WILLIAM MITCHELL COLLEGE OF LAW
FINAL EXAMINATION
SECURITIES REGULATION
Professor Niels Schaumann
Monday, December 13, 1993 - 6:30 p.m.
3 Hours
STUDENT TEST NO.
1. For anonymity, use your assigned test number which was mailed to you.
2. Put your test number on this page and on all bluebooks.
3. If you do not know your test number, you may obtain it at the Communication Center or in the
Records Office (Cindy Boyum) during the first 30 minutes of the exam period.
4. If you do not use your test number, you will be deemed to have waived your privilege of
anonymous grading.
5. TURN IN YOUR BLUEBOOKS AND THIS EXAM AT THE END OF THE PERIOD.
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STUDENT CONDUCT CODE
IT IS A VIOLATION OF THE CODE:
1. To use any sources which are forbidden by the instructor to complete an exam.
2. To submit as one's own work the work of another.
3. To engage in any conduct which tends to give an unfair advantage to any student in any
academic matter.
Knowledge of any violation should be promptly reported.
VIOLATION OF THE STUDENT CONDUCT CODE MAY RESULT IN EXPULSION
OR SUSPENSION FROM THE COLLEGE OR DISMISSAL FROM THE CLASS.
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GRADUATING SENIORS: IF YOU ARE A GRADUATING SENIOR, NOTE THIS FACT
ON ALL BLUEBOOKS AND THIS EXAM PAPER. DO SO CONSPICUOUSLY.
TYPING AREA: If you are going to type your examination, the typing area is located in the Boardroom. You must return the exam to this room at the conclusion of the exam period.
GENERAL INSTRUCTIONS
READ THESE INSTRUCTIONS!!!!
MATERIALS PERMITTED FOR THIS TEST: Soderquist, Securities Regulation (2d ed. 1988),
with 1991 Supplement. In addition, you may use class notes, outlines and other materials
prepared by students, and any material distributed by the instructor. NO OTHER MATERIAL IS
PERMITTED.
1. FOR THE ESSAY, WRITE ON ONLY ONE SIDE OF THE PAGE.
WRITE ON EVERY OTHER LINE.
2. Answer only according to the materials we studied in class this semester. In the essay, citations
to cases are not necessary. You should, however, cite relevant statutes and rules.
3. To save time, you are encouraged to cross-reference discussions of legal rules or principles that
appear in earlier answers. You should never repeat a discussion of a legal rule -- cross-reference
it instead. If the rule is applied differently in the later answer, just describe and discuss the
differences, without repeating your earlier answer.
4. This examination consists of two Parts, numbered I and II. Below each Part is set out the
number of points (out of 100) that will be assigned to that Part in scoring your answers, and the
suggested time to be allotted to that Part. No matter how long you spend on a Part, you can
earn no more than the specified number of points for your answer.
5. Label each answer in your examination book clearly with the number of the question you are
answering.
6. Take some time to organize your answer. All other things being equal, a coherent response
will earn more credit than one that rambles aimlessly.
7. Try to write legibly. I want to give you as much credit as possible, but I can't give credit for an
answer I can't read.
8. Be calm -- relax -- in the broader scheme of things, this exam will play only a minor part.
PART I: Essay
(55 points)
(Suggested Time: 1 hr. 40 mins.)
Tom is a traveling salesman, selling miscellaneous office equipment. In the course of making a
sales call at Acme Corp., a publicly-held corporation, Tom was waiting in the outer office of the
President. Tom owned some stock in Acme (less than 0.01% of the outstanding stock), but had
no other connection with the company.
As Tom waited, Acme's President called her secretary into the inner office for a moment. While
the secretary was gone, Tom got up and wandered around to pass the time. His eye fell on a
document that the secretary had carelessly left on top of his desk: the document was stamped
"Confidential" in large red letters, and on the first page, under the caption "Executive Summary,"
Tom noticed that Acme's sales figures showed a very significant decline in sales for the fiscal
quarter just ended.
