WCC Final Exam Test Bank 1 Newest 2026-2027

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WCC Final Exam Test Bank 1 Newest 2026-2027 Actual Exam With Complete Questions And Correct Detailed Answers (Verified Answers) |Already Graded A+

How does investment fraud impact the economy? - ANSWER-It can lead to significant financial losses, reduce capital available to companies, and undermine market integrity.

What is the potential annual range of investment fraud in the U.S.? - ANSWER-$10-$40 billion.

What is the importance of transparency in securities regulation? - ANSWER-It allows investors to make informed decisions and helps prevent fraud.

What happens to stock prices upon the release of earnings reports? - ANSWER-Stock prices can fluctuate greatly based on the reported earnings.

What is the consequence of willful violations of securities laws? - ANSWER-They can be prosecuted as crimes by the Department of Justice.

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What does Rule 10b-5 prohibit? - ANSWER-It makes it illegal to employ a device, scheme, or artifice to defraud; make untrue statements of material fact; or engage in practices that operate as fraud or deceit.

What are the elements required to prove a violation under the Exchange Act of 1934? - ANSWER-The defendant must have engaged in a fraudulent scheme, made a material misstatement or omitted material information, the act occurred in connection with a security transaction, and the defendant acted willfully.

What is the definition of 'Mens Rea' in the context of securities fraud? - ANSWER-Mens Rea refers to the deliberate and intentional commission of a prohibited act, where the defendant must know their conduct was unlawful.

How can willfulness be proven in securities fraud cases? - ANSWER- Willfulness can be proven circumstantially, including through the concept of willful blindness or deliberate ignorance.

What are the key elements of the Sarbanes-Oxley Act of 2002? - ANSWER-The defendant must knowingly execute a scheme to defraud, the statements made must be material, the defendant must act with intent to defraud, and the scheme must be in connection with securities transactions.

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What is one type of securities fraud involving misstatements? - ANSWER-Misstatements on a public company's financial reports.

What is 'Insider Trading'? - ANSWER-Trading on the basis of material, nonpublic information.

What did the Supreme Court rule in Strong v. Repide regarding insider trading? - ANSWER-A director must disclose inside information to the public or abstain from trading.

What is the Traditional/Classical theory of insider trading? - ANSWER- It involves trading based on secret information from a company in violation of a duty to shareholders.

What is the Misappropriation theory of insider trading? - ANSWER-It involves trading by someone who takes information in violation of a fiduciary duty to the source of the information.

What are the elements required to establish insider trading? - ANSWER- The defendant must have bought or sold securities, enjoyed special status as an insider or misappropriator, knowingly possessed material nonpublic information, and acted willfully.

What constitutes material information in insider trading? - ANSWER- Information that would significantly affect an investor's decision to invest or alter the total mix of information available. 3 / 4

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What is 'Tipper/Tippee Liability'? - ANSWER-It refers to the liability of a tippee who trades on material nonpublic information received from a tipper who breached a duty.

What must a tipper do to establish liability? - ANSWER-The tipper must be an insider, act for personal gain, and the tippee must have obtained material nonpublic information and acted willfully.

What was the significance of Dirks v. SEC in insider trading law? - ANSWER-It established the requirements for tipper and tippee liability in insider trading cases.

What is the maximum punishment under the Sarbanes-Oxley Act for securities fraud? - ANSWER-25 years.

What is 'Pump and Dump' in the context of securities fraud? - ANSWER-A scheme to artificially inflate the price of a stock through misleading positive statements to sell it at a higher price.

What is 'Stock Parking'? - ANSWER-Selling shares with the understanding that the seller will buy them back later.

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