Unit 7 Quiz 2

If a member firm is underwriting an initial public offering of common stock for ABCD Corp., a new issue that qualifies for Nasdaq listing, a prospectus must be provided to all purchasers for how many days following the effective date? A) 60. B) 90. C) 25. D) 40.

C) 25

If an officer of a bank wants to purchase new issues, which of the following statements is TRUE? A) He may not purchase a new issue because he is considered a restricted person. B) He may not purchase a new issue unless the amount he wishes to purchase is considered small in relation to the total offering. C) He may purchase a new issue because anyone is allowed to purchase new issues. D) He may purchase a new issue because no banking rules prohibit it.

A) He may not purchase a new issue because he is considered a restricted person.

ABC Corporation is offering 500,000 units to the public at $5 per unit. Each unit consists of 2 shares of ABC preferred stock and 1 perpetual warrant for ½ common share of ABC exercisable at $5. How much capital was raised by the initial sale of the issue? A) $2.5 million. B) $1.25 million. C) $7.5 million. D) $5 million.

A) $2.5 Million ($500,000 * $5 per unit)

A resident of a state who acquires stock pursuant to Rule 147 (intrastate offerings) is prohibited from selling the stock to a nonresident of that state for how many months? A) 9. B) 18. C) 12. D) 6.

A) 9

Which of the following terms is used in connection with a municipal securities underwriting? A) Agreement among underwriters. B) Cooling-off period. C) In-registration. D) Effective date.

A) Agreement among underwriters

Which of the following investors would be exempt from filing form 144 when selling securities they own? A) An employee of the company selling registered shares purchased in the open market. B) An investor selling shares acquired in a Regulation D private placement. C) An employee of the company selling unregistered shares. D) An affiliated person selling unregistered shares.

A) An employee of the company selling registered shares purchased in the open market.

The largest portion of an underwriting spread is the: A) concession. B) manager's fee. C) stabilizing bid. D) underwriting fee.

A) Concession

Your customer informs you that he has shares of stock restricted under Rule 144. He suggests that he wants to sell covered calls against the shares he owns to bring additional income into his account. Which of the following should you advise? A) Selling calls against restricted (Rule 144) shares is prohibited because the restricted shares could not be delivered if the calls were exercised by the buyer. B) This is permitted because there is no restriction against using covered calls to bring income into any account. C) This is prohibited because the customer may need to sell the stock before the restriction is lifted. D) This is permitted, as the calls would be considered covered by the restricted shares.

A) Selling calls against restricted (Rule 144) shares is prohibited because the restricted shares could not be delivered if the calls were exercised by the buyer.

If you are an associated person of a FINRA member, which of the following individuals is NOT considered a restricted person and may buy shares of a new issue? A) Your grandparent. B) Your supervisor at the broker/dealer you are affiliated with. C) Your parents. D) Your spouse.

A) Your grandparent

An officer of a broker/dealer firm would be categorized as a restricted person if he attempted to purchase: A) a new issue. B) a municipal bond in a state where he does not reside. C) closed-end funds on the secondary market. D) call options on a stock he believed was going down in price.

A) a new issue.

An intrastate offering is exempt from: A) federal registration. B) blue-sky registration. C) state registration. D) all registrations.

A) federal registration

All of the following are required to be registered with the SEC EXCEPT: A) insurance companies offering fixed annuities to investors. B) securities analysts. C) securities associations, such as FINRA. D) national stock exchanges.

A) insurance companies offering fixed annuities to investors.

Under SEC Rule 134, a tombstone advertisement includes all of the following EXCEPT: A) net proceeds to the issuer. B) number of shares to be sold. C) names of the syndicate members. D) the public offering price.

A) net proceeds to the issuer

All of the following may occur during the mandatory 20-day cooling-off period EXCEPT: A) soliciting transactions for the security. B) publishing a tombstone ad. C) the performance of due diligence by the underwriters. D) forwarding a preliminary prospectus to a customer.

A) soliciting transactions for the security.

If a customer purchases a new issue of stock from a syndicate member, the customer will pay the public offering price: A) with no mark-up or commission. B) plus a commission. C) plus a mark-up. D) plus the spread.

A) with no mark-up or commission

If a corporation issues stock to the public at $10 per share, and the syndicate manager's fee is $.10 per share, the underwriting fee is $.25 per share, and the selling concession is $.45 per share, what is the spread? A) $.60. B) $.80. C) $.70. D) $.90.

B) $.80

A corporate insider may profitably sell the stock of his company, without penalty, after the stock has been held for more than: A) 12 Months B) 6 months C) 3 months D) 9 months

B) 6 months

XYZ Corporation is preparing a registration statement for a new issue consisting of 300,000 new shares and 200,000 existing shares held by officers. The offering price is $30 per share and the spread taken by the underwriters is $2 per share. After the offering is complete, XYZ will receive: A) 14000000. B) 8400000. C) 9000000. D) 150000000 15000000.

B) 8400000 30-2=28 28*300,000

Securities issued outside the United States by US issuers and sold to non-US residents A) are considered to be offered by an exempt issuer B) are considered to be offered in an exempt transaction C) must be registered with the SEC D) are considered to be offered in a nonexempt transaction

B) are considered to be offered in an exempt transaction

All of the following securities are exempt from the registration provisions of the Securities Act of 1933 EXCEPT: A) state and municipal bonds. B) commercial bank holding company securities. C) commercial paper and bankers' acceptances that have maturities of no more than 270 days. D) national and state bank securities.

B) commercial bank holding company securities.