After finishing his business, Tom left and immediately sold his entire holding of Acme stock.
Later that day, Tom described his glimpse of the Acme memo to Anne, a friend, who immediately
sold all her Acme stock. In describing what had happened earlier that day, Tom told Anne "I
don't think they wanted me to see that memo, but since they left it out, I had to look." Like Tom,
Anne had no connection with Acme apart from owning a small amount of Acme stock.
Two weeks after Tom and Anne sold their Acme stock, Acme held a press conference at which
the company's declining sales were discussed. By the close of business on that day, Acme stock
had fallen in price by 25%.
All of these acts took place within the jurisdiction of the U.S. Court of Appeals for the Second
Circuit.
You are a new junior staff attorney assigned to the S.E.C.'s Enforcement Division. Your task is
to prepare a memo for your boss describing the possible bases for Tom's and Anne's liability
arising from these events, under 1934 Act § 10(b) and Rule 10b-5. You represent the
government; you are expected to search out all the possible bases for liability under § 10(b) and
Rule 10b-5. Nevertheless, you must provide a realistic assessment of the strengths and
weaknesses of the government's case: An overly optimistic view could lead to embarrassment for
your boss if the judge tosses the case out, and as for your next assignment ... well, you get the
picture.
Final notes: discuss each defendant separately, because an action could be brought against only Tom, or only Anne. Also, assume that all necessary federal jurisdiction exists over both possible defendants.
PART II: Multiple Choice
(45 points)
(Suggested Time: 1 hr. 20 mins.)
Instructions for Multiple Choice Questions
A. For each question, choose the most accurate answer (whether or not you think it fits
perfectly). Print (do not write in script) the letter for your answer on the examination paper in the
space provided immediately to the left of the question.
B. For each question, assume that every action taken involves the use of instrumentalities of
interstate commerce and that the necessary federal jurisdiction exists over the parties and the
cause(s) of action.
C. All questions are worth the same number of points.
D. Although I have diligently tried to make the questions as clear as possible, objective questions
are very difficult to write. Moreover, law students under exam pressure are extraordinarily adept
at spotting lurking ambiguities.
For these reasons, below each question there are three lines. If you consider it necessary to
qualify your answer, you may use those lines to write in any additional information that you
believe I should have.
The foregoing should not be construed as encouragement to qualify your answer. No "extra credit" will be given for material written in these spaces. Similarly, no points will be deducted for incorrect statements made in a qualification. If, however, students identify a material flaw in a question, I may either allow more than one answer or, if necessary, not score the question at all.
____ 1. With respect to listing its publicly-offered equity securities on a stock exchange, an issuer:
A. Should base its decision to list or not to list on whether it can afford to comply with the 1934
Act.
B. May gain significant publicity by listing.
C. May find it easier to complete stock offerings if the offered stock is listed.
D. Both B. and C. above, but not A.
E. None of the above.
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____ 2. A so-called "managing underwriter":
A. Is sometimes also referred to as the "lead underwriter."
B. Frequently advises the issuer as to structure, syndicate members, pricing and other factors in an
offering.
C. Negotiates directly with the issuer as to the compensation to be paid to the underwriters for
their participation in the offering.
D. All of the above.
E. Both A. and B. above, but not C.
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____ 3. In a "best efforts" underwriting:
A. The underwriters are obligated to buy the securities from the issuer, regardless of whether they
are able to resell them.
B. Resales by the underwriters of the underwritten securities are permitted only in accordance
with 1933 Act Rule 144.
C. Resales by the underwriters of the underwritten securities are not restricted, but resales by
ordinary members of the public who are not connected in any way with the offering may be made
only in accordance with 1933 Act Rule 144.
D. Both A. and C. above, but not B.
E. None of the above.
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____ 4. In a "firm commitment" underwriting:
A. The underwriters are obligated to buy the securities from the issuer, regardless of whether they
are able to resell them.
B. Resales by the underwriters of the underwritten securities are permitted only in accordance
with 1933 Act Rule 144.
C. Resales by the underwriters of the underwritten securities are not restricted, but resales by
ordinary members of the public who are not connected in any way with the offering may be made
only in accordance with 1933 Act Rule 144.
D. Both A. and C. above, but not B.
E. None of the above.
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____ 5. Under the 1933 Act, before an issuer files a registration statement with the S.E.C.
concerning a public offering of securities:
A. Both oral and written offers to sell the securities to the public are permitted, but they may not
include projections of the issuer's future financial performance.
B. Some offers to sell the securities to the public are permitted, but they may not be made in writing.
C. Sales of the securities to the public are permitted, but the securities may not be delivered until
the registration statement is declared effective.
D. Neither offers nor sales of the securities to the public are permitted.
E. None of the above.
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____ 6. The phrase "conditioning the market" is used by the S.E.C. to describe:
A. Impermissible offering activity, usually during the pre-filing period.
B. Impermissible offering activity, usually during the waiting period.
C. Impermissible offering activity, usually during the post-effective period.
D. Impermissible sales activity, usually during the waiting and post-effective periods.
E. None of the above.
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____ 7. During the period in which a public offering is contemplated, but before any documents
are filed with the S.E.C., an issuer:
A. Is permitted to sign contracts with a prospective underwriter.
B. Is permitted to sign contracts with a prospective dealer.
C. Is not permitted to sign contracts with prospective underwriters or dealers, because to do so
would constitute making a "sale" of securities under the 1933 Act.
D. Both A. and B. above, but not C.
E. None of the above.
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____ 8. Issuer was considering making a public offering of securities, and approached Shearson
Bros. about Shearson's acting as lead underwriter. Shearson agreed to act in that capacity, on a
"best efforts" basis. Issuer filed the registration statement for the offering with the S.E.C., and
then, before the registration statement became effective, Issuer and Shearson signed a contract for
a "best efforts" underwriting. The contract:
A. Is illegal, because under the definition of "sale" in the 1933 Act, such a contract creates a
"sale" of a security and sales are not permitted before effectiveness.
B. Is illegal, because under the 1933 Act, a best efforts underwriting is not a "true" underwriting
and therefore Issuer has violated 1933 Act § 5 by "selling" securities to Shearson.
C. Is legal and enforceable by each party, although Issuer bears the risk that some or all of the
securities will not be sold.
D. Is legal, but is voidable at Issuer's option, because it lacks mutuality of obligation.
E. None of the above.
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____ 9. Shortly before filing a registration statement with the S.E.C., Marianne, the CEO of
CompCo, invited reporters from the local newspapers to CompCo's headquarters to discuss
CompCo's plans for the future. When several reporters asked about the company's plans to obtain
financing, Marianne truthfully replied, "CompCo intends to commence a public offering of
securities in the very near future -- perhaps as soon as the next two or three months." She said
nothing else about the contemplated offering. Her statement appeared in the local newspapers the
next day. Marianne's statement:
A. Probably constitutes an offer to sell securities, and if so, it violates 1933 Act § 5.
B. Probably constitutes an offer to sell securities, and if so, it violates 1934 Act § 10(b) and Rule
10b-5.
C. Probably constitutes an offer to sell securities, and if so, at least some purchasers of the securities will have the right to rescind the transaction and get their money back.
D. Both A. and B. above, but not C.
E. Both A. and C. above, but not B.
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____ 10. Mitchell Corp., considering a public offering of securities, wasn't sure if there was
enough interest to justify going to the expense of such a transaction. To determine the level of
interest, Mitchell officers wrote letters to all the stockbrokers they knew and inquired whether the
brokers would be interested in dealing in Mitchell common stock, if an offering were made.
Because there was a lot of interest among the brokers, Mitchell selected an underwriter and
commenced a public offering. The letters to the brokers:
A. Were legal under the 1933 Act, because Mitchell hadn't definitely decided whether to do an
offering or not.
