Question

1. Which of the following statements about due diligence is false?
a. It is designed to ensure the legitimacy of securities offered to the public.
b. It is designed to ensure that there is no misleading information when companies issue shares.
c. It is expensive to implement.
d. There is no cost to implement it.

2. Which of the following statements about asymmetric information is false?
a. There is asymmetric information between managers and investors.
b. There is no asymmetric information in the used car market.
c. A prospectus is designed to reduce information asymmetry in the capital market.
d. Information asymmetry varies across corporations.

3. Which of the following statements about Ponzi schemes is false?
a. Such schemes are named after Carlo Ponzi, an Italian born in 1882 who immigrated to the United States.
b. Ponzi schemes are legal in Canada.
c. There were cases of Ponzi schemes in the United States.
d. There were cases of Ponzi schemes in Canada.

4. Which of these pieces of information is not required in an IPO prospectus by the British Columbia Securities Commission?
a. A description of the securities being issued and who can buy them
b. The price of the securities, the fees to the investment dealer involved with the distribution, and the net proceeds
c. The market for the securities—that is, whether they will be traded
d. The CEO’s resume

5. Which of the following regulators does not exist in Canadian securities markets?
a. Ontario Securities Commission
b. British Columbia Securities Commission
c. Federal Securities Commission
d. Quebec Securities Commission

6. Which of the following statements is false?
a. An IPO is assumed to have the least information asymmetry.
b. An IPO is the distribution of securities from the corporation to the investors.
c. An IPO is the first-time distribution of securities.
d. “Full, true, and plain” means every material fact has to be disclosed.

7. The market for non-registered securities is called the:
a. Non-registered market.
b. Secondary market.
c. Primary market.
d. Exempt market.

8. Which of the following statements about the exempt market is false?
a. “Backdoor underwriting” refers to the practice of slipping securities from the exempt market into the public market.
b. In the exempt market, the issuer prepares a prospectus too.
c. Only if the issuer becomes a reporting issuer can the issuer sell securities in the public market.
d. The exemption from prospectus requirement is based on smaller issues, the sophistication of the potential investors, and the risk of the securities.

9. Which of the following issuers is not exempt?
a. Government debt issuers
b. Financial institution debt issuers
c. Securities issued as part of takeovers
d. Private firms issuing large amounts of stocks

10. Which of the following statements about public offerings is false?
a. There are four types of offerings: a best efforts offering, a firm commitment offering, a bought deal, and a standby or rights offering.
b. Bought deal offerings and standby offerings are used only for seasoned offerings.
c. Most IPOs are best efforts offerings.
d. A lead investment dealer and a banking syndicate are involved in larger issues.

11. Which of the following is not a main component of continuous disclosure?
a. Filing of quarterly financial statements
b. Filing of annual financial statements
c. Filing of proxy and information circulars
d. Filing of monthly financial statements

12. Which of the following statements about seasoned offerings is false?
a. A seasoned offering’s prospectus has the same content as the prospectus for an IPO.
b. A seasoned offering has less information asymmetry than an IPO.
c. A seasoned offering allows the use of a short-form prospectus.
d. A seasoned offering is the offering after the firm goes public.



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  • CreatedFebruary 25, 2015
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