UNIVERSITY OF SANTO TOMAS

ESPANA, MANILA

ALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY

LAW 6 – NEGOTIABLE INSTRUMENTS LAW AND OTHER COMMERCIAL
LAWS

Multiple Choice: Choose the BEST answer. Letter only.

1. ABC Corp is engaged in the pawnshop business involving cellphones, laptops and other gadgets of value.
To expand its business and attract investors, it offered to any person who invests at least P100,000.00 a “promissory
note” where it obligated itself to pay the holder a 50% return on investment within one month. Due to the attractive
offer, many individuals invested in the company but none was able to realize any profit after one month.
a. ABC violated the SRC because of its failure to comply with its obligation
b. ABC has not violated the SRC and is well within its rights to sell issue PNs
c. ABC violated the SRC which prohibited the sale of securities to the public without a registration statement
filed and approved by the SEC
d. None of the above

2. The SRC protects the investing public via:

a. Requiring Full disclosure of information of the issuer
b. Close monitoring of securities
c. Prohibiting and penalizing fraudulent practices
d. All of the above

3. Mr . X died leaving thousands of shares in XYZ Company, a publicly listed company. The executor Mr. A
sells these shares in order to distribute the proceed to his heirs pursuant to the last will and testament of Mr. X.
a. Mr. A should register the sale transaction pursuant to the SRC
b. Mr. A need not register the transaction because the same is exempt
c. The Last will and testament of Mr. X should undergo probate
d. None of the above

4. DBP Bank sells securities to its customers in several forms. In order to do this lawfully it should:
a. Register the securities
b. Register the transactions
c. Both A and B
d. None because securities sold by banks are exempt from registration

5. The following are Securities Market Professionals except:

a. Broker
b. Dealer
c. Salesman
d. Director

6. A registration statement may be revoked or rejected if:

a. The issuer is judicially declared insolvent

b. The issuer is engaged in fraudulent transactions
c. The issuer violated any provision of the SRC
d. All of the above
e. None of the above

7. A transaction in which there is no genuine change in the beneficial ownership or actual ownership pf a
security:
a. Hype and dump
b. Squeezing the Float
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Alfredo M. Velayo - College of Accountancy

c. Painting the tape

d. Wash Sale

8. Refers to activities that involve the use of high pressure sales tactics such as direct mail offers or telephone
follow-ups to promote purchase and sale of securities wherein there is misrepresentation in these securities:
a. Hype and dump
b. Squeezing the Float
c. Boiler Room Operations
d. Wash Sale

9. Refers to taking advantage of a shortage of securities in the market by controlling the demand and
exploiting market congestion during such shortages in a way to create artificial prices which prevents the market from
determining the price of these securities:
a. Hype and dump
b. Squeezing the Float
c. Boiler Room Operations
d. Wash Sale

10. Buying and selling securities at the close of the market in an effort to alter the closing prices of these
securities:
a. Hype and dump
b. Squeezing the Float
c. Boiler Room Operations
d. Marking the close

11. The AMLA requires covered institutions to:

a. Report covered transactions

b. Report suspicious transactions
c. Identify their customers.
d. All of the above.

12. ___________involves initial introduction of the illegal funds into the financial system. Banks and other financial
institutions are usually used at this point.

a. Integration
b. Layering
c. Placement
d. Inducement

13. _____________involves a series of financial transactions during which the dirty money is passed through a
series of procedures, putting layer upon layer of persons and financial activities into the laundering process.

a. Integration
b. Layering
c. Placement
d. Inducement

14. _____________________-the money is once again made available to the criminal with the occupational and
geographic origin obscured or concealed. The laundered funds are now infused back into the legitimate economy
through the purchase of properties, businesses and other investments.

a. Integration
b. Layering
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Alfredo M. Velayo - College of Accountancy

c. Placement
d. Inducement

15. The following laws are amendatory to the original law RA 9160 as amended by RA 9194 except-

a. RA 9165
b. RA 10167
c. RA 10365
d. RA 10927

16. The Anti-Money Laundering law:

a. Criminalizes money laundering

b. Creates a financial intelligence unit or implementing agency.
c. A, B and D
d. Imposes requirements re: customer identification, record-keeping and reporting of covered and suspicious
transactions.

