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Los Angeles Lawyer
The Magazine of the Los Angeles County Bar Association

February 2002
MCLE Test and Answer Sheet

Test No. 103: Tied to the Stake

Instructions for Obtaining MCLE Credits
The Los Angeles County Bar Association certifies that this activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1 hour.

1.Study the CLE article in this issue.


2.Answer the test questions by marking the appropriate boxes. Each question has only one answer. Photocopies of this answer sheet may be submitted; however, this form should not be enlarged or reduced.

3.Mail the answer sheet and the $15 testing fee ($20 for non-LACBA members) to:
Los Angeles Lawyer
MCLE Test
P.O. Box 55020
Los Angeles, CA 90055 
Make checks payable to Los Angeles Lawyer.

4.You can also fill in the test form and submit it directly to LACBA by clicking "Submit." To submit your test answers online you will need to pay by credit card. After submitting your answers you will be presented with a screen requesting payment information. This information will be submitted in a secure mode which will allow you to safely transmit your credit card number over the Internet. If you prefer not to pay by credit card, please print this answer sheet and submit your responses by regular mail.

5.Within six weeks, Los Angeles Lawyer will return your test with the correct answers, a rationale for the correct answers, and a certificate verifying the CLE credit you earned through this self-assessment activity.

6.For future reference, please retain the CLE test materials returned to you.
Test Sheet 
Mark your answers to the test by clicking next to your choice. All questions must be answered.  Each question has only one answer. This test is worth 1 hour of credit.*

1. In Central Bank of Denver v. First Interstate Bank of Denver, the U.S. Supreme Court held that a private right of action for securities violations caused by alleged aiders and abettors could be brought under Section 10(b) of the Securities and Exchange Act of 1934.
True.
False.

2. The Supreme Court in Central Bank of Denver ruled that both primary and secondary liability claims could not be brought against securities professionals under Section 10(b).
True.
False.

3. Prior to Central Bank of Denver, attorneys who were actively involved in the drafting of clients’ offering documents that contained misstatements:
A. Were not subject to claims under Section 10(b).
B. Always had a duty to correct the misstatements.
C. Always were equally liable with their clients as primary violators of Section 10(b).
D. Faced liability under Section 10(b) only in certain jurisdictions.

4. Prior to Central Bank of Denver, district courts in the Ninth Circuit had not addressed whether an attorney could be liable for a primary violation under Section 10(b) for misstatements in offering documents.
True.
False.

5. No cases subsequent to Central Bank of Denver have held attorneys liable for primary violations of Section 10(b) in connection with misstatements in offering documents.
True.
False.

Unlike attorneys, accountants cannot be liable as primary violators under Section 10(b).
True.
False.

7. In 1995, the Public Securities Law Reform Act (PSLRA) eliminated the requirement that plaintiffs allege or prove scienter in claims brought under the Securities and Exchange Act of 1934.
True.
False.

8. The Ninth Circuit requires that scienter be pled in great detail, with facts that constitute strong circumstantial evidence of deliberately reckless or conscious misconduct.
True.
False.

9. Attorneys who have an equity interest in a client and who have been sued for securities fraud will have a difficult time prevailing on a motion to dismiss because:
A. The attorneys arguably have a divided loyalty between their client’s interests and their own interests.
B. The judgment of the attorneys arguably has been impaired by their financial interest in the client.
C. The attorneys have an interest greater than the fee they will earn through representing the client.
D. All of the above.

10. Prior to 1998, a California plaintiff alleging that an attorney acted recklessly could state a claim for aiding and abetting under the Corporations Code.
True.
False.

11. Which of the following was not one of the goals of Congress when it enacted the Securities Litigation Uniform Standards Act (SLUSA) in 1998?
A. The creation of national standards for securities fraud.
B. Making filing and prevailing in class action securities fraud claims more difficult.
C. Making state law negligence claims the sole remedy for securities law violations.
D. Extending the PSLRA’s heightened pleading requirements.

12. SLUSA only affects claims that require allegations of scienter.
True.
False.

13. SLUSA is intended to affect which of the following claims?
A. Fraud in connection with securities not publicly traded.
B. Fraud in connection with securities that are exempt from registration under federal law.
C. Common law negligence claims.
D. Claims like those under Section 10(b) that require scienter.

14. California does not have laws regulating the sale of securities, so complaints must allege violations of federal law.
True.
False.

15. Claims against attorneys for aiding and abetting that are based on state law likely cannot survive in light of SLUSA and Central Bank of Denver.
True.
False.

16. Central Bank of Denver prohibits the SEC from bringing claims against attorneys for aiding and abetting.
True.
False.

17. The SEC can obtain injunctive relief enjoining attorneys from practicing before the SEC if there is a finding that an attorney violated federal securities laws.
True.
False.

18. An attorney sued for violation of federal securities laws has no basis to assert a claim for coverage under an attorney malpractice insurance policy.
True.
False.

19. The Second, Third, Sixth, and Ninth Circuits are in accord on the pleading requirements for scienter following passage of the PSLRA.
True.
False.

20. An attorney can avoid all liability for primary or secondary securities laws violations by reading this month’s MCLE article in Los Angeles Lawyer and taking the accompanying MCLE test.
True.
False.

Address and Billing 
After submitting your answers you will be asked to enter your name, address, and payment information on the next screen. Once you have submitted the current form, you will be switched to a secure mode which will allow you to safely transmit your credit card number over the Internet.

If you do not wish to complete this transaction over the Internet you should print this page and send it to the address listed in Step 3 of the instructions at the top of this page.

  
Before hitting the "Submit" button please verify that all questions have been answered.

*The Los Angeles County Bar Association has been approved as a continuing legal education provider of Minimum Continuing Legal Education credit by The State Bar of California. This self-assessment activity will qualify for Minimum Continuing Legal Education credit by The State Bar of California in the amount of one hour.

   
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