CPCU 552 QUIZ QUESTIONS & ANSWERS
Which one of the following is a major responsibility of corporate directors?
a) to perpetuate a competent board through regular elections
b) to manage investments and disbursements of the corporation's assets
c) to create the proper annual & interim reports for shareholders
d) to establish the procedures & operational goals for each department - Answer -a
Corporate directors are considered to have met their duty of care if they:
a) Discharge their responsibilities according to the same standards that an employee of
the organization would use
b) Act in good faith and in a manner they reasonably believe to be in the best interests
of the corporation
c) Conduct themselves in a manner that guarantee's the enterprise's profitability
d) Make informed decisions based upon their special business skills - Answer -b
Directors' and Officers' fiduciary duties include the duty of:
a) Trustworthiness
b) Reliability
c) Obedience
d) Credibility - Answer -c
A lawsuit brought by one or more shareholders in the name of the corporation is a:
a) Derivative lawsuit
b) Class action lawsuit
c) Fiduciary lawsuit
d) Retaliation lawsuit - Answer -a
A corporation's directors are:
a) Elected by the corporation's officers
b) Appointed by the corporation's officers
c) Elected by the corporation's shareholders
d) Appointed by the corporation's management - Answer -c
A typical securities class action complaint contains an allegation such as:
a) Directors and officers have failed to fulfill legal duties owed to employees under the
Employee Retirement Income Security Act of 1974 (ERISA)
b) Directors and officers have violated state environmental statutes
,c) Insiders have profitably sold their personal holdings in the company's shares while
the share price was artificially inflated
d) Directors and officers have used the corporate jet for personal use - Answer -c
Although a corporation's directors and officers must exercise care when making
decisions about the running of the company, courts have held that they cannot be held
liable for honest mistakes. This latitude allowed by courts to officers and directors is
called the:
a) Business judgment rule
b) Nonjudgmental rule
c) Due diligence rule
d) Honest mistake rule - Answer -a
Directors and officers are considered to have met their duty of care if they have met 2
standards. Which one of the following is one of these standards?
a) Maintaining and enforcing the corporate charter & bylaws.
b) Approve important financial matters & corporate reports
c) Act in a manner believed to be in the corporation's best interests
d) Be involved in establishing the goals & policies of the organization - Answer -c
Which one of the following is a fiduciary duty of directors and officers?
a) Duty of information
b) Duty of care
c) Duty of adherence
d) Duty of consent - Answer -b
The director of a corporation has been named in a suit brought by a stockholder of the
corporation alleging a failure to correct inaccurate statements made within its
prospectus. What is the classification of the suit made:
a) Non-derivative suit
b) Civil suit
c) Derivative suit
d) Class action - Answer -a
Which one of the following is a distinguishing characteristic of a derivative suit?
a) Damages recovered, except for the expenses of bringing the suit, go directly to the
corporation.
b) It is brought by one or more individuals representing the interests of an entire group
of people.
c) Persons outside of the corporation may initiate such lawsuits.
, d) Such lawsuits are made in the name of individual customers or employees. - Answer
-a
A common defense used to protect directors and officers against claims that allege a
breach in the duty of care is the:
a) Ultra vires rule
b) Securities & Exchange Act of 1934
c) CLass-Action Fairness Act of 2005
d) Business judgment rule - Answer -d
A shareholder may bring a derivative suit against a director or officer for having
ownership in a competing business. This is a breach of their:
a) Loyalty
b) Obedience
c) Disclosure
d) Care - Answer -a
A corporation owned by its shareholders is controlled by its:
a) Management
b) Board of Advisors
c) Proxies
d) Board of Directors - Answer -d
Directors and officers of a corporation owe special duties to the stockholders of that
corporation. Those duties include: the duty of care; the duty of loyalty; the duty of
disclosure; and the duty of obedience. What is the term used to describe these duties?
a) Legal
b) Moral
c) Fiduciary
d) Ethical - Answer -c
Jean is a director on the board of an apparel promotion company. Towards the
company, Jean owes a duty of:
a) Undivided time
b) Profitability
c) Divided loyalty
d) Undivided loyalty - Answer -d
Under common law and the Securities & Exchange Act of 1934, no director or officer
can sue which one of the following types of information to buy or sell corporation stock?