B. Were legal under the 1933 Act, because transactions with brokers are always permitted, even
when a registration statement has not been filed.
C. Were illegal under the 1933 Act, because they constituted "prospectuses" and they did not
meet the requirements of § 10 of that Act.
D. Were illegal under the 1933 Act, because sending the letters amounts to a "sale" of securities
under that Act.
E. Both C. and D. above, but neither A. nor B.
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____ 11. An issuer filed a registration statement. Thereafter, employees of the underwriter for the
offering made telephone calls to various dealers, offering each dealer a place in the offering.
These telephone calls:
A. Will be viewed as legal by the S.E.C., regardless of whether any dealers agreed to participate
in the offering.
B. Will be viewed as illegal "offers" by the S.E.C.
C. Will be viewed initially as legal "offers" by the S.E.C., but if any dealer bound itself to participate, an illegal "sale" has taken place.
D. Will be viewed as "prospectuses" by the S.E.C.
E. Both B. and D., but neither A. nor C.
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____ 12. During the waiting period:
A. Neither offers nor sales of the securities to be registered are permitted.
B. Oral and written offers of the securities to be registered are permitted, but sales are not permitted.
C. Oral offers and sales of the securities to be registered are permitted, but written offers are not
permitted.
D. Oral offers and certain written offers of the securities to be registered are permitted, but sales
are not permitted.
E. Written offers and certain sales of the securities to be registered are permitted, but oral offers
are not permitted.
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____ 13. Broker sent a letter to Customer. The letter included a glowing description of XYZ
Co., and concluded with the following statement: "I strongly recommend that you purchase at
least 100 shares of XYZ Co. stock immediately. Because XYZ is such a terrific value, I request
that you respond at your earliest convenience." Broker's letter:
A. Is legal, as long as a registration statement for the XYZ stock has been filed.
B. Is legal, as long as a registration statement for the XYZ stock has been declared effective.
C. Is legal, as long as it was accompanied or preceded by a preliminary (i.e., "red herring")
prospectus.
D. Is legal, as long as it was accompanied or preceded by a final prospectus.
E. Is legal, as long as it was truthful.
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____ 14. Shortly after ABC Co. filed its registration statement with the S.E.C., but before the
registration statement was declared effective, the managing underwriter for the ABC offering
began to receive unsolicited letters from dealers, requesting to be included as participants in the
offering. One of the letters included the following statement:
"By initialing and returning the enclosed copy of this letter, you (Underwriter) agree to reserve a
place for us (Dealer) in the ABC offering and to sell to us at least 100,000 shares of ABC stock in
that offering."
Assuming that both the underwriter and the dealer would be bound if this letter were initialed and
returned, the letter:
A. Is an illegal offer to purchase securities under the 1933 Act, whether or not the underwriter initials and returns it.
B. Results in an illegal sale under the 1933 Act, if the underwriter initials and returns it prior to
the effectiveness of ABC's registration statement.
C. Is a legal offer to purchase securities under the 1933 Act, but only if it was accompanied or
preceded by a final prospectus.
D. Is a legal offer to purchase securities under the 1933 Act.
E. Both B. and D. above, but neither A. nor C.
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____ 15. During the waiting period:
A. The preliminary prospectus may not be distributed, because it is a written offer.
B. If the preliminary prospectus is not distributed to the proper persons, the S.E.C. may deny
acceleration of the effectiveness of the registration statement.
C. The preliminary prospectus may be distributed, as long as it meets the requirements of 1933
Act § 10(a).
D. Both B. and C. above, but not A.
E. None of the above.
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____ 16. During the post-effective period:
A. Sales of securities may be made, but securities may not be delivered unless they are
accompanied or preceded by a final prospectus.
B. Oral offers are permitted, but only if they comply with 1933 Act § 10(a).
C. Both oral offers and written offers are permitted, but written offers must be accompanied or
preceded by a final prospectus.
