TRUE - FALSE

QUIZ #10
Cheeseman Chapter 21

1. A "security" is defined by statute and is defined narrowly.

2. The Securities Exchange Commission (SEC) examines registration statements for meeting the disclosure requirements. Also, the SEC evaluates and comments upon the merits of the security.

3. During the waiting period --between filing a registration statement and the SEC declaring the registration statement effective-- the issuer of the security may make sales of the security. However, any buyer may revoke the sale prior to the end of the waiting period.

4. The federal Commerce Clause allows the federal government to
completely preempt the State governments on the regulation of securities since all securities have a close and substantial affect on commerce between the States.

5. Some small securities (e.g., less than $1 million) have been exempted from the registration and reporting requirements
as well as exempted from the anti-fraud provisions of the securities' laws.

6. "Fraud," for securities law purposes, is defined as the defendant's
knowing and intentional misrepresentation or omission of a material fact, inducing the plaintiff's justifiable reliance and causing the plaintiff's injury.

7. The issuer's due diligence defense is a defense to criminal and civil liability.

8. All person's who violate SEC insider trading rules are violating their fiduciary duties.

9. "Statutory insiders" --who must return short swing profits-- are executive officers, directors, and 10% shareholders of an equity security of a reporting company.