Practice Quiz

CLEP Business Law

Category - Legal Envrmt

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Richie, a shrewd investor, just purchased 6% of the equity of Inter-Net, Inc. Why must Richie report this transaction to the Securities and Exchange Commission (SEC)?
  1. Because of concerns about insider trading issues.
  2. Because of concerns that the transaction is unconscionable.
  3. Because of concern that the trade is erroneous.
  4. Because of concerns about a possible takeover.
  5. None of the above.
Explanation
Answer: D. Richie must report this transaction to the Securities and Exchange Commission (SEC) because of concerns about a possible takeover. Under SEC rules, if someone purchases more than 5% of the equity of a company, the purchase must be reported to the SEC because of the takeover potential the purchase may pose.
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