Unit 7
Certain investors are deemed accredited when they have a net worth of
$1 million, not including net equity in the primary residence.
The aftermarket prospectus requirement following an APO for exchange-listed securities is
0 days
Six days into the cooling-off period, an issuer receives a deficiency letter from the Securities and Exchange Commission (SEC) requesting clarification and corrections. Once the issuer submits these, and assuming that they satisfy the deficiency, the cooling-off period will resume. With no other deficiencies arising, the issue should become effective in
14 days
During the cooling-off period, underwriters may not A) distribute a preliminary prospectus. B) distribute sales literature or advertising material. C) place a tombstone advertisement. D) take indications of interest.
B) distribute sales literature or advertising material.
State registration is not required if the transaction is exempt. An example of an exempt transaction would be A) one involving municipal bonds. B) one that is solicited. C) one that is unsolicited. D) one involving U.S. government bonds.
C) one that is unsolicited.
Which type of underwriting is characterized by the broker-dealer buying the entire issue from the issuer and then reoffering it to the public?
Firm commitment
Which of the following would be applicable to nonexempt securities (those that must be registered) being offered to the public by a corporate issuer? I. Securities Act of 1933 II. Prospectus III. Securities Act of 1934 IV. Secondary market
I and II
When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in
a primary offering.
An offering in which one or more stockholders in the corporation are selling all or a portion of their own shares to the investing public for the first time is known as
a secondary offering.
For nonlisted and non-Nasdaq securities, a prospectus must be provided to all those who purchase securities for how many days after the effective date?
40 days
The aftermarket prospectus requirement for the IPO of nonlisted securities is
90 days
All the following are exempt from the Securities Act of 1933 except A) limited partnership. B) U.S. Treasury securities. C) fixed annuity contracts. D) debt securities issued by religious organization.
A) limited partnership.
Which of the following will not be found in a final prospectus? A) Effective date and offering price B) Business plan and use of the proceeds C) Agreement among underwriters D) Statement that the Securities and Exchange Commission (SEC) neither approves nor disapproves of the issue
C) Agreement among underwriters
Underwriters acting as principals and committing to purchase any unsold shares for the syndicate account would best be described as being engaged in
a firm commitment.
Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933? A) Shelf offerings B) Additional public offerings (APOs) C) Private (nonpublic) securities offerings D) Initial public offerings (IPOs)
C) Private (nonpublic) securities offerings
Shelf offerings are covered under which if the following? A) The Bank Secrecy Act B) The Trust Indenture Act of 1939 C) The Investment Company Act of 1940 D) The Securities Act of 1933
D) The Securities Act of 1933
A corporation increases capitalization by selling shares of stock which can either come from a new issue or previously authorized but unissued shares. Total stock outstanding must
never exceed the number of shares authorized.
An investor requests a preliminary prospectus for a new issue. Regarding the document which of the following is true? A) It is made available between the registration date and the effective date. B) Receipt of it is a commitment that the underwriters will sell securities to the recipient. C) The final price for the securities is published within it. D) It can be deemed an offer to sell securities to the public.
A) It is made available between the registration date and the effective date.
The Securities Act of 1933 requires that A) a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale. B) registration with the Securities and Exchange Commission (SEC) before public sale can be made be an option for all new issues. C) both exempt and nonexempt new issues be registered with the Securities and Exchange Commission (SEC) before public sale. D) all new issues be exempted from registration with the Securities and Exchange Commission (SEC) so that they may be sold to the public.
A) a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale.
During the cooling off period, underwriters would be allowed to do all of the following except A) advertise the issue. B) take indications of interest. C) distribute a preliminary prospectus. D) publish a tombstone.
A) advertise the issue.
When an investor receives a final prospectus, the expectation should be that one of the following would not be found. Which is it? A) the Securities and Exchange Commission's (SEC's) verification of accuracy B) the effective or offering date C) all known risks to purchasers of the stock D) the intended use of the proceeds raised in the offering
A) the Securities and Exchange Commission's (SEC's) verification of accuracy
Restricted persons are not allowed to purchase an IPO of common stock. All of the following are restricted persons except A) the grandparent of a restricted person. B) any person owning 10% or more of a member firm. C) broker-dealers. D) registered representatives.
A) the grandparent of a restricted person.
