UNIFORM SECURITIES ACT - PRACTICE QUESTIONS

Which of the following would be defined as an issuer transaction?

A. An initial public offering of common stock by a corporation B. The sale of closed-end fund shares in the NASDAQ market C. The sale of a security effected on the New York Stock Exchange floor D. The resale of limited partnership interests originally offered in a private placement Ans. A. An issuer transaction is one where the proceeds go to the issuer ---- primary market A "non-issuer" transaction is one where the proceeds do not go to the issuer --- secondary market

Under the Uniform Securities Act, which of the following could NOT be considered to be a "broker-dealer"?

A. Credit Union B. Attorney C. Investment Adviser D. Market Maker Ans. A. A credit union is a savings institution, so it is excluded from the definition and CANNOT be defined as a broker-dealer. This is the case because banks and savings institutions are already regulated by the State, so this avoids double regulation. On the other hand, an attorney or an investment adviser is not excluded from the definition and would be defined as a broker-dealer if that person were to offer securities in the State for compensation. Finally, a market maker is a dealer in the securities and clearly falls under the definition

Under the Uniform Securities Act, all of the following are defined as "persons" Except:

A. General partner in a limited partnership B. Public utility selling to public investors C. Administrator of the State D. Municipality selling industrial development bonds Ans. C.

Which of the following is NOT considered to be an "issuer transaction" under the Uniform Securities Act?

A. Google incorporated selling its common shares in an initial public offering to investors via Dutch auction and then listing its shares on NASDAQ B. MM Mars Corporation, a privately held company that is proposing to go public by offering 20% of its common stock in an initial public offering and then listing its shares on the NYSE C. RJR Corporation, a publicly held company listed on the NYSE that is proposing to go "private" in a leveraged buyout transaction D. AJAX Company, a publicly held company listed on the AMEX (NYSE-MKT), making a secondary offering of common shares that will be listed on the AMERX (NYSE-MKT) Ans. C. When a publicly held company goes private, the existing shareholders are bought out. In such a transaction, the proceeds go to the shareholders - not the issuer - hence this is a non-issuer transaction.

Under the Uniform Securities Act, an investment adviser may be formed as any of the following EXCEPT a(n):

A. corporation B. Partnership C. Association D. Broker-dealer Ans. Broker-Dealer: Investment advisers (and broker-dealers) can be formed as any legal operating entity, such as a corporation, partnership, sole proprietorship, association, etc. Investment advisers cannot be formed as broker-dealers; nor can broker-dealers be formed as investment advisers. Each is a legally separate entity, and each is regulated separately

An agent of a broker-dealer has been spending his spare time, at night and on weekends, on the Internet. The agent has been trading a thinly traded stock listed in the Pink Sheets, and has accounted for more than 50% of the trading volume in the stock. The agent has also been sending out e-mails to potential investors, recommending the stock. The agent has not informed his broker-dealer of these activities, since they only occur when the broker-dealer is closed. Which statement is TRUE regarding the applicability of the Uniform Securities Act to these activities?

Ans. A.The best answer is A. The agent is operating outside the scope of his authority as the employee of the broker-dealer and the broker-dealer is not aware of his activities. The agent should have notified his broker-dealer of these "work" activities and followed any instructions of the broker-dealer (which would not have permitted this). Because the agent is trading such a large volume of the stock, he or she would be considered to be a "statutory broker-dealer" under Uniform State Law and must register as such. Remember, a broker-dealer is a person that is in the business of trading securities for others or for its own account (this individual is trading for his own account as a business). Furthermore, an unregistered broker-dealer cannot solicit orders in the State - which this individual is doing by sending out e-mails recommending the stock. The State Administrator can issue a stop order against the individual in this case, but would not issue a stop order against the broker-dealer (since the broker-dealer is not the one trading these securities) - making Choice D incorrect A. The agent is defined as a statutory broker-dealer and must register in the State B. Activities effected through the Internet are exempt from the provisions of the Uniform Securities Act C. A violation of the Uniform Securities Act will occur only if there is a customer complaint lodged against the agent with the Administrator D. The State Administrator can issue a stop order against the agent's broker-dealer for these actions

Under the Uniform Securities Act, which of the following would be defined as a "non-issuer" transaction?

Ans. The sale of a security effected on the New York Stock Exchange floor Explanation: A "non-issuer" transaction is one where the proceeds do not go to the issuer; this is a normal secondary market trade such as a trade

Issuers of Corporate Securities

Corporation is the issuer

Which of the following are defined as "issuers" under the Uniform Securities Act?

I. For corporate securities, the corporation itself is the issuer II. For collateral trust certificates, the person performing the functions of depositor under the Trust agreement is the issuer III. For equipment trust certificates, the corporation is the issuer IV. For oil and gas program fractional interests, the owner of the minerals is the issuer Ans. I, II and III

Persons as defined under the Uniform Securities Act, include which of the following?

I. Joint Ventures II. Individuals III. Unincorporated businesses IV. Municipalities Ans. ALL OF THE ABOVE

Issuers of Collateral trust certificates

Person performing the functions of depositor under the Trust agreement is the issuer

Issuers of equipment Trust Certificate

The corporation is the issuer

Issuers of oil and gas program fractional interest

There is NO defined issuer (oil and gas programs register with the state under the toughest method - Registration by Qualification. The easier methods cannot be used).

Definition of Issuer

depends on the type of security being issued