D. Both A. and C. above, but not B.
E. None of the above.
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____ 17. So-called "tombstone advertisements":
A. May be used during both the pre-filing and waiting periods.
B. May be used only during the waiting period.
C. May be used during both the waiting and the post-effective periods.
D. May be used only during the post-effective period.
E. May be used only if the underwriters are not the subject of an injunction against future
violations of the securities laws.
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____ 18. Nancy purchased a house to be her principal residence, mortgaging the property to Foist
Bank of Brooklyn. At the closing, she signed a note and a mortgage and delivered each to Foist
Bank. Nancy expected to realize a profit on the eventual sale of her house. The note Nancy
signed:
A. Was a security, because "notes" are among the classes of instruments specifically mentioned in
the 1993 Act definition of the term "security."
B. Was a security, because even though as a general rule Congress did not intend to regulate consumer mortgage notes under the 1933 Act, Nancy expected to realize a profit when the time came
to sell the house.
C. Was not a security, because regardless of the definition of the term "security," the S.E.C. is
prohibited by the doctrine of res ipsa loquitur from asserting that a consumer mortgage note is a
security.
D. Was not a security, because Congress did not intend to regulate certain notes (including consumer mortgage notes) under the 1933 Act.
E. None of the above.
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____ 19. Televid Partners offered for sale to the public general partnership interests in a cable
television franchise. The offering materials stated that each partner would have one vote at
general partners' meetings and would have personal liability for all debts of the partnership.
However, the offering materials continued, the present partners, none of whom were expert in
television technology, intended to hire Selma Louise, a cable television expert, to manage the
business of the partnership. All of these statements were true. The offered partnership interests:
A. Were not securities, because the partners had the legal right to manage the business and
therefore did not "expect profits solely from the efforts of others."
B. Were not securities, because general partnership interests are not listed in the 1933 Act definition of the term "security."
C. Were securities, because neither the present partners nor the offerees had the expertise to
manage the business and could be expected to rely on the expertise of Selma Louise.
D. Were securities, because the Supreme Court has held as a matter of law that general
partnership interests are securities.
E. None of the above.
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____ 20. XYZ Corp. awarded Jeanne, a Vice President, a stock bonus of 1000 shares of XYZ
common stock. The XYZ stock plan under which the award was made stated that "All Vice
Presidents who achieve their annual sales goals will be awarded 1000 shares of the Company's
stock on Dec. 24." Jeanne knew this when she was hired, and she received the bonus because she
met the sales goals. The award to Jeanne:
A. Was a sale of stock, because in accepting employment at XYZ, Jeanne made an investment
decision.
B. Was not a sale of stock, because it amounted to a gift.
C. Was not a sale of stock, because awards under employee benefit plans are not "sales."
D. Was a sale of stock, because XYZ probably expects Jeanne to work harder next year as a
result of receiving the bonus.
E. None of the above.
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____ 21. George wants to sell his business to Hal. For tax reasons, the transaction will be
structured as a sale of 100% of the stock in the corporation conducting the business. From a
business perspective, the transaction could also have been structured as a sale of all assets of the
business. This transaction:
A. Requires registration under the 1933 Act, because it involves a sale of securities.
B. Does not require registration under the 1933 Act, because under the "sale of business doctrine"
the transaction is deemed not to involve a sale of securities.
C. Does not require registration under the 1933 Act, because although it involves a sale of
securities, a sale to one person has never been found to be a public offering.
D. Requires registration under the 1933 Act, but the "sale of business doctrine" makes available a
special, easy-to-fill-out form for registering the transaction.
E. May require registration under the 1933 Act, but only in federal circuits that follow the "sale of
business doctrine."
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____ 22. P Corp. owned 100% of the stock of S Corp. P Corp. planned to acquire 100% of the
stock in C Corp., a company in the same line of business as S Corp. To resolve antitrust concerns
voiced by the Federal Trade Commission, P Corp. decided to distribute the stock of S Corp. to
the holders of P Corp. stock. No money or other consideration would be payable by the P Corp.
stockholders for the S Corp. stock. This transaction:
A. Does not involve the sale of a security, because under 1933 Act Rule 145 the recipients are not
deemed to be underwriters.