17. Maria a new accounts clerk in Wash Bank meets Joneeel, a driver who wants to deposit P10M in his newly
opened account.

a. Maria should report this as a covered transaction

b. Maria should report this as a suspicious transaction
c. Maria need not report because P10M is common among drivers
d. Maria should keep quiet and treat this as a regular transaction

18. Money Laundering is defined as

a. making dirty money appear to have come from a lawful source

b. cleaning dirty money from several sources
c. none of the above
d. the law does not define money laundering

19. Money Laundering is also committed by any covered person who, knowing that a covered or suspicious
transaction is required under the AMLA, as amended, to be reported to the Anti-Money Laundering Council (AMLC),
fails to do so.

a. True, reporting applies to both suspicious and covered transactions

b. False, reporting should be done in suspicious transactions only
c. Both true and false for suspicious and covered transactions respectively
d. Both false and true for suspicious and covered transactions respectively

20. The following are predicate crimes in Money laundering except:

a. Malversation
b. Illegal logging
c. Violation of RA 9165 (Drugs)
d. Tax evasion

21. There can be separate convictions for money laundering offense and unlawful activity constituting it. But unlawful
activity shall be given precedence over money laundering charge, without prejudice to freezing and other remedies
provided by Act.
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a. False
b. True
c. Conviction in the predicate crime is a requisite before ML offense can be prosecuted
d. None

22. Jurisdiction over money laundering offenses are vested in the Regional Trial Courts and the Sandiganbayan:

a. True
b. False
c. Sandiganbayan for private persons/individuals
d. None

23. Ellen deposited Php499,999 in each of her accounts in 3 banks in the same day. Such act constitutes:

a. Dangling
b. Restructuring
c. Smurfing or structuring
d. None.

24. Mang Gagancho went to a restaurant and ordered tons of food. Waiving at a supposed friend, he directs the
waitress to send the bill to the friend. He later leaves the restaurant without paying for his food.What crime was
committed?

a. Violation of BP 22
b. Money Laundering
c. Swindling or Estafa
d. None because Mang Gagancho was a friend

25. Daniel issues a check to pay for a second hand laptop he purchased from Mimi. The check bounced due to
insufficiency of funds. What crime was committed :

a. Estafa
b. Violation of BP 22 because
c. None
d. Misrepresentation

26. Mich makes it appear that she has enough funds on her account and asks Maria to give her cash in exchange for
a post dated check with additional P2000 representing interest of the investment to be made by Maria. The check
was dishonored . What crime was committed :

a. Estafa
b. Violation of BP 22 because
c. None
d. Misrepresentation

27. Boy Bawang issues a check of Banco Filipino, a closed bank, in favor of Tata Ngatanga. The latter accepts and
give him Php500,000.What crime was committed:

a. Estafa
b. Violation of BP 22 because
c. None
d. Misrepresentation

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28. In the previous no. assuming the check was presented to a bank:

a. the bank will dishonor due to closed drawee bank

b. the bank will not accept because it is apparent that BF does not exist anymore
c. none
d. the bank will report to the AMLC due to fraudulent nature of the transaction

29. Which of the following is necessary to make an instrument negotiable?

a. it should be in writing
b. it should be payable on demand or a fixed and determinable future time
c. signed by the maker or drawee
d. all of the above

30. The following are parties to a check except:

a. payee
b. maker
c. drawer
d. drawee

31. According to Section 1 of the Negotiable Instruments Law (NIL), an instrument must be in writing and signed by
the maker or ________ for it to be negotiable. 

a. Holder
b. Banker
c. Drawer
d. Lender

32. What type of promise does a negotiable instrument contain?

a. Conditional
b. Unconditional
c. Forever
d. Fixed

33. The following are the function of a negotiable instrument, except:

a. Operates as money
b. It is a means of transferring and creating credit
c. It facilitates the sale of goods
d. It increases the purchasing medium in circulation

