Reg Cpafree Fed Regulations Memorize

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Affirmative defenses to actions under the bribery provisions of the Foreign Corrupt Practices Act include:

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(1) the payments or gifts which were lawful under the laws of the foreign official's, political party's, party official's, or candidate's country; or
(2) the payments were a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to the promotion, demonstration, or explanation of products or services; or the execution or performance of a contract with a foreign government or agency thereof.

Front 2

ConEx began its year forecasting annual earnings per share in the range of $13.90 to $14.30. In June ConEx revised that estimate to $11.70 to $12.00 per share. On August 15th, ConEx lowered its earnings estimate to $9.00 to $9.25 per share, which it reaffirmed in a press release. October 12, Bear, ConEx's CEO, met privately with analysts from three investment and brokerage firms. When one of the analysts asked about ConEx's earnings guidance for the year, Bear reaffirmed the previous guidance. ConEx's company policy was to respond that the earnings guidance "was effective at the date given and would not be updated until the company publicly announced updated guidance." Which is correct?


A Bear is not in violation of Regulation FD (Full Disclosure) since his statement was in response to a legitimate inquiry.
B Even if Bear has violated Regulation FD, ConEx is not in violation.
C ConEx must immediately file with the SEC a Form 8-K confirming that it has reaffirmed its full year estimated earnings per share.
D There has been no violation of Regulation FD since the disclosure was not material.

Back 2

The correct answer was C.

Both Bear and ConEx are in violation of Regulation FD. S.E.C. regulation FD ("Full Disclosure") requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large. In the case of an unintentional disclosure of material non-public information to one person, the company must make a public disclosure "promptly." Bear's confirmation to analysts in a private meeting of its previous earnings estimates, especially at a time when ConEx's earnings have been falling dramatically, would violate Regulation FD and should be promptly followed by an 8-K disclosure filed with the SEC.

Front 3

Section 401 of the Sarbanes-Oxley Act requires that financial statements published by issuers be

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accurate and presented in a manner that does not contain incorrect statements or omit material information.
Also, each annual and quarterly financial report must disclose all material off-balance sheet transactions and "other relationships" with "unconsolidated entities" that may have a material current or future effect on the financial condition of the issuer.

Front 4

Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 must be accompanied by a certification of the chief executive officer and chief financial officer that the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Violations of this provision may result in

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Whoever certifies any statement knowing that the periodic report accompanying the statement does not comport with all the requirements as set forth in Sarbanes-Oxley may be fined up to $1,000,000 or imprisoned up to 10 years, or both. Willfully violations may result in fines of up to $5,000,000 and imprisonment up to 20 years, or both.

Front 5

What are the provisions and regulations of Section 302 of the Sarbanes-Oxley Act of 2002?

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Sarbanes-Oxley amends securities laws to prohibit an issuer from making personal loans to officers and directors.
Under Section 302 and its regulations of the Sarbanes-Oxley Act of 2002 a chief executive or financial officer must disclose internal audit deficiencies to the company's auditors or audit committee;
management must evaluate any changes in internal control methods;
and, the company's attorneys must report securities laws violations and breaches of fiduciary duties to the CEO.

Front 6

Crawford & Co., CPA has been engaged by Brace Incorporated to prepare an annual report to Brace's shareholders. In connection with the annual report, section 404 of the Sarbanes-Oxley Act of 2002 requires all of the following except:


A the inclusion of an internal control report which states the responsibility of management for establishing and maintaining an adequate internal control structure.
B the auditor's evaluation may not be the basis for increased charges or fees.
C the auditor must attest to, and report on, the assessment made by the management of the issuer.
D the annual report must contain an internal control report which contains an assessment, as of the end of the issuer's fiscal year, of the effectiveness of the internal control structure.

Back 6

The correct answer was B.

Section 404 of the Sarbanes-Oxley Act requires the inclusion in the annual report of an internal control report which states the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; Each issuer's auditor must attest to, and report on, the assessment made by the management of the issuer; and, the annual report must contain an internal control report which contains an assessment, as of the end of the issuer's fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting. A legislative Committee report explained the provision as follows: "[T]he Committee does not intend that the auditor's evaluation be the subject of a separate engagement or the basis for increased charges or fees."

Front 7

Under Sarbanes-Oxley, each periodic report must be accompanied with

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a statement from its CFO or CEO that the reports fairly represent the financial condition of the company.
The Act does not require mailing to shareholders nor does it require the signatures of all officers. Willful violations can result in both civil and criminal penalties.

Front 8

Section 409 of the Sarbanes-Oxley Act requires that issuers disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that

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are easy to understand,
and may include graphic presentations if appropriate.
Real time disclosures might also be supported by disclosures of trends and by qualitative information.