B. Does not involve the sale of a security, because the recipients are not required to make an investment decision.
C. Involves the sale of a security, because of the likelihood of resale by the original recipients
within a relatively short time.
D. Involves the sale of a security, because the recipients will receive "restricted stock" under 1933
Act Rule 144.
E. Both C. and D. above, but not A. or B.
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____ 23. Burton Corp. sold $900,000 worth of its common stock on September 1, 1992 in a
transaction under 1933 Act Rule 504. On April 5, 1993, Burton sold $1,500,000 worth of its
common stock, this time under 1933 Act Rule 505. Assuming you know all the relevant facts, on
May 1, 1993, how much stock (in dollar terms) can Burton sell under Rule 504?
A. $0
B. $100,000
C. $500,000
D. $1,000,000
E. $5,000,000
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____ 24. On May 1, 1991, Xylens Co. sold $750,000 worth of its common stock in what it
believed to be a private placement (the "May Offering") under 1933 Act § 4(2). On July 1, 1991,
Xylens sold another $750,000 worth of its common stock (the "July Offering"), this time under
1933 Act Rule 504. If the S.E.C. determines that the May Offering violated 1933 Act § 5, then:
A. Rule 504 will not exempt the July Offering.
B. Rule 504 will exempt the July Offering unless the May and July Offerings are integrated under
applicable S.E.C. rules.
C. Rule 504 will exempt the July Offering unless Xylens has exceeded the limitation on the
number of purchasers under Rule 504.
D. Both B. and C. above, but not A.
E. None of the above.
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____25. With respect to offerings made under Regulation D:
A. Dollar limits apply to offerings made under some, but not all, rules under Regulation D.
B. Resale restrictions apply to offerings made under some, but not all, rules under Regulation D.
C. Limitations on the number of purchasers apply to offerings made under some, but not all, rules
under Regulation D.
D. All of the above.
E. Both A. and C. above, but neither B. nor D.
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____ 26. When an issuer offers securities without registration in reliance on 1933 Act Regulation
D:
A. The issuer must file certain forms with the S.E.C.
B. The offers are technically made in violation of 1933 Act § 5, but the S.E.C. staff agrees in advance not to recommend enforcement action against the issuer.
C. The issuer is not permitted to register a public offering under the 1933 Act for a period of one
year.
D. Both A. and C. above, but not B.
E. None of the above.
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____ 27. On January 1, 1993, Issuer sold $20 million worth of its common stock in an offering,
without registration, in reliance on 1933 Act § 4(2). All legal requirements for the offering were
met at the time the offering was made. On May 1, 1993, Issuer wishes to sell $900,000 worth of
additional shares of its common stock, this time relying on 1933 Act Rule 504 to avoid registration. With respect to the proposed May 1 offering:
A. Issuer can safely rely on Rule 504 to avoid registration.
B. Issuer will violate 1933 Act § 5 if it attempts to rely on Rule 504 to avoid registration.
C. Issuer might be able to rely on Rule 504 to avoid registration, but not enough facts are stated
to permit the conclusion that Rule 504 is available to exempt the May offering.
D. Issuer can rely on Rule 504 to avoid registration, but only if it limits the offering to not more
than $500,000 worth of additional shares.
E. None of the above.
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____ 28. Deb, the Executive Vice President of Ultra Corp., purchased on the New York Stock
Exchange (through her broker) 1000 shares of Ultra common stock. These were the only Ultra
securities Deb owned. Seven months later, Deb sold those shares through her broker. In the sale:
A. Deb was an underwriter under the 1933 Act.
B. Deb's broker was an underwriter under the 1933 Act.
C. Both Deb and her broker were underwriters under the 1933 Act.
D. Neither Deb nor her broker were underwriters under the 1933 Act.
E. Deb was an underwriter under the 1933 Act, but her broker was only an underwriter if it also
qualified as a "dealer" under that Act.