An underwriter is placing a tombstone advertisement for a company's new issue. A prospective investor might expect to see all of the following information on the advertisement except A) the names of the company's officers. B) the names of the underwriting members. C) the type of security to be sold (stock or bond). D) the number of shares to be sold.
A) the names of the company's officers.
A company is already public with several major stockholders. Sale proceeds for shares being sold to the investing public will go to some of the existing stockholders who want to divest of their shares. This is I. a secondary offering. II. a primary offering. III. an additional public offering (APO). IV. an initial primary offering (IPO).
I and III
Regarding a shelf registration filed with the Securities and Exchange Commission (SEC), which of the following statements are true? I. A supplemental prospectus must be filed before each sale. II. This registration is for issuers who want to issue securities for the first time. III. Portions of a shelf offering can be sold over a 10-year period without having to reregister the security. IV. Portions of a shelf offering can be sold over a three-year period without having to reregister the security.
I and IV
A tombstone advertisement placed before the effective date can A) always be deemed to be an offer to sell the securities. B) be placed by the issuer directly or by the underwriters. C) only be placed by those assisting the issuing company in the underwriting. D) only be placed by the issuing company.
B) be placed by the issuer directly or by the underwriters.
The Securities Act of 1933 protects investors who buy new issues by doing all of the following except A) requiring an issuer to provide full and fair disclosure. B) requiring the licensing of persons affiliated with broker-dealers. C) providing criminal penalties for fraud in the issuance of new securities. D) regulating the underwriting and distribution of primary and secondary issues.
B) requiring the licensing of persons affiliated with broker-dealers.
During the cooling off period, underwriters would be allowed to do all of the following except A) distribute a preliminary prospectus. B) take orders. C) publish a tombstone. D) take indications of interest.
B) take orders.
Regarding the purchase of new equity issues by restricted persons, which statements are true? I. An investment club is permitted to buy a new equity issue at the offering price. II. An investment club is not permitted to buy a new equity issue at the offering price. III. An investment club that has eight members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price. IV. An investment club that has 12 members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price.
I and IV
A preliminary prospectus (red herring) A) if requested by an investor serves as a binding order to purchase shares. B) will show the final offering price. C) may be used to gather indications of interest. D) may not be distributed during the cooling-off period.
C) may be used to gather indications of interest.
Regarding the purchase of new equity issues (IPOs), restricted persons may A) purchase shares of a new issue only if they work for a bank. B) purchase shares of a new issue only if they are employed by a broker-dealer as a registered representative. C) not purchase shares of a new issue. D) purchase shares of a new issue only in amounts that are not substantial in relation to the total number of shares being issued.
C) not purchase shares of a new issue.
A member firm receives an order to purchase shares in a common stock initial public offering (IPO) from another broker-dealer for a customer. Regarding restricted persons, the member must A) refuse to accept the order. B) obtain a list of all of the broker-dealer clients to determine eligibility. C) obtain a written representation that the buyer is not a restricted person. D) obtain a statement witnessed by a notary representing that the buyer is not restricted.
C) obtain a written representation that the buyer is not a restricted person.
The prospectus delivery requirement, access equals delivery, is satisfied when A) the preliminary prospectus has been filed with FINRA and is therefore available on FINRA's website for investors to see. B) the final prospectus has been filed with Financial Industry Regulatory Authority (FINRA) and is available on FINRA's website for investors to see. C) the final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see. D) a red herring is initially sent by mail to investors during the cooling-off period. Explanation
C) the final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see.
Member firms violate rules regarding sales of new equity issues to restricted persons when they do which of the following? I. Sell a new issue to one of their own customers. II. Sell blocks of the new issue to accounts of partners or officers of the member firm. III. Sell shares to the grandparent of a member affiliate. IV. Sell to accountants or attorneys acting on behalf of the underwriters.
II and IV
An underwriting group is currently assisting an issuer with the preparation and filing of the registration statement for a new issue. Who is responsible for the accuracy of the information within the registration statement?
Issuing corporation
A person who looks to provide advice to a city government concerning the issuance of municipal debt securities would best be described as
a municipal advisor.
An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase
a new issue initial public offering (IPO) at the public offering price.
A company is looking to raise additional capital to fund an expansion plan. The company's senior management chooses to issue additional bonds to the general public. The best expression to explain this type of offering would be
a primary offering.
When an issuing company sells securities to primarily institutional investors and a small number of wealthy individuals, as opposed to the general investing public in an exempt offering, this is known as
a private placement.
A company's board of directors has agreed that the company should be prepared to have shares of common stock ready to be issued that are intended to be distributed in the form of a one-time employee bonus. Not knowing exactly when the one-time bonus plan will be implemented and the shares will be needed, the type of registration or offering that would best suit the scenario is
a shelf registration.
A select pair or group of companies organized to underwrite corporate or municipal securities is best known as
a syndicate.
A corporate issuer of common stock has decided that it wants an agreement that its underwriter must either raise all of the capital needed or cancel the underwriting. To best accommodate this the underwriting should be
an all or none (AON).
An indication of interest given by an investor during the cooling-off period is
an investor's declaration of potential interest in purchasing some of the issue after the security comes out of registration.
Mrs. Jones is an employee of a member firm and as such is a restricted person regarding the purchase of new issues. She belongs to an investment club and has a 1% interest in the club's brokerage account. The investment club
is not a restricted account and will be allowed to purchase equity shares of an initial public offering (IPO).
If it finds that the registration statement needs revision, expansion, or to have corrections made, the Securities and Exchange Commission (SEC) may suspend the review of the new issue and issue a deficiency letter. Once the issuer submits a corrected registration statement, the 20-day cooling-off period
resumes where it had left off.
In a split offering,
shares are issued from the corporation and sold by existing shareholders.
The federal law requiring companies offering public equity or debt securities to provide a prospectus to investors is known as
the Securities Act of 1933.
Raising funds is generally accomplished by corporations through the issuance of stock (equity) or bonds (debt). This is done in
the capital market.
When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is
the effective date.
The access equals delivery rule applies to
the final prospectus and aftermarket delivery obligations.
Under the de minimis exemption, an initial public offering of common stock may be sold to an account where restricted persons have a beneficial interest as long as their interest in the account does not exceed
10%
After the issuer files a registration statement with the Securities and Exchange Commission (SEC), the time known as the cooling-off period begins. This allows a registration to become effective as early as
20 calendar days after the date the SEC has received it.
For a new issue that qualifies for Nasdaq listing, a prospectus must be provided to all purchasers within how many days after the effective date?
25 days
For a new issue that qualifies for listing on an exchange, a prospectus must be provided to all purchasers for how many days after the effective date?
25 days
For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable? A) Securities Act of 1934 regulating securities that must be offered by prospectus B) Securities Act of 1933 regulating issues that must be offered by prospectus C) Securities Act of 1933 regulating securities traded in the secondary market D) Securities Act of 1934 regulating issues that must be offered by prospectus
B) Securities Act of 1933 regulating issues that must be offered by prospectus
An offering is defined as the sale of a security. Regarding offerings, all of the following are true except A) offerings of stocks can be made to the investing public. B) corporate securities can only be offered in public securities offerings. C) offerings of bonds can be made to the investing public. D) offerings can be identified by who is selling the securities issuer or investor.
B) corporate securities can only be offered in public securities offerings.
Regarding the registration statement filed with the Securities and Exchange Commission (SEC) when new securities are to be issued, all of the following are true except A) the names and addresses of company officers and directors, their salaries, and a five-year business history of each must be shown. B) a description of how the proceeds raised from the sale will be used must be disclosed. C) the accuracy and adequacy of the registration documents is the responsibility of the underwriters. D) underwriters may assist the issuer in preparing and filing the registration statement.
C) the accuracy and adequacy of the registration documents is the responsibility of the underwriters.
Which of the following would most closely match the meaning of a red herring? A) A registration statement B) A tombstone advertisement C) Prospectus D) A preliminary prospectus
D) A preliminary prospectus
Which of the following would be allowed during the cooling off period? A) Allocating shares to investors B) Distributing a prospectus C) Taking orders D) Distributing a red herring
D) Distributing a red herring
Which of the following best describes a prospectus? A) It is a truth-in-lending document required whenever a loan is made to an issuer via the purchase of its debt securities. B) It is a useful but not mandatory document showing detailed information intended to offer investors adequate reason to purchase shares. C) It is a document, required by securities law, which offers limited information about an issuer's securities to be offered to the public. D) It is a full and fair disclosure of all material information and facts regarding the issuance of securities.