Which one of the following is a major responsibility of corporate directors?
a) to perpetuate a competent board through regular elections
b) to manage investments and disbursements of the corporation's assets
c) to create the proper annual & interim reports for shareholders
d) to establish the procedures & operational goals for each department - Answer -a
Corporate directors are considered to have met their duty of care if they:
a) Discharge their responsibilities according to the same standards that an employee of
the organization would use
b) Act in good faith and in a manner they reasonably believe to be in the best interests
of the corporation
c) Conduct themselves in a manner that guarantee's the enterprise's profitability
d) Make informed decisions based upon their special business skills - Answer -b
Directors' and Officers' fiduciary duties include the duty of:
a) Trustworthiness
b) Reliability
c) Obedience
d) Credibility - Answer -c
A lawsuit brought by one or more shareholders in the name of the corporation is a:
a) Derivative lawsuit
b) Class action lawsuit
c) Fiduciary lawsuit
d) Retaliation lawsuit - Answer -a
A corporation's directors are:
a) Elected by the corporation's officers
b) Appointed by the corporation's officers
c) Elected by the corporation's shareholders
d) Appointed by the corporation's management - Answer -c
A typical securities class action complaint contains an allegation such as:
a) Directors and officers have failed to fulfill legal duties owed to employees under the
Employee Retirement Income Security Act of 1974 (ERISA)
b) Directors and officers have violated state environmental statutes
,c) Insiders have profitably sold their personal holdings in the company's shares while
the share price was artificially inflated
d) Directors and officers have used the corporate jet for personal use - Answer -c
Although a corporation's directors and officers must exercise care when making
decisions about the running of the company, courts have held that they cannot be held
liable for honest mistakes. This latitude allowed by courts to officers and directors is
called the:
a) Business judgment rule
b) Nonjudgmental rule
c) Due diligence rule
d) Honest mistake rule - Answer -a
Directors and officers are considered to have met their duty of care if they have met 2
standards. Which one of the following is one of these standards?
a) Maintaining and enforcing the corporate charter & bylaws.
b) Approve important financial matters & corporate reports
c) Act in a manner believed to be in the corporation's best interests
d) Be involved in establishing the goals & policies of the organization - Answer -c
Which one of the following is a fiduciary duty of directors and officers?
a) Duty of information
b) Duty of care
c) Duty of adherence
d) Duty of consent - Answer -b
The director of a corporation has been named in a suit brought by a stockholder of the
corporation alleging a failure to correct inaccurate statements made within its
prospectus. What is the classification of the suit made:
a) Non-derivative suit
b) Civil suit
c) Derivative suit
d) Class action - Answer -a
Which one of the following is a distinguishing characteristic of a derivative suit?
a) Damages recovered, except for the expenses of bringing the suit, go directly to the
corporation.
b) It is brought by one or more individuals representing the interests of an entire group
of people.
c) Persons outside of the corporation may initiate such lawsuits.
, d) Such lawsuits are made in the name of individual customers or employees. - Answer
-a
A common defense used to protect directors and officers against claims that allege a
breach in the duty of care is the:
a) Ultra vires rule
b) Securities & Exchange Act of 1934
c) CLass-Action Fairness Act of 2005
d) Business judgment rule - Answer -d
A shareholder may bring a derivative suit against a director or officer for having
ownership in a competing business. This is a breach of their:
a) Loyalty
b) Obedience
c) Disclosure
d) Care - Answer -a
A corporation owned by its shareholders is controlled by its:
a) Management
b) Board of Advisors
c) Proxies
d) Board of Directors - Answer -d
Directors and officers of a corporation owe special duties to the stockholders of that
corporation. Those duties include: the duty of care; the duty of loyalty; the duty of
disclosure; and the duty of obedience. What is the term used to describe these duties?
a) Legal
b) Moral
c) Fiduciary
d) Ethical - Answer -c
Jean is a director on the board of an apparel promotion company. Towards the
company, Jean owes a duty of:
a) Undivided time
b) Profitability
c) Divided loyalty
d) Undivided loyalty - Answer -d
Under common law and the Securities & Exchange Act of 1934, no director or officer
can sue which one of the following types of information to buy or sell corporation stock?
