Regulations - Securities Exchange Act of 1934

The annual audited financial statements of corporate issuers that are filed with the SEC, and which are a public record. Included are the corporation's balance sheet; income statement; retained earnings statement; and sources and uses of cash statement.

10 K Report

The quarterly unaudited financial statements of corporate issuers that are filed with the SEC, and which are a public record. Included are the corporation's balance sheet; income statement; retained earnings statement; and sources and uses of cash statement

10 Q Report

A report filed with the SEC by anyone who accumulates a 5% or greater holding in a publicly traded company, this is a public announcement that this person may intend to exercise "control" over the corporation, or may attempt to take over the company.

13 D Report

A corporate filing made with the SEC for any unusual events that occur, such as a declaration of a merger, divestiture, bankruptcy, or change in the composition of the Board of Directors of the corporation.

8 K Report

The determination of which stocks are marginable is made by (the): A. FRB B. SEC C. FINRA D. SIPC

A. Federal Reserve Board The Federal Reserve Board decides which non-exempt securities are marginable. The Fed has decided that all listed securities are marginable and over-the-counter securities which it approves are marginable.

Which of the following statements are TRUE regarding margin regulations? I In-house rules may be more stringent than FINRA rules II Exchange rules may be more stringent than Federal Reserve rules III In-house rules may be less stringent than FINRA rules IV Exchange rules may be less stringent than Federal Reserve Rules A. I and II B. III and IV C. I and IV D. II and III

A. I & II Regarding margin rules, FINRA rules may be more stringent than Federal Reserve rules, but cannot be less stringent. Firm rules can be more stringent than FINRA rules, but cannot be less stringent.

When is a foreign broker-dealer permitted to solicit U.S. based clients? I If the foreign broker-dealer establishes an SEC- registered U.S. subsidiary II If the foreign broker-dealer only offers exempt securities III If the foreign broker-dealer only deals with major institutional investors IV If the foreign broker-dealer only deals with accredited investors A. I and III B. I and IV C. II and III D. II and IV

A. I & III Recognizing the increasingly global nature of the world's securities markets, the SEC adopted Rule 15a-6, which is intended to permit foreign broker-dealers to engage in limited activities in the U.S. without registering with the SEC. Under Rule 15a-6, foreign broker-dealers that are not SEC registered are permitted to: -effect trades for U.S. persons that contact them on an unsolicited basis; -solicit business from and provide research reports to Major Institutional Investors (an investor with at least $100 million of investments) and Institutional Investors (investment companies, insurance companies, banks, etc.) -conduct business with foreign nationals temporarily present in the U.S.

The SEC requires financial reports from all of the following EXCEPT: A. municipal issuers B. corporate issuers C. municipal broker-dealers D. corporate broker-dealers

A. Municipal issuers Municipal issuers are exempt from the provisions of the Securities Acts, as are all other governmental issuers. The SEC has authority over corporate issuers, and requires financial reports from corporations. Broker-dealers, including municipal broker-dealers, are registered through FINRA under SEC oversight; and their financial reports are filed with both FINRA and the SEC

All of the following publicly held issuers must report to the SEC under the Securities Exchange Act of 1934 EXCEPT: A. Municipalities B. Unit investment trusts C. Mutual funds D. Corporations

A. Municipalities Municipal and federal issuers are exempt from the Securities Exchange Act of 1934

The Securities Exchange Act of 1934 regulates all of the following markets EXCEPT: A. Primary B. Secondary C. Third D. Fourth

A. Primary

Margins on government and municipal securities are set by (the): A. MSRB B. FINRA C. FRB D. SEC

B. FINRA Because municipals and governments are exempt, the Federal Reserve has no power to set margins. However, FINRA sets minimum maintenance margins for these securities that member firms must meet

The anti-fraud provisions of the Securities Exchange Act of 1934 apply to which of the following? I Persons trading exempt securities in the secondary market II Persons trading non-exempt securities in the secondary market III Issuers selling exempt securities in the primary market IV Issuers selling non-exempt securities in the primary market A. II only B. I and II C. III and IV D. I, II, III, IV

B. I & II The anti-fraud provisions of the Securities Exchange Act of 1934 apply to the trading of both exempt and non-exempt securities. All investors are subject to the anti-fraud rules. The Securities Act of 1933 covers full and fair disclosure by issuers in the new issue (primary) market.