D) It is a full and fair disclosure of all material information and facts regarding the issuance of securities.
A private securities transaction I. is nonexempt and must be register under the Act of 1933. II. is exempt from registration under the Act of 1933. III. can be sold to individual accredited investors. IV. can be sold to institutional investors only.
II & III
During the cooling-off period, underwriters of new securities may I. accept orders to purchase shares. II. not accept orders to purchase shares. III. not accept indications of interest regarding potential purchases of shares. IV. accept indications of interest regarding potential purchases of shares.
II & IV
During the 20-day cooling-off period, I. solicitations of sales can be made. II. solicitations of sales may not be made. III. deficiency letters, if issued, are sent to the issuer. IV. deficiency letters, if issued, are sent to the underwriters.
II and III
Indications of interest taken during the cooling-off period are I. binding on the selling issuer and underwriters. II. nonbinding on the issuer and underwriters. III. binding on the investor. IV. nonbinding on the investor.
II and IV
Regarding primary and secondary offerings, which of the following are true? I. An offering can only be either a primary or secondary. II. An offering can be a combination of primary and secondary. III. An initial public offering (IPO) is a secondary offering. IV. An additional primary offerings (APO) is a primary offering.
II and IV
Issuance and trading of securities are regulated at more than one governmental level. These would include regulations at which of the following? I. County level II. City level III. Federal level IV. State level
III & IV
Ensuring that the investing public is fully informed about a security and its issuing company when shares are first sold in the primary market is covered under which of the following federal acts?
Securities Act of 1933
A new registered representative receives a memo discussing the distribution of a red herring. The registered representative knows that the memo is referencing
a preliminary prospectus.
Securities sold in an issuer-related transaction would best be described as
a primary offering.
Sales for new issues of securities may be solicited
after the cooling-off period.
A corporation sells shares to the investing public in order to raise capital. This is known as
an issuer transaction.
A company that offers sales of another company's securities would best be described as
an underwriter.
A registered representative provides financial support and housing at her home for her grandfather. Regarding the purchase of new issues,
both persons are considered restricted.
A preliminary prospectus is used to solicit
indications of interest before the effective date.
The statement "These securities have not been approved or disapproved nor have any representations been made about the accuracy or the adequacy of the information" is
mandated to be in the final prospectus by the Securities and Exchange Commission (SEC).
In an underwriting where fixing a minimum dollar amount to be sold in order to move forward with the entire offering is most commonly referred to as
mini-max.
Regarding the purchase of a new equity issue, an account where a restricted person has a beneficial interest would be allowed to purchase the new shares at the public offering price
only if the interest does not exceed 10%.
The primary purpose of the Securities Act of 1933 is to
require full and fair disclosure in connection with the sale of securities to the public.
The requirement for a supplemental prospectus to be filed before each sale is applicable to
shelf registration sales.
Public offerings of securities are regulated under
the Securities Act of 1933.
Securities regulations that are called blue-sky laws refer to those at
the state level.
Regarding the sale of a new issue, a customer is considered a restricted person if the person is
working as a salesperson who works for the issuing firm's underwriter.
Each of the following may be traded on an exchange except A) life insurance. B) equities. C) options. D) bonds.
A) life insurance.
All of the following are true of tombstone advertisements except A) they are mandatory and must be placed during the cooling-off period. B) they are not an offer to sell or solicit sales for the securities. C) they can be placed by the underwriters. D) they would be expected to show the number of shares to be offered.
A) they are mandatory and must be placed during the cooling-off period.
The ATOP Company is planning to offer shares of both common and preferred stock to the investing public in order to raise operating capital intended to be used for expansion. Which of the following laws enacted by Congress would be the most relevant when issuing these equity securities to the public? A)The Securities Act of 1933 B) The Trust Indenture Act of 1939 C) The Securities Investors Protection Act of 1970 D) The Investment Company Act of 1940
A)The Securities Act of 1933
A company with previously issued shares outstanding wants to issue more shares to the public. These new shares are issued in what is known as
An additional public offering (APO).
Which of the following situations may not be disclosed to a potential buyer while a security is in registration? A) There will be a road show in New York City in May. B) A brokerage report shows the security is properly undervalued. C) The issue is expected to be priced in early June. D) The issue is being offered through ABC Investment Bank.