Front 9

Perry Corporation wishes to issue, in a public offering, preferred non-cumulative stock. Misstatements contained in financial statements which are a part of Perry's registration statement will subject Perry Corporation to liability for damages ONLY if the misstatements are

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material.
The correct answer was A.

For liability to be incurred under the 1933 Securities Act three things must be established: misstatement or omission of a fact, materiality of the fact, and damages. Neither fraudulent intent nor negligence is required.

Front 10

The majority of securities regulations are aimed at:

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the fair and full disclosure of all material information relating to the markets and to specific securities transactions, as well as the financial reporting by public companies.

Front 11

The Federal Securities Laws include of a series of statutes, and in turn a series of regulations. The two main statutes involved in the Federal Securities laws are the the Securities Act of 1933 and the the Securities Exchange Act of 1934. Which is a correct statement with respect to these laws and regulations?

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In general, the Securities Act of 1933 governs the ORIGINAL issuance of securities by companies, and
the Securities Exchange Act of 1934 governs the trading, purchase and sale of those securities.
Rule 10b-5, and Section 10b are known as the anti-fraud provisions of the Securities Exchange Act of 1934. Rules adopted pursuant to Section 10b of the '34 Act (not the 1933 Act) include the insider trading and market manipulation rules.

Front 12

Which of the following is an example of a creditor remedy involving an involuntary lien on tangible personal property?

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An artisan's lien is a lien on personal property imposed by law for nonpayment of a debt relating to an improvement on or repair to an item of personal property.

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A second mortgage is

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a voluntary lien on real estate.

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A garnishment involves

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an involuntary lien on money (intangible personal property).

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A judgment is

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an order by a court indicating an amount owed and to whom it is owed.

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This act prohibits businesses which regularly extend credit from discriminating on the basis of sex, race, national origin, age or religion:

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Fair Debt Collection Practices Act
The Equal Credit Opportunity Act of 1974 was originally designed to eliminate the practice of lenders refusing to extend credit to women of child bearing age. Many other bases of discrimination are proscribed by the Act.

Front 17

The SEC of 1934 is applicable to any firm whose shares are _____________ and also to any firm with _______ shareholders and gross assets of __________.

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Listed on a national securities exchange
at least 500
at least $10 million

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A sale or offer to sell the securities is made by a person OTHER THAN an issuer, underwriter, or dealer is _________ under the Sec. act of 1933

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EXEMPT FROM REGISTRATION

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NO offering is exempt form the ANTIFRAUD provisions of the ________

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1933 Act

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Non audit items of less than _____ of total amount paid by the client would not necessarily require pre-approval by the audit committee.

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5%

Front 21

Securities of charitable orgainzations and bonds by municiplities for gov. purposes are ________ registration

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EXEMPT ROM REGISTRATION

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SUMMERY REQUIREMENTS OF REGULATION D (MEMORIZE)
1 Advertisingt allowed?
2 Notice req. to SEC
3 Resale allowed ?
4 Dollar limitation? 504,505,506
5. limits on Uncredited buyers?504,505,506
6. limits on Accredited buyers?

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1. NO
2. 15 DAYS
3. AFTER 2 YEARS
4. $1 mln, $5mln, no limit
5. no limit, up to 35, up to 35 sophisticated
6 NO LIMIT

Front 23

UNDER what regulation the issuer files
1. OFFERING CIRCULAR
2. SALES may not exceed $5mln in 12 months.

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REGULATION A
- it is partial exemption, cost less, small offering.

Front 24

1. __________ req. NO proof of scienter , reliance or negligence; show acquisition of sock, damages, and that there was a material misrepresentation of material omission of fact in the registration statement.
2. _________ does REQUIRE proof of scienter and reliance;show acquisition of sock, damages, and that there was a material misrepresentation of material omission of fact in the registration statement, SCIENTER and RELIANCE.

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1. SECTION 11 OF 1933
2. RULE 10-b of the 1934

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1. regulating disclosure of facts about listed securities
2. regulating securities brokers
3. investigating securities fraud
ARE ____________

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DUTIES OF THE SEC

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_________ is an UNSECURED promissory note (bond)to pay a specified amount on a specified date

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A DEBENTURE

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INTRASTATE offerings are exempt from the registration req-ts of the ________

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Sec. Act of 1933

Front 28

The registration req-ts of the SEC Act of 1934 apply to ___________ , rather than to the securities offering.

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ISSUERS, UNDERWRITERES, BROKERS, AND EXCHANGES

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_________ are officers, directors, more than 10% stockholders,accountants or attorneys of a company registered under the 1934 Act

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INSIDERS

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1. 10Q, 10K, 8K
2 5% or more owners
3. Tender Offerers - one making the offer
4. Insider trading
5 . Proxy solicitations and Proxy statements
ARE NAMES OF THE _____

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PERIODIC REPORTS
THAT ARE REQUIRED UNDER 1934 ACT