An underwriting spread is the: A) amount a managing underwriter receives. B) difference between an offering price and the proceeds to an issuer. C) amount a selling group receives. D) amount a syndicate receives.

B) difference between an offering price and the proceeds to an issuer

Your customer wishes to purchase shares of an IPO. During the cooling- off period, the customer can: A) purchase shares in limited amounts. B) indicate an interest in the offering. C) enter an order to sell the new issue short upon the effective date. D) pay in advance for shares to be purchased when the cooling-off period ends.

B) indicate an interest in the offering.

If QRS, Inc., makes a new offering not registered with the SEC to accredited investors, this arrangement is called a(n): A) Rule 144 offering. B) private placement. C) secondary offering D) intrastate offering.

B) private placement

An offering of securities in compliance with Rule 144A is sold primarily to: A) American individual investors. B) qualified institutional buyers. C) All of these. D) foreign individual investors.

B) qualified institutional buyers

The maximum amount of securities that can be offered under Regulation A+ Tier 2 is: A) $50 million over an indefinite period of time B) $40 million in a 2-year period C) $50 million in a 12-month period D) $25 million in a 12-month period

C) $50 million in a 12-month period

Which of the following are TRUE regarding the two tiers of securities offerings under Regulation A+? A) Both tiers require that public investors be accredited B) Neither tier requires public investors to be accredited C) Both tiers are open to the public for investing D) Both tiers specify maximum investment limits per offering for investors

C) Both tiers are open to the public for investing

Under the intrastate offering rule (Rule 147), when may a resident purchaser of securities resell them to a nonresident? A) Six months after the last sale made in that state. B) Three months after the first sale made in that state. C) Nine months from the end of the distribution. D) None of these.

C) Nine months from the end of the distribution

Regarding Regulation D (Private Placement) offerings, which of the following statements is TRUE? A) The SEC requires no filings be made by the issuer. B) The amount of capital that can be raised via a private placement is limited. C) Registration with the SEC is not required. D) Purchasers need not be provided or have access to offering information normally provided by a prospectus.

C) Registration with the SEC is not required.

Which of the following underwriting arrangements allows an issuer whose stock is already publicly traded to structure the timing of sales for an additional issue? A) Competitive. B) Negotiated. C) Shelf. D) Standby.

C) Shelf

Underwriters that reserve the right to stabilize the price of securities distributed to the public under an SEC registration statement may do so: A) only if the securities being distributed will be immediately listed for trading on the NYSE or other exchange. B) under no circumstances. C) only if notice is given in the prospectus. D) without restriction.

C) only if notice is given in the prospectus

During the cooling-off period, a registered representative (in order to highlight key points) marks a preliminary prospectus and sends it to a client. This action is: A) permitted without restriction. B) permitted if the customer is an accredited investor. C) prohibited. D) permitted if approved by a principal.

C) prohibited.

The Securities Act of 1933 requires securities issued by all of the following to register and be subject to prospectus provisions EXCEPT: A) investment companies. B) foreign governments with which the United States maintains diplomatic relations. C) the U.S. government. D) corporations involved in interstate commerce.

C) the U.S. Government

Which of the following securities are exempt from the registration and disclosure provisions of the Securities Act of 1933? I. Any interest in a railroad equipment trust certificate. II. Municipal bonds. III. U.S. government securities. IV. Commercial paper maturing in 270 days or less. A) I and III. B) I and II. C) II and III. D) I, II, III and IV.

D) I, II, III and IV.

If the customers of a selling-group member sell into a penalty stabilizing bid, the selling-group member must pay back to the underwriter the: A) give up. B) reallowance. C) spread. D) concession.

D) concession

Under FINRA rules, if a member firm receives an order to buy a new equity issue on behalf of an undisclosed principal from a bank, the member must: A) accept the order. B) determine the identity of the purchaser. C) reject the order. D) obtain a representation from the bank that the purchaser is not restricted.

D) obtain a representation from the bank that the purchaser is not restricted.

The Act of 1934 applies to all of the following EXCEPT: A) secondary market trading. B) the extension of credit on purchase of securities. C) registration of broker/dealers. D) regulation of new issues.

D) regulation of new issues

An investor and his father own 20% and 10%, respectively, of a corporation's outstanding shares, and the father wants to sell his holding. According to Rule 144, which of the following statements are TRUE? I. He must file Form 144 to sell the shares. II. He does not have to file Form 144 to sell the shares. III. He is considered an affiliated person. IV. He is not considered an affiliated person.

I. He must file Form 144 to sell the shares. III. He is considered an affiliated person.

If an investment representative gave her retail customers copies of sales literature for a variable annuity she was recommending and promised to send the prospectus soon, which of the following statements are TRUE? I. She should not have distributed sales literature without the prospectus. II. It was okay to distribute the sales literature and send the prospectus later to those who were interested. III. She should not have recommended a specific variable annuity without having the prospectus available. IV. Because she only answered questions about the investment, she was not required to provide a prospectus.

I. She should not have distributed sales literature without the prospectus. III. She should not have recommended a specific variable annuity without having the prospectus available.

Which of the following factors is (are) considered when determining whether underwriting compensation is fair and reasonable? I. The size of the offering. II. The type of underwriting commitment. III. The market conditions. IV. The profitability of the underwriter.

I. The size of the offering. II. The type of underwriting commitment.

If a wife owns 9% of the common shares of XYZ, and her husband owns 2% and wishes to sell his shares, he: I. is considered an affiliate. II. is not considered an affiliate. III. must file a Form 144 to sell. IV. does not have to file a Form 144 to sell.

I. is considered an affiliate. III. must file a Form 144 to sell.