B) A brokerage report shows the security is properly undervalued.
Which of the following choices would best describe a follow-on offering? A) An initial public offering (IPO) that has additional shares added by the issuer on the effective date B) An issue of shares by a public company that is already listed on an exchange C) The common stock that is issued attached to a rights offering D) An offering to the employees of the issuing company
B) An issue of shares by a public company that is already listed on an exchange
Capital markets can be characterized by all of the following except A) entities can utilize them to finance both long- and short-term capital needs. B) they are utilized by the public sector only. C) they would include stock and bond markets. D) securities traded in them can be bought and sold by both individuals and institutions.
B) they are utilized by the public sector only.
An investor is viewing a company's prospectus on the Securities Exchange Commission's (SEC's) website. Which of the following is true? A) Access equals delivery can only mean physical delivery of the prospectus and not viewing one on a website. B) This does not satisfy the access equals delivery rule for an aftermarket prospectus. C) This satisfies the access equals delivery rule for a preliminary prospectus. D) This satisfies the access equals delivery rule for a final prospectus.
D) This satisfies the access equals delivery rule for a final prospectus.
Which of the following could not be considered an institutional investor? A) Insurance company B) Bank C) An accredited investor D) QIB
C) An accredited investor
Which of the following would be allowed during the cooling off period? A) Allocating shares to investors B) Taking orders C) Distributing a final prospectus D) Placing a tombstone ad
D) Placing a tombstone ad
A company's management team has agreed to issue additional shares of common stock in part to provide an employee stock ownership plan. It is agreed the issuance of the stock is not urgent and can wait until more favorable market conditions exist. What type of registration is most suitable under these conditions?
A shelf registration
Underwriters who are assisting an issuer in bringing securities to the investing public can do which of the following between the time the registration was filed with the Securities and Exchange Commission (SEC) and the effective date? A) Make a binding offer to sell the securities. B) Solicit orders from investors to purchase the securities. C) Mail sales literature to those who have expressed an interest in purchasing the securities. D) Distribute a preliminary prospectus to the investing public
D) Distribute a preliminary prospectus to the investing public
Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is not accurate? A) For an additional issue listed on an exchange or Nasdaq there is no delivery requirement. B) For an IPO if listed on an exchange or Nasdaq the delivery requirement is 25 days. C) For an initial public offering (IPO) if non-Nasdaq the delivery requirement is 90 days. D) For an additional issue if the security is non-Nasdaq there is no delivery requirement.
D) For an additional issue if the security is non-Nasdaq there is no delivery requirement.
Which of the following is true regarding the primary market? A) Price is determined by supply and demand. B) It is regulated by the Securities Act of 1934. C) The NYSE is an example of a primary market. D) Issuer transactions occur in the primary market.
D) Issuer transactions occur in the primary market.
A prospectus displays which of the following? A) Description of how the proceeds will be used B) The Securities and Exchange Commission (SEC) endorsement C) A guarantee insuring against loss D) Performance predictions for a minimum of three years
A) Description of how the proceeds will be used
Tombstone ads A) are disclosures detailing all the information shown in a prospectus. B) must be placed in all new offerings. C) are permitted before the effective date. D) are offers to sell securities to the public.
C) are permitted before the effective date.
A municipal advisor does which of the following activities? A) Advises institutions on selling municipal bonds B) Advises municipalities on selling securities C) Advises municipalities on buying securities D) Advises institutions on buying municipal bonds
B) Advises municipalities on selling securities
Which of the following calls for the underwriters to buy securities from the issuer acting as an agent, not as principal? A) Follow-on offering B) Best efforts underwriting C) Firm commitment underwriting D) Initial public offering
B) Best efforts underwriting
For the primary market, which of the following is true? A) All U.S. exchanges are primary markets where securities are offered at a public offering price. B) Issuer transactions occur in the primary market, and securities are offered at a public offering price. C) All U.S. exchanges are primary markets where price is determined by supply and demand. D) Issuer transactions occur in the primary market, and price is determined by supply and demand.
B) Issuer transactions occur in the primary market, and securities are offered at a public offering price.
