to be: → The plaintiff with the largest financial interest in the outcome
29. Under Section 220 of the Delaware General Corporation Law, what right do shareholders have? → The right to inspect corporate books and records for a proper purpose
30. What is a 'prospectus' in securities law? → A formal document disclosing details of a securities offering to potential investors