Fact Pattern 37-1

question 7

Multiple Choice

Fact Pattern 37-1
Fresh Cream, Inc., wants to make an initial public offering of securi?ties. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.
-Refer to Fact Pattern 37-1. Fresh decides to sell its new securities via the Internet. This offering

• A) will avoid the payment of commissions to brokers or underwriters.
• B) is an investment scam.
• C) is a Ponzi scheme.
• D) constitutes insider trading.

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Definitions:

External Costs

These are costs of a transaction that affect someone who did not choose to incur that cost, often not reflected in the market prices.

Adverse Selection

A situation in which one party in a transaction has more or better information than the other, often leading to an imbalance and inefficient market outcomes.

Home Insurance

A type of insurance policy that provides coverage for damages or losses to an individual’s residence and possessions.

Pollution Abatement

Actions taken to reduce, control, or eliminate pollution from a given source.