Which of the following best describes a final prospectus? A) Filed with the Securities and Exchange Commission (SEC) but is never made available to the general public B) Meets the full and fair disclosure requirements of the Securities Act of 1933 C) Used to solicit indications of interest in a new issue during the cooling-off period D) Must be refiled with the SEC on an annual basis
B) Meets the full and fair disclosure requirements of the Securities Act of 1933
An official statement is a disclosure document that would be used in connection with an offering of which of the following securities? A) U.S. Treasury notes B) Municipal bonds C) Limited partnership interests D) Common of preferred stock offered privately
B) Municipal bonds
Which of the following securities is exempt from the Securities Act of 1933? A) Common stock B) Municipal note C) Preferred stock D) Debenture
B) Municipal note
Which of the following statements is true? A) Only municipalities can raise funds in the capital markets. B) Municipalities, the federal government, and corporations can raise funds in the capital markets. C) Only corporations can raise funds in the capital markets. D) Only the federal government and municipalities can raise funds in the capital markets.
B) Municipalities, the federal government, and corporations can raise funds in the capital markets.
A final prospectus contains all of the following except A) description of the management. B) SEC approval. C) history of the business. D) the use of the proceeds.
B) SEC approval.
Primary market transactions would include which of the following? A) Sale of $10 million of corporate stock by a broker-dealer acting as a market maker B) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter C) Sale of $10 million of municipal bonds by a broker-dealer acting as a market maker D) Sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker
B) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter
If an officer of a bank with the authority to purchase and sell securities on behalf of the bank wants to purchase new issues, which of the following statements is true? A) The officer may purchase a new issue because anyone is allowed to purchase new issues. B) The officer may not purchase a new issue because he is considered a restricted person. C) The officer may not purchase a new issue unless the amount he wishes to purchase is considered small in relation to the total offering. D) The officer may purchase a new issue because no banking rules prohibit it.
B) The officer may not purchase a new issue because he is considered a restricted person.
A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised? A) Government bond market B) Secondary market C) Capital market D) Municipal bond market
C) Capital market
For primary and secondary markets, which of the following is true? A) In the primary market, securities are purchased from and sold to individual investors. B) In the secondary market, securities transactions cannot take place on an exchange. C) In the primary market, securities are sold to the public and the issuer receives the sale proceeds. D) In the secondary market, all sales proceeds go to the issuer.
C) In the primary market, securities are sold to the public and the issuer receives the sale proceeds.
Regarding the registration of securities with the Securities Exchange Commission (SEC) which of the following is true? A) Public securities offerings are generally exempt from registration. B) No securities offering can ever be exempt from registration. C) Private securities offerings are generally exempt from registration. D) All securities offerings, public or private, are exempt from registration.
C) Private securities offerings are generally exempt from registration.
Which of the following would be allowed during the cooling off period? A) Distributing a prospectus B) Taking orders C) Taking indications of interest D) Allocating shares to investors
C) Taking indications of interest
All of the following names describe the Securities Act of 1933 except A) The Full and Fair Disclosure Act. B) The Truth in Securities Act. C) The Exchange Act. D) The Prospectus Act.
C) The Exchange Act.
The XYZ Company is looking to offer shares of its common stock to the public. Which of the following laws enacted by Congress would have the most relevance to the issuance of these securities? A) The Investment Company Act of 1940 B) The Securities Investors Protection Act of 1970 C) The Securities Act of 1933 D) The Trust Indenture Act of 1939
C) The Securities Act of 1933
Regarding the issuance of new securities to the public, which of the following is true? A) Underwriters are permitted to accept orders for securities during the Securities and Exchange Commission (SEC) review period. B) Registrations become effective within 10 business days of Securities and Exchange Commission (SEC) filing. C) The Securities Act of 1933 provides criminal penalties for fraud. D) The Securities and Exchange Commission (SEC) review of a new issues filing must always be longer than 20 days.
C) The Securities Act of 1933 provides criminal penalties for fraud.
Regarding primary offerings, which of the following is true? A) After its initial public offering (IPO), a corporation can have only one more primary offering—its subsequent primary offering (SPO). B) A corporation can have two primary offerings—the initial public offering (IPO) and an additional public offering (APO). C) There is no limit to the number of primary offerings a corporation can issue. D) A corporation can have only one primary offering—the initial public offering (IPO).
