Quiz

This quiz consist of 20 multiple choice questions. The first 10 questions cover the material in Chapter 14. The second 10 questions cover the material in Chapter 15. Be sure you are in the correct Chapter when you take the quiz. | * Question 1 5 out of 5 points | | | In assessing a takeover bid, the directors are not expected to consider theAnswer| | | | | Selected Answer:| prospect of their future employment. | Correct Answer:| prospect of their future employment. | | | | | * Question 2 5 out of 5 points | | | Brice is on the board of Success Corporation.

Eager Corporation has made a move to acquire Success. Tina, the president of Success advises the board that the offer made by Eager is a good one that should be accepted. She did not disclose, however, that Eager had offered her a generous bonus if she could convince the board members of Success to take Eager’s offer. Brice tells the other board members that they should simply rely on Tina because she is probably right, and under the business judgment rule they are protected even if she is wrong. Which of the following is true regarding Brice’s advice?

Answer| | | | | Selected Answer:| Brice is incorrect because no statement made by an officer is entitled to blind reliance. | Correct Answer:| Brice is incorrect because no statement made by an officer is entitled to blind reliance. | | | | | * Question 3 5 out of 5 points | | | The courts have held that officers and directors that usurp a corporate opportunity must disgorge the illegal profits to theAnswer| | | | | Selected Answer:| corporation. | Correct Answer:| corporation. | | | | | * Question 4 5 out of 5 points | | | Which of the following is true regarding state rules of corporate governance?

Answer| | | | | Selected Answer:| California imposes state pro-shareholder rules on quasi-foreign corporations. | Correct Answer:| California imposes state pro-shareholder rules on quasi-foreign corporations. | | | | | * Question 5 5 out of 5 points | | | The business judgment rule will not protect a director whoAnswer| | | | | Selected Answer:| has a conflict between personal interests and the interests of the corporation and its shareholders. | Correct Answer:| has a conflict between personal interests and the interests of the corporation and its shareholders. | | | | | * Question 6 5 out of 5 points | | Which state has the nation’s toughest state antitakeover statute? Answer| | | | | Selected Answer:| Pennsylvania| Correct Answer:| Pennsylvania| | | | | * Question 7 5 out of 5 points | | | Directors are always ________ of the corporation. Answer| | | | | Selected Answer:| agents| Correct Answer:| agents| | | | | * Question 8 5 out of 5 points | | | Some jurisdictions permit the shareholders to amend the articles of incorporation to relieve directors of any financial liability for violations of the duty ofAnswer| | | | | Selected Answer:| care. |

Correct Answer:| care. | | | | | * Question 9 out of 5 points | | | A ________ occurs when minority shareholders are forced to convert their shares into cash, for example, when a subsidiary merges with its parent. Answer| | | | | Selected Answer:| freeze out| Correct Answer:| freeze out| | | | | * Question 10 5 out of 5 points | | | The ________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation. Answer| | | | | Selected Answer:| corporate opportunity doctrine| Correct Answer:| corporate opportunity doctrine| | | | | * Question 11 5 out of 5 points | | The U. S. Supreme Court has made it clear that only persons who actually ________ can sue under Rule 10b-5. Answer| | | | | Selected Answer:| purchase or sell securities| Correct Answer:| purchase or sell securities| | | | | * Question 12 5 out of 5 points | | | There is a split in the circuits as to whether ________ qualifies as scienter. Answer| | | | | Selected Answer:| recklessness| Correct Answer:| recklessness| | | | | * Question 13 5 out of 5 points | | | When can a securities fraud claim be used as a predicate act in a civil case under the Racketeer Influenced and Corrupt Organizations Act (RICO)?

Answer| | | | | Selected Answer:| When the defendant has been criminally convicted in connection with the fraud. | Correct Answer:| When the defendant has been criminally convicted in connection with the fraud. | | | | | * Question 14 0 out of 5 points | | | A person may be liable under Section 16(b) of the 1934 Act if he or she was an officer or director at the time ofAnswer| | | | | Selected Answer:| both the purchase and the sale. | Correct Answer:| either the purchase or the sale. | | | | | * Question 15 5 out of 5 points | | | How are criminal prosecutions of illegal insider trades brought?

Answer| | | | | Selected Answer:| By the Department of Justice through the U. S. Attorney’s Office. | Correct Answer:| By the Department of Justice through the U. S. Attorney’s Office. | | | | | * Question 16 5 out of 5 points | | | The materiality of a misstatement or omission under Rule 10b-5 is judged at the timeAnswer| | | | | Selected Answer:| the statement is made. | Correct Answer:| the statement is made. | | | | | * Question 17 5 out of 5 points | | | Before signing a written consent allowing their audited report to be included in a registration statement, accountants should do a(n) ________.

Answer| | | | | Selected Answer:| S-1 review| Correct Answer:| S-1 review| | | | | * Question 18 5 out of 5 points | | | If a purchase or sale by an officer, director, or greater-than-10 percent shareholder that would otherwise result in recoverable short-swing profits was involuntary and did not involve the payment of cash and if there was no possibility of speculative abuse of inside information, than a court may hold that it was a(n) ________ to which no liability will attach. Answer| | | | | Selected Answer:| unorthodox transaction|

Correct Answer:| unorthodox transaction| | | | | * Question 19 5 out of 5 points | | | Which of the following is not considered a traditional insider? Answer| | | | | Selected Answer:| attorneys| Correct Answer:| attorneys| | | | | * Question 20 5 out of 5 points | | | Under Section 16(b) pertaining to short-swing profits, a person will be considered a(n) ________ of any securities held by his or her immediate family or any other relative living in his or her household. Answer| | | | | Selected Answer:| beneficial owner| Correct Answer:| beneficial owner| | | | |

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