Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) New SEC rules require firms to report option grants within two days of the grant date, which may help prevent further abuses.
• B) Studies have found evidence that the practice of timing the release of information to maximize the value of CEO stock options is widespread.
• C) Managers have an incentive to manipulate the release of financial forecasts so that good news comes out before options are granted and bad news is delayed until after the options are granted.
• D) The factor contributing most to the climb in CEO total compensation for the 1990s was the sharp increase in the value of stock and options granted each year.

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Definitions:

Ponzi Scheme

A fraudulent investing scam promising high rates of return with little risk to investors, which generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities.

Sarbanes-Oxley Act

An act that criminalizes specific nonaudit services when provided by a registered accounting firm to an audit client; also increases the punishment for a number of white-collar offenses. Also known as the Public Company Accounting Reform and Investor Protection Act of 2002.

Investment Company Act

A U.S. federal law enacted in 1940 aimed at regulating investment companies to protect investors by enforcing transparency and reducing conflicts of interest.

Finance Companies

Businesses that provide loans to individuals or corporations, excluding banks and other traditional financial institutions.