C) There is no limit to the number of primary offerings a corporation can issue.
An issuer that is already a publically traded company wants to register new securities without selling any of the shares until later when it anticipates it will be retooling all of its existing manufacturing plants. Which of the following applies? A) This cannot be done because newly registered securities must be made available for sale immediately. B) This can be accomplished by utilizing an additional issue offering, which is specifically for publically traded companies wanting to register new shares to be issued later. C) This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later. D) This can be accomplished by utilizing a new initial public offering, which is necessary for registration of all new shares.
C) This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later.
Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 except A) Rule 147. B) Regulation D. C) access equals delivery rule. D) Regulation A+.
C) access equals delivery rule.
A tombstone announcement may contain all of the following except A) number of shares offered. B) type of security. C) an offer to sell the securities. D) names of the underwriters.
C) an offer to sell the securities.
A tombstone advertisement would be expected to include all of the following information except A) an advisory that the advertisement is neither an offer to sell nor a solicitation of an offer for any of these securities. B) the name of the issuer and underwriters if they are being used to assist in the offering. C) any inherent risks associated with the offering or the issuer offering the securities. D) the price or price range at which the securities are expected to be offered.
C) any inherent risks associated with the offering or the issuer offering the securities.
A company is considering raising capital without going through the registration process requirements mandated by the Securities Act of 1933. To be exempt from the act, which of the following offerings might they employ? A) Shelf offering B) Additional public offering (APO) C) Initial public offering D) Private (nonpublic) securities offering
D) Private (nonpublic) securities offering
Under the Securities Act of 1933, which of the following is a nonexempt security? A) Commercial paper B) Municipal bonds C) U.S. government bonds D) Shares issued by a U.S. government bond fund
D) Shares issued by a U.S. government bond fund
Which of the following statements with regard to the issuance of securities is true? A) While the Securities and Exchange Commission (SEC) is reviewing a registration statement for a new offering of securities, the underwriters are permitted to solicit and accept orders for the securities from the public. B) Once a registration statement has been filed with the Securities and Exchange Commission (SEC) it should be expected that the securities could be sold to the public within two business days. C) The cooling-off period beginning when a registration statement is filed with the Securities and Exchange Commission (SEC) can't last longer than 20 days. D) The Securities Act of 1933 provides criminal penalties for fraud.
D) The Securities Act of 1933 provides criminal penalties for fraud.
Which of the following would not be expected to be found in a tombstone advertisement for a new issue? A) The number of shares to be offered B) The type of security to be offered (equity or debt) C) The name of the issuer or those of the underwriters D) The intended purpose for which to use the sales proceeds
D) The intended purpose for which to use the sales proceeds
The Securities Act of 1933 requires that all of the following be offered by a prospectus except A) mutual fund shares. B) variable annuities. C) unit investment trusts. D) Treasury bonds.
D) Treasury bonds.
During the cooling-off period of a new registration filed with the Securities and Exchange Commission (SEC) A) sales literature may be distributed with the preliminary prospectus. B) tombstone advertisements may not be published. C) indications of interest received are binding on the broker-dealers. D) a red herring may be given to prospective investors.
D) a red herring may be given to prospective investors.
Rules regarding restricted persons state that each of the following is considered immediate family except A) a mother-in-law or a father-in-law. B) parents. C) a brother or a sister. D) an aunt or an uncle.
D) an aunt or an uncle.
After the filing of a registration for a new issue with the Securities and Exchange Commission (SEC), and still in the registration's cooling-off period, broker-dealers may A) never publish tombstone advertisements. B) take binding indications of interest received from prospective investors. C) distribute sales literature with the preliminary prospectus. D) give a red herring to prospective investors.
D) give a red herring to prospective investors.
All of the following are restricted persons except A) employees of members. B) portfolio managers. C) finders and fiduciaries acting on behalf of the underwriters. D) individual owning 5% of a member firm.
D) individual owning 5% of a member firm.
Assets offered and traded in the securities markets can include all of the following except A) currencies. B) equities. C) derivative products. D) life insurance.
D) life insurance.
In the capital markets, securities such as stocks and bonds can be A) purchased and sold by institutions only. B) offered by the public sector only. C) purchased and sold by individuals only. D) offered by both public and private sectors.
D) offered by both public and private sectors.