Which of the following statements are TRUE regarding the Securities Exchange Act of 1934? I The general provisions of the Act apply to non- exempt securities only II The general provisions of the Act apply to both exempt and non-exempt securities III The anti-fraud provisions of the Act apply to non- exempt securities only IV The anti-fraud provisions of the Act apply to both exempt and non-exempt securities A. I and III B. I and IV C. II and III D. II and IV

B. I & IV

Which of the following statements are TRUE regarding corporate reports sent to shareholders? I The 10K report consists of the annual financial statements II The 10K report consists of the quarterly financial statements III The 10Q report consists of the annual financial statements IV The 10Q report consists of the quarterly financial statements A. I and III B. I and IV C. II and III D. II and IV

B. I & IV Corporate annual reports are 10K reports which are audited reports. The 10Q is a quarterly report which is unaudited. Corporate annual reports contain the following audited financial statements - Income Statement; Balance Sheet; Statement of Changes to Retained Earnings; and Statement of Sources and Uses of Cash.

Which of the following usually acts as the stabilizing market maker? A. Issuer B. Managing underwriter C. Any member of the syndicate D. Any member of the selling group

B. Managing Underwriter Only 1 stabilizing bid is permitted at any time, typically placed by the manager of the syndicate

A snapshot of a company's financial position that shows all of its assets, liabilities, and net worth (stockholder's equity).

Balance Sheet

Commonly used name for Uniform Securities Act - the state laws (as opposed to the federal securities laws) that govern the securities industry.

Blue Sky Laws

An investor who accumulates a 5% or greater position in the common stock of a registered issuer must file which of the following forms with the SEC? A. 8K B. 10K C. 13D D. 144

C. 13 D Investors who accumulate a 5% or greater position in the common stock of one registered issuer are required to file a 13D notice with the SEC within 10 business days of date that the 5% threshold was passed. This information is made public (and is of great interest to the management of the company, since the new large stockholder will probably want a say in how the company is being run!

A corporate issuer is obligated to file an 8K report of significant events within how many business days of the event? A. 1 day B. 2 days C. 4 days D. 10 days

C. 4 days

A tender offer is announced for ABC common stock. Which of the following customer accounts can tender 100 shares of ABC on the offer? I Long 100 shares of ABC II Long 100 shares of ABC; Short 100 shares of ABC III Long 200 shares of ABC; Short 100 shares of ABC IV Long 100 shares of ABC; Short 200 shares of ABC A. I only B. III and IV C. I and III D. I, II, III, IV

C. I & III Under the "short tender rule," a person cannot tender borrowed shares. To tender stock, the person must be in a "net long" position in that security.

The Securities Exchange Act of 1934 regulates trading of which of the following? I Corporate Stock II Corporate Bonds III Options IV Commodities Futures A. I only B. II only C. I, II, III D. I, II, III, IV

C. I, II, III The Securities Exchange Act of 1934 only applies to trades of securities, it does not apply to the futures markets. The futures market is regulated by the CFTC, Commodities Future Trading Commission

An issuer is required to make an 8K filing with the SEC for which of the following events? I Election of new members of the Board of Directors II Declaration of bankruptcy III Declaration of a cash dividend IV Proposal of a merger with another corporation A. II and III only B. I and IV only C. I, II, and IV D. I, II, III, IV

C. I, II, IV An 8K filing with the SEC is required by a corporation if a "major event" happens at the company. These include if there is a change in the composition of the Board of Directors; if the company declares bankruptcy; if there is a major acquisition or divestiture of assets; if the company proposes a merger; or if any other major corporate event occurs. The notice must be filed no later than 4 business days after the event.

