How does Section 16(b) of the Securities Exchange Act of 1934 protect the interests of a corporation? Explain with an example
What will be an ideal response?
Section 16(b) of the Securities Exchange Act of 1934 requires that any profits made by a statutory insider on transactions involving short-swing profits—that is, trades involving equity securities occurring within six months of each other—belong to the corporation. The corporation may bring a legal action to recover these profits. Involuntary transactions, such as forced redemption of securities by the corporation or an exchange of securities in a bankruptcy proceeding, are exempt. Section 16(b) is a strict liability provision. Generally, no defenses are recognized. Neither intent nor the possession of inside information need be shown.
Example—Rosanne is the president of a corporation and a statutory insider who does not possess any inside information. On February 1, she purchases one thousand shares of her employer's stock at $10 per share. On June 1, she sells the stock for $14 per share. The corporation can recover the $4,000 profit because the trades occurred within six months of each other.
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A business accepts a 12 percent, $19,000 note due in three years. Assuming simple interest, how much will the business receive when the note falls due?
a. $21,280 b. $25,840 c. $23,560 d. $19,000
What is the ‘tension’ relating to values highlighted by Aronson (1960) ___________?
a. Humans are social animals living in a state of tension between values associated with their individuality and values associates with social conformance b. Humans are social animals that control tension because they create values to establish norms of how to get along as individuals and as a society c. Humans are social animals that use values as the building blocks of their culture, and so use culture to control tension d. All of the above
Some think that renewed focus on exchange rates would be a good path forward for the IMF, which is struggling with core issues related to its purpose.
Answer the following statement true (T) or false (F)
On May 18 of last year, Carter sells unlisted stock with a cost of $24,000 for $60,000. Carter collects $20,000 initially and is scheduled to receive $10,000 each year for four years starting this year plus an acceptable rate of interest. After receiving the first $10,000 scheduled installment payment, Carter is unable to collect any further payments. After incurring legal fees of $1,000, Carter recovers a portion of the stock valued at $26,000. As a result of the repossession, Carter must report
A. ordinary income of $13,000. B. ordinary income of $9,000. C. capital gain of $9,000. D. capital gain of $13,000.