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Cross-8e: Question with Sample Answer
Chapter 29: Investor Protection and Corporate
Governance
29–2. Question with Sample Answer: Registration Requirements.
Huron Corp. has 300,000 common shares outstanding. The owners of these
outstanding shares live in several different states. Huron has decided to split the
300,000 shares two for one. Will Huron Corp. have to file a registration statement
and prospectus on the 300,000 new shares to be issued as a result of the split?
Explain.
Sample Answer:
No. Under federal securities law, a stock split is exempt from registration requirements. This is because no sale of stock is involved. The existing shares are
merely being split, and no consideration is received by the corporation for the
additional shares created.