Which statements are TRUE about a tender offer for common shares? I The offer must remain open for at least 10 business days II The offer must remain open for at least 20 business days III Each "sweetening" of the offer must extend the offer for an additional 10 business days IV Each "sweetening" of the offer must extend the offer for an additional 20 business days A. I and III B. I and IV C. II and III D. II and IV

C. II & III The initial offer must be held out for a minimum of 20 business days under SEC rules. Each sweetening of the offer must extend the life of the offer by another 10 business days

Under Regulation M, which statements are TRUE regarding stabilizing bids entered by market makers? I Stabilizing bids can only be maintained for 5 consecutive business days II There is no time limitation on the period that a stabilizing bid can be maintained III A stabilizing bid cannot be placed unless a "Notice of Stabilization" is included in the prospectus IV A stabilizing bid cannot be placed unless an "Official Notice of Sale" is placed in the prospectus A. I and III B. I and IV C. II and III D. II and IV

C. II & III There is no time limitation on the period that a stabilizing bid can be maintained under Regulation M. However, stabilization must cease when the syndicate is broken by the manager. A "Notice of Stabilization" must be included in the prospectus (on the inside front cover) that details the fact that the manager can start and stop stabilizing at any time and that when stabilization stops, the price of the issue may drop.

The provisions of the Securities Exchange Act of 1934 apply to which of the following activities? I Trading rules for exempt securities II Trading rules for non-exempt securities III Anti-fraud rules for exempt securities IV Anti-fraud rules for non-exempt securities A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

C. II, III & IV The Securities Exchange Act of 1934 relates to the secondary (trading) market. The provisions of the Act apply to non-exempt securities only, with the exception of the "anti-fraud" provisions of the Act. The "anti-fraud" provisions apply to both exempt and non-exempt securities.

Which of the following must be sent to customers of broker-dealers semi-annually? I Broker-dealer securities inventory amounts II Broker-dealer balance sheet III Broker-dealer subordinated loan amounts IV Broker-dealer net capital computation A. II only B. III and IV only C. II, III, IV D. I, II, III, IV

C. II, III, IV Semi-annually, customers receive a balance sheet (which includes a listing of subordinated loans - these are loans to broker-dealers where the lender subordinates his claim to all other creditors and are included as part of the firm's capital base) and a net capital computation from the broker-dealer. There is no requirement for a broker-dealer to disclose his inventory positions to customers

All of the following meet the statutory definition of an "insider" EXCEPT: A. an officer of a company B. the holder of 10% of the equity securities of a company C. the holder of 10% of the debt of a company D. a director of a company

C. The holder of 10% of the debt of a company The Securities Exchange Act of 1934 defines a statutory "insider" as any officer, director, or 10% shareholder of the equity securities of the issuer.

Stabilization rules for new issues are: A. set by FINRA B. covered under the Securities Act of 1933 C. covered under the Securities Exchange Act of 1934 D. covered under the Securities Investor Protection Act of 1970

C. covered under the Securities Exchange Act of 1934 Stabilization of new issues is permitted as long as the stabilizing trades (which take place in the secondary market) conform to the requirements of the 1934 Act.

Which of the following statements is TRUE regarding a brokerage firm holding fully paid customer securities? Brokerage firms: A. cannot hold fully paid customer securities under any circumstances B. can hold fully paid customer securities without restriction C. can hold fully paid customer securities if the dollar value of the positions is kept in a depository institution D. can hold fully paid customer securities if they are segregated from other marginable securities and are kept in safekeeping

D. Brokerage firms can hold fully paid customer securities as long as the positions are segregated from other margin securities and are kept in safekeeping.

Under the provisions of the Securities Exchange Act of 1934, all of the following must be registered EXCEPT: A. the exchanges that trade securities B. member firms C. sales employees of member firms D. customers of member firms

D. Customers of member Firms

The Securities Exchange Act of 1934 regulates which of the following markets? I First II Second III Third market IV Fourth A. I only B. II only C. II, III, IV D. I, II, III, IV

D. I, II, III IV The Securities Exchange Act of 1934 regulates the secondary market (the trading market). The trading markets consist of the first market (trading of listed securities on an exchange), second market (over-the-counter trading of securities not listed on an exchange), third market (over-the-counter trading of securities listed on an exchange floor), and fourth market (direct trading of securities between institutions via ECNs and ATSs).

The Securities Exchange Act of 1934 established "self regulatory organizations" (SROs) and empowered these organizations to: I set guidelines for fair dealing with the public II handle complaints against broker-dealers for securities law violations III take administrative action against broker-dealers that violate industry regulations IV establish arbitration procedures to settle intra- industry disputes A. I and II only B. I, II, III C. II, III, IV D. I, II, III, IV

D. I, II, III, IV

The anti-fraud provisions of the Securities Exchange Act of 1934 apply to: I Individuals trading exempt securities II Individuals trading non-exempt securities III Broker-dealer firms trading exempt securities IV Broker-dealer firms trading non-exempt securities A. II and IV B. I and II C. III and IV D. I, II, III, IV

D. I, II, III, IV The anti-fraud provisions of the Securities Exchange Act of 1934 apply to the trading of both exempt and non-exempt securities. Both individuals and firms are subject to the rules.