34. Assuming all the requisites of negotiability are present, which among the following instrument is NOT payable to
bearer?
a. Pay to the order of cash
b. Pay to the order of Jose Rizal, our national hero
c. Pay to Pedro, Bearer
d. Pay to Pedro or bearer

35. All are negotiable instrument, except:

e. Check
f. Trade Acceptance
g. Certificate of deposit
h. Debenture

36. The following are parties to a negotiable instrument and can be held liable, except:
a. Drawer
b. Drawee
c. Payee
d. Maker
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Espana Manila
Alfredo M. Velayo - College of Accountancy

37. Dorina obtains the signature of Lavina by way of autograph. She prepared a negotiable promisory note above
Lavina’s signature . The note was validly negotiated to Boyet who is a HOLDER IN DUE COURSE. What defense
can Lavina avail against Boyet?
a. Personal Defense
b. Equitable Defense
c. Real Defense
d. Qualified Defense

38. I promise to pay bearer P5,000.00 or deliver 2 sacks of rice , if he wants (sgd) Pedro
a. Negotiable because he gives the holder an election to require something done in lieu of payment
b. Negotiable because the rice can be quantified by checking the millers price.
c. Non- negotiable because the price is not certain.
d. Non- negotiable because it requires an act in addition to the payment of money.

39. One of the following can set up the defense of forgery to an instrument payable to order. Who is it?
a. An indorser, if the maker’s signature is forged
b. The acceptor, if the drawer’s signature is forged
c. A person negotiating by mere delivery if the prior party’s signature is forged
d. The maker, if an indorser’s signature is forged

40. This is a real defense

a. Fraud in inducement
b. Want of consideration
c. Want of delivery of incomplete instrument
d. Duress in the absence of physical pressure

38. I promise to pay Bubuy or his order the sum of P100,000.00 30 days after the death of JR. This instrument is
payable:
a. At a determinate future time
b. On demand
c. Upon fulfillment of a condition (death of JR)
d. At an indefinite time, thus not negotiable

41. I promised to pay Melai or order P100,000.00 with interest at 15% per annum, from date until paid; 12% if paid
when due. The promissory note is;
a. Negotiable because there is still certainty in the amount
b. Non- negotiable because the amount is not certain
c. Non- negotiable because it contains 2 interest rates
d. None of the above.

42. Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards the person so issuing,
accepting, or indorsing it, payable on ________.

a. Bearer
b. Demand
c. Time
d. Right

43. On the face of the bill of exchange, he appears as a party and yet he is not yet liable thereto.
a. Drawer
b. Drawee
c. Acceptor
d. Indorser

44. Where the instrument is not dated, it will be considered to be dated as of the time it was ________.

a. Issued
b. Ratified
c. Bought
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d. Written 

45. Which of the following instruments is not negotiable because it lacks the requirement of an unconditional promise
or order to pay a sum certain in money?
a. Bill of exchange
b. Check
c. Certificate of Stock
d. Promissory note

46. On the face of the bill of exchange, he appears as a party and yet he is not yet liable thereto.
a. Drawer
b. Drawee
c. Acceptor
d. Indorser

47. Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the
same intended to sign, he is to be deemed ________.

a. An Indorser
b. A Maker
c. A nobody
d. An Issuer

48. Which of the following is a personal defense?

a. Insertion of a wrong date where the instrument is undated
b. Fraud in factum
c. Forgery of a signature
d. Incomplete and undelivered instrument

49. A holder in due course is a holder who the instrument under the following conditions except:
a. That the instrument is genuine and in all respects what it purports to be
b. That the instrument is complete and regular upon its face
c. That he took it in good faith and for value
d. That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the
title of the one negotiating it

50. When is ante-dating and post-dating the instrument not allowed?

a. When there is no space provided for a date

b. When it is done for an illegal or fraudulent purpose
c. When doing so will make the instrument non-negotiable
d. When you don’t know the date of issuance

-----------------------------------------------------------GOOD LUCK!----------------------------------------------

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