Part 1 Unit 4

A business incorporated in State A, with its principal place of business in that state, would like to take advantage of the intrastate offering exemption found in the Securities Act of 1933. Which of the following would be most appropriate? A. Rule147 B. Rule501 C. Rule506(b) D. Rule506(c)

A. Rule 147 contains the intrastate offering exemption

XYZ Corporation has been in business for over 20 years. They need additional capital for expansion, and determine that a public offering in their home state and neighboring states is appropriate. Which method of securities registration would most likely be used to register this initial public offering? A. Coordination B. Notice filing C. Qualification D. Registration

A. SEC registration is necessary for this offering. Coordination would allow for simultaneous registration with the SEC and the states.

KAPCO Dividend Yield Fund, a closed-end investment company registered under the Investment Company Act of 1940, wishes to commence offering its shares in States A, B, C, and D. It could be required to A. coordinate its federal registration with each of the four states B. notice file C. register by qualification in each of the states D. do none of these because investment companies registered under the Investment Company Act of 1940 are federal covered securities and are exempt from registration

B. Notice filing can be expected to be required here as this is a registered investment company even though the securities are federally covered and exempt from traditional registration.

Under the Uniform Securities Act, which of the following persons is responsible for proving that a securities issue is exempt from registration? A. Underwriter B. The person requesting the exemption C. State Administrator D. There is no need to prove eligibility for an exemption.

B. The burden of proof for claiming eligibility for an exemption falls to the person claiming the exemptions.

In general, registration statements for securities under the Uniform Securities Act are effective for A. a period determined by the Administrator for each issue B. 1 year from the effective date C. 1 year from the date of issue D. 1 year from the previous January 1

B. on the state level securities registration statements are generally effective for 1 year

Which of the following statements about accredited investors is TRUE? A. Tax payers who report an income in excess of$200,000 on a joint return in each of the last two years and who reasonably expect the same for the current year are included in the definition. B. An officer, director, or greater than 10% share holder of any company listed on the NYSE would be considered an accredited investor for purposes of acquiring a private placement your firm is selling. C. The term includes an employee benefit plan with assets in excess of $2 million. D. Purchases of securities by accredited investors do not count toward the 35 investor limitation found in Rule 506(b) of Regulation D.

D. One benefit of this term is that these investors do not count in the numerical limitation placed on private placements made under rule 506(b) Note that for offerings made under rule 506(c) ALL investors must be accredited.

T/F The following 6 terms are all Securities - An insurance/annuity contract in which the insurance company promises to pay a fixed sum - Interest in a retirement plan, such as an IRA or a 401(k) - Collectibles - Commodities such as metals, grains and futures contracts - condominiums used as a personal residence - Currency

F / False each of these are NOT securities according to the Uniform Securities Act

T/F Under the Uniform Securities Act it is unlawful for any person to offer or sell an unregistered security in a state unless: - It is Registered under the act - The security or transaction is exempt from registration - it is a federal covered security

T / True

One of: Fixed annuities, and Variable annuities are considered a security which is it and Why?

variable annuities are considered securities because they are dependent on the investment performance of securities within the annuity, thus Fixed annuities are NOT securities because they do not have an investment tied to the distributions.

Which group of instruments is NOT composed of securities? A. Stock, treasury stock, rights, warrants, and transferable shares B. Voting trust certificates and interests in oil and gas drilling programs C. Commodity futures contracts and fixed payment life insurance contracts D. Options on securities and interests in multilevel distributorship arrangements

C. Commodity futures and fixed payment life insurance contracts are included in our list of 6 items that are not securities

Which of the following are exempt transactions? I. A non issuer transaction with a bank in a Nasdaq traded security II. An unsolicited request from an existing client to purchase a nonexempt security III. The sale of an unregistered security in a private, non publicly advertised transaction to 10 non-institutional purchasers over a period not exceeding 12 months IV. The sale of unlisted securities by a trustee in bankruptcy A. I and II B. I, II, and III C. I, II, and IV D. I, II, III, and IV

C. choice III is not an exempt transaction because the private placement exemption is limited to 10 offerees, not 10 purchasers. All of the others are included in our list of exempt transactions

Which of the following securities is NOT exempt from the registration and sales literature filing requirements of the USA? A. Shares of investment companies registered under the Investment Company Act of 1940 B. Shares sold on the Nasdaq Stock Market C. AAA rated promissory notes of $100,000 that mature in 300 days D. Bonds issued by Saskatchewan, Canada

C. to be exempt, promissory notes cannot have a maturity beyond 270 days.

Which of the following is defined as a security under the Uniform Securities Act? A. A guaranteed, lump-sum payment to a beneficiary under a modified endowment policy B. Fixed, guaranteed payments made for life or for a specified period under an annuity contract C. Commodity futures contracts D. An investment contract

D. Investment Contracts are defined as a security under the USA

All of the following securities are exempt from the registration provisions of the Uniform Securities Act EXCEPT A. an issue of a savings and loan association authorized to conduct business in the state B. a U.S. Treasury bill maturing in 52weeks C. a bond issued by a company that has common stock listed on the New York Stock Exchange (NYSE) D. common stock listed on the Vancouver Stock Exchange (VSE)

D. No exemption is granted to securities listed on the VSE, Federal covered securities are exempt but they are also listed on the NYSE.

Registration is effective when ordered by the Administrator in the case of registration by A. coordination B. integration C. notice filing D. qualification

D. Registration by qualification is the only time when the administrator sets the effective date. The SEC sets coordination and notice filing is simply the filing of certain documents

All of the following describe exempt transactions EXCEPT A. ABC, a broker-dealer, purchases securities from XYZ Corporation as part of an underwriting commitment B. First National Bank sells its entire publicly traded bond portfolio to Amalgamated National Bank C. Amalgamated National Bank sells its publicly traded bond portfolio to ABC Insurance Company D. Joan Smith, an employee of Amalgamated National Bank, buys securities recommended by her agent at ABC Brokerage Corporation

D. The purchase of securities from a BD by an employee of a bank is a nonexempt transaction

Which of the following securities is NOT exempt from the registration and advertising requirements of the USA? A. Shares of Commonwealth Edisin, a regulated public utility holding company B. Securities issued by the nonprofit Carnegee Endowment for Peace C. Securities issued by a bank that is a member of the Federal Reserve System D. Variable annuity contracts issued by Metrodential Insurance Company, licensed to do business in the state

D. Variable annuities are nonexempt, and have to register.

T/F If the SEC registers a security that means they are approving the security for investors

F / False, The SEC does not approve securities registered with it, does not pass on the investment merit of any security, and never guarantees the accuracy of statements in the registration statement and prospectus.

T/F if a security is exempt it is also exempt from the antifraud provisions of the Uniform Securities Act

F / False, securities that are exempt are not exceptions to the antifraud laws of the USA. However, they do not apply to an investment that is excluded from the definition of a security.