All of the following are included in the 10K report filed by corporate issuers with the SEC EXCEPT: A. income statement B. balance sheet C. retained earnings statement D. net capital computation

D. Net Capital Computation Corporate annual reports contain the following audited financial statements - Income Statement; Balance Sheet; Statement of Changes to Retained Earnings and Statement of Sources and Uses of Cash Net capital computations are only required for broker-dealers registered with the SEC, not corporate issuers.

The Securities and Exchange Commission was created by: A. a Constitutional amendment B. a Supreme Court decision C. the Securities Act of 1933 D. the Securities Exchange Act of 1934

D. The Securities Exchange Act of 1934 The Securities and Exchange Commission was created by the Securities Exchange Act of 1934 (which was passed in the very beginning of 1934, while the 1933 Act was passed at the very end of 1933 - so these 2 Acts were really enacted "back-to-back").

The Securities and Exchange Commission is empowered to administrate all of the following Acts EXCEPT: A. Securities Act of 1933 B. Trust Indenture Act of 1939 C. Investment Company Act of 1940 D. Uniform Securities Act

D. Uniform Securities Act The Uniform Securities Act is more commonly known as the "Blue Sky" state law, and is adopted "state by state." The SEC, a Federal agency, has no jurisdiction over activities within each state and does not administrate this Act

The Securities Exchange Act of 1934 is primarily concerned with: A. registration of exempt issues B. registration of non-exempt issues C. prevention of manipulation and fraud in the primary market D. prevention of manipulation and fraud in the secondary market

D. prevention of manipulation and fraud in the secondary market The Securities Act of 1933 requires that new issues that are not exempt from the Act be registered with the SEC. Thus, the 1933 Act is concerned with the primary (new issue) market. The Securities Exchange Act of 1934 consists of a variety of rules covering the trading (secondary) market that are primarily intended to prevent manipulation and fraud.

A profit-and-loss statement showing all of the income and expenses of a business for a period of time.

Income Statement

Federal regulation administered by the SEC that defines the structure for investment companies (face amount certificate company; unit investment trust; or management company) and which sets the regulations under which the companies must operate.

Investment Company Act of 1940

Set by the SEC, the minimum liquid net worth that must be maintained by a broker-dealer in order for the firm to operate.

Net capital

The federal regulation to curb manipulation and fraud in the trading (secondary) markets. The Act consists of a broad array of provisions to: curb insider abuses; require registration and self-regulation of exchanges under SEC oversight; require registration of member firms and their sales employees; require issuers to make public their financial statements; give the Federal Reserve the power to set margins; and numerous rules to curb manipulative market practices.

Securities Exchange Act of 1934

This is an exchange or regulatory body over the marketplace that is registered with the SEC under the Securities Exchange Act of 1934, and which regulates itself under SEC oversight. For example, the CBOE, FINRA, and the MSRB.

Self Regulatory Organization "SRO"

Rule that states that if there is a tender offer for a company's shares, only those people who are "net long" the stock can tender

Short Tender Rule

Unique to the brokerage and banking industries, part of a firm's capitalization where the lender (usually a parent company) contributes capital to the firm in the form of a ________________________ loan. This type of loan specifies that the lender will be repaid after all other creditors; and there are specified conditions where the loan cannot be repaid

Subordinate Loan

A limited-time offer made by a company to purchase its own securities or another company's outstanding securities, usually at a premium to their current market value. Offers can also be made by anyone who wishes to attempt to "take over" a company. Such offers can be conditioned upon a minimum number of shares or bonds.

Tender offer

Federal law enacted to protect corporate bondholders from harmful actions by the issuer. The act requires issuers of non-exempt debt securities to include SEC approved protective covenants for the purchasers of the debt securities. Additionally, the issuer must appoint an independent trustee to monitor its adherence to the covenants

Trust Indenture Act of 1939

Adopted in each state, these are the state "blue sky" laws that require registration of securities, broker-dealers and agents in that state

Uniform Securities Act