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____ 29. Moira, the Chief Executive Officer of Minc Corp., received 10,000 shares of Minc
common stock as a stock bonus on December 31, 1992. Minc transferred the stock directly to
Moira, without registration, in reliance on 1933 Act § 4(2). On March 1, 1993, Moira wanted to
sell the stock. With respect to the proposed sale:
A. The stock will be deemed to be "restricted" under the 1933 Act.
B. If Moira sells the stock publicly through her broker, and does not comply with the relevant
1933 Act Rules, then both she and her broker will be deemed to be underwriters under the 1933
Act.
C. If Moira sells the stock publicly through her broker, and does not comply with the relevant
1933 Act Rules, then Moira will not be deemed to be an underwriter under the 1933 Act, but her
broker will be deemed to be an underwriter.
D. Both A. and B. above, but not C.
E. None of the above.
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____ 30. John wants to sell publicly 1000 shares of XYZ Corp. common stock that he purchased
directly from XYZ in a private placement. John is neither an officer nor a director of XYZ, and
the 1000 shares are his total holdings of XYZ securities (amounting to less than 0.01% of the
outstanding XYZ common stock). Approximately 500,000 shares of XYZ stock trade each week
in the over-the-counter market. With respect to John's proposed sale:
A. 1933 Act Rule 144 requires him to hold the stock for two years before selling any of it.
B. 1933 Act Rule 144 imposes no holding period requirement on John.
C. 1933 Act Rule 144 permits John to sell the stock free of restrictions on quantity of shares sold
or manner of sale, if he has held the stock for at least three years.
D. Both A. and C. above, but not B.
E. None of the above.
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____ 31. Barry, an executive officer and director of Barco, Inc., sold 2000 shares of Barco
common stock to Harriet in a one-on-one, negotiated transaction. Barry had acquired the shares
10 months earlier in a purchase made through a broker on the New York Stock Exchange.
Barry's sale to Harriet:
A. Violated 1933 Act § 5, unless Harriet qualified as a proper buyer in a private placement under
the Ralston Purina case and its progeny.
B. Violated 1933 Act § 5, unless Barry effectively restricted Harriet's ability to resell the stock so
that a sale by her would not result in a distribution of the Barco stock.
C. Violated 1933 Act § 5, unless the requirements specified in choices A. and B. above are both
met.
D. Did not violate 1933 Act § 5, regardless of whether Harriet qualified as a proper buyer or
Barry restricted her resales.
E. Violated 1933 Act § 5, regardless of whether Harriet qualified as a proper buyer or Barry
restricted her resales.
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____ 32. A registration statement of XYZ Corp. turned out to contain a material misstatement of
fact. Assume that the statute of limitations has not run. Which of the following actions may
properly be brought by retail purchasers:
A. An action under 1933 Act § 11 against XYZ, its directors, and its officers who signed the
registration statement.
B. An action under 1933 Act § 12(1) against XYZ and its directors.
C. An action under 1933 Act § 12(2) against XYZ and its directors.
D. Both A. and C. above, but not B.
E. None of the above.
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____ 33. On October 1, 1992, Elcorp Co. completed a public offering of its common stock, at $8
per share. Shortly thereafter, Jaye purchased 100 shares of Elcorp common stock through a
broker, paying $10 per share. Three months after her purchase, on the same day that the price of
Elcorp common stock fell to $5 per share, Jaye filed suit against Elcorp under 1933 Act § 11,
claiming that the registration statement for the offering contained material misstatements. By the
end of that year, and before any judgment in Jaye's case, Elcorp stock fell to $2.00 per share.
Jaye sold all her shares at that time, realizing $200 from the sale (100 shares x $2). The maximum
amount of damages Jaye can recover under § 11 is:
A. $800
B. $600
C. $500
D. $300
E. None of the above.
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May you each have a healthy and happy holiday, and to those that are
graduating, my best wishes in your careers!