Which of the Following Is False Regarding Classification of Principals

question 76

Multiple Choice

Which of the following is false regarding classification of principals?

• A) If the third party is aware of the principal's existence but not his or her identity, the principal is classified as a disclosed principal.
• B) When the third party is aware that the agent is making an agreement on behalf of a principal and also knows who the principal is, the principal is a disclosed principal.
• C) An unidentified principal is in the same classification as a partially disclosed principal.
• D) If the third party does not know that an agent is acting on behalf of a principal, an undisclosed principal is involved.
• E) Classification of the principal is important because it helps determine the principal's liability.

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Definitions:

Registered Bonds

Bonds that are registered in the name of the holder and require transfer of ownership when sold, contrasting with bearer bonds.

Transfer Agent

An organization that keeps records of the owners of a company’s securities. When a security is sold by one investor to another, ownership is transferred on the record by the transfer agent.

SEC

The Securities and Exchange Commission, a U.S. federal agency responsible for enforcing federal securities laws and regulating the securities industry.

Company

An legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise.