Regulations - Securities Exchange Act of 1934 : Review Questions

An investor must file a 13D report with the SEC if a: A. 5% or greater common stock holding is purchased of one issuer B. 10% or greater common stock holding is purchased of one issuer C. 15% or greater common stock holding is purchased of one issuer D. 20% or greater common stock holding is purchased of one issuer

A. 5% or greater common stock holding is purchased of one issuer

An officer of a company has been invited by a large mutual fund company to give a talk to the fund company's analysts about its business plans and prospects. At the talk, the officer inadvertently discloses material information that could affect the stock's price. Which statement is TRUE? A. A public announcement of the news must be made within 24 hours B. A public announcement of the news must be made within 10 business days C. A public announcement of the news must be made within 5 business days D. No public announcement of the news is required

A. A public announcement of the news must be made within 24 hours

Which statement is TRUE about stabilizing bids? A. A stabilizing bid is placed by the syndicate manager B. A stabilizing bid is placed by each syndicate member C. Stabilizing bids must be lower than the public offering price D. Any number of stabilizing bids can be placed at any time

A. A stabilizing bid is placed by the syndicate manager

Who is NOT required to be fingerprinted at a broker-dealer? A. Administrative assistant B. Accounting supervisor C. Registered representative D. Registered principal

A. Administrative assistant

The Securities and Exchange Commission is empowered to administer all of the following EXCEPT: A. Blue Sky Laws B. Securities Act of 1933 C. Trust Indenture Act of 1939 D. Investment Company Act of 1940

A. Blue Sky Laws

The Securities Exchange Act of 1934regulates trading of all of the following EXCEPT: A. Commodities Futures B. Options C. Corporate Bonds D. Corporate Stock

A. Commodities Futures

Which of the following issuers must report to the SEC under the Securities Exchange Act of 1934? A. Corporations and Investment Companies B. The U.S. Treasury C. Municipalities D. Federal Agencies

A. Corporations and Investment Companies

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

A. FRB

When is a foreign broker-dealer permitted to solicit U.S. based clients? A. If the foreign broker-dealer establishes an SEC-registered U.S. subsidiary B. If the foreign broker-dealer only offers exempt securities C. If the foreign broker-dealer only deals with Non-U.S. citizens who are residing within U.S. borders D. If the foreign broker-dealer only deals with accredited individual investors

A. If the foreign broker-dealer establishes an SEC-registered U.S. subsidiary

Which statement is TRUE regarding margin regulations? A. In-house rules may be more stringent than FINRA rules B. Exchange rules may be less stringent than Federal Reserve rules C. In-house rules may be less stringent than FINRA rules D. In-house rules must be approved by the SEC prior to any change

A. In-house rules may be more stringent than FINRA rules

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

All of the following requires filing with the SEC EXCEPT: A. Purchase of a 3% position in one company's stock B. An officer selling 1% of that company's stock C. Broker-Dealer Net Capital computation D. Corporate proxy materials

A. Purchase of a 3% position in one company's stock

The director of a public corporation wishes to sell stock of that company in compliance with Rule 144. Which statement is FALSE? A. Registered control stock must be held for 6 months, fully paid, before it can be sold B. Unregistered restricted stock must be held for 6 months, fully paid, before it can be sold C. If the sale is for 5,000 shares or less, worth $50,000 or less, no SEC filing is required D. Any short swing profits (within 6 months) from trading the stock must be returned to the corporation

A. Registered control stock must be held for 6 months, fully paid, before it can be sold

An issuer is required to make an 8K filing with the SEC for all of the following events EXCEPT: A. declaration of a cash dividend B. election of new members of the Board of Directors C. declaration of bankruptcy D. proposal of a merger with another corporation

A. declaration of a cash dividend

Under the "penny stock rule," an established customer who is exempt from the rule is defined as a person who has: A. effected a securities transaction or made a deposit of funds or securities with that broker-dealer more than 1 year previously B. effected a securities transaction or made a deposit of funds or securities with that broker-dealer more than 3 years previously C. made at least 1 previous purchase of "penny stocks" from the same broker-dealer D. made at least 2 previous purchases of "penny stocks" from the same broker-dealer

A. effected a securities transaction or made a deposit of funds or securities with that broker-dealer more than 1 year previously

All of the following statements are true about listed securities EXCEPT: A. listed securities trade in the Second Market B. under Regulation T, all listed securities are marginable C. listed securities are subject to Regulation SHO D. listed companies must be registered with, and report their results to, the SEC

A. listed securities trade in the Second Market

During a tender offer, all of the following activities are prohibited EXCEPT: A. purchasing the stock in a cash account and tendering 4 business days after trade date B. purchasing a call option in a cash account and tendering 4 business days after trade date C. tendering shares held in an arbitrage account where the position is "short against the box" D. purchasing a warrant in a cash account and tender 5 business days after trade date

A. purchasing the stock in a cash account and tendering 4 business days after trade date

A "short swing" profit is defined as a profit achieved by an insider who trades his or her company's stock within: A. 3 months B. 6 months C. 9 months D. 12 months

B. 6 months

Which of the following describes a "Chinese Wall" as used in the securities industry? A. The prohibition on trading in the United States of companies listed on the Hong Kong, Singapore, and Taiwan markets B. A separation of investment banking and trading functions within a broker-dealer to stop the potential flow of inside information C. The restriction of currency movement imposed by mainland China on the Hong Kong Stock Exchange D. The restriction imposed by the U.S. Government against trading of securities issued by mainland China by "Wall Street" firms

B. A separation of investment banking and trading functions within a broker-dealer to stop the potential flow of inside information

What departments must be separated by an information barrier in an investment banking firm? A. Investment Banking and Retail Sales B. Investment Banking and Research C. Investment Banking and Marketing D. Investment Banking and Back-Office Operations

B. Investment Banking and Research

The Securities and Exchange Commission was created by the: A. Securities Act of 1933 B. Securities Exchange Act of 1934 C. Trust Indenture Act of 1939 D. Investment Company Act of 1940

B. Securities Exchange Act of 1934

Which statement is FALSE about stabilizing bids? A. A stabilizing bid is placed by the syndicate manager B. Stabilization is permitted during the 20-day cooling off period C. Only 1 stabilizing bid is permitted at any time D. A stabilizing bid can be placed at or below the Public Offering Price

B. Stabilization is permitted during the 20-day cooling off period

If a publicly traded corporation declares bankruptcy: A. a 10K report must be filed within 4 business days B. an 8K report must be filed within 4 business days C. a 10K report must be filed immediately D. an 8K report must be filed immediately

B. an 8K report must be filed within 4 business days

A "penny stock" is a designation that applies to a: A. debt security B. equity security C. long call option D. mutual fund share

B. equity security

The Securities Exchange Act of 1934established "self regulatory organizations" (SROs) and empowered these organizations to do all of the following EXCEPT: A. set guidelines for fair dealing with the public B. establish commission rates to be charged to the public C. take administrative action against broker-dealers that violate industry regulations D. establish arbitration procedures to settle intra-industry disputes

B. establish commission rates to be charged to the public

A 13D notice would be filed when a(n): A. corporation has a change in its Board of Directors B. investor accumulates a 5% or greater position in the common stock of an issuer C. corporation reports its annual results to the Securities and Exchange Commission D. investor wishes to sell shares of restricted stock in the public market

B. investor accumulates a 5% or greater position in the common stock of an issuer

If an individual is found guilty of insider trading, the civil penalty imposed can be how many times the profit achieved or loss avoided? A. 1X B. 2X C. 3X D. 4X

C. 3X

The Chairman of XYZ Corporation, while playing golf with a neighbor, casually mentions that this quarter's earnings are likely to be lower than expected. Based on this information, the neighbor sells short XYZ stock the next day. Which statement is TRUE? A. Only the Chairman has violated insider trading rules B. Only the neighbor has violated insider trading rules C. Both the neighbor and the Chairman have violated insider trading rules D. Neither the Chairman nor the neighbor has violated insider trading rules

C. Both the neighbor and the Chairman have violated insider trading rules

Which statement is TRUE about a tender offer for common shares? A. The offer must remain open for at least 10 business days B. The offer must remain open for at least 30 business days C. Each "sweetening" of the offer must extend the offer for an additional 10 business days D. Each "sweetening" of the offer must extend the offer for an additional 20 business days

C. Each "sweetening" of the offer must extend the offer for an additional 10 business days

Which statement is TRUE regarding the Securities Exchange Act of 1934? A. The anti-fraud provisions of the Act apply only to exempt securities B. The anti-fraud provisions of the Act apply only to non-exempt securities C. The anti-fraud provisions of the Act apply to both exempt and non-exempt securities D. The anti-fraud provisions of the Act do not apply to either exempt or non-exempt securities

C. The anti-fraud provisions of the Act apply to both exempt and non-exempt securities

A corporate executive holds a meeting with a select group of research analysts and gives information about the company's expected revenue and income for the upcoming quarter. If the analysts use the information to make recommendations, which statement is TRUE under Regulation FD? A. The corporate officer and each analyst are considered to be tippers B. The corporate officer and each analyst are considered to be tippees C. The corporate officer is considered to be a tipper and each analyst is considered to be a tippee D. The corporate officer is considered to be a tippee and each analyst is considered to be a tipper

C. The corporate officer is considered to be a tipper and each analyst is considered to be a tippee

The Self Regulatory Organizations (SROs) are: A private companies B. government sponsored enterprises C. membership organizations D. publicly traded companies

C. membership organizations

Pre-arranged trades by insiders are: A. prohibited B. permitted under Rule 10b-5 C. permitted under Rule 10b-5-1 D. permitted under Regulation FD

C. permitted under Rule 10b-5-1

Corporate officers who wish to trade their own company's stock must comply with all of the following rules EXCEPT: A. filing change of holding reports with the SEC B. prohibitions on short sales of that company's stock C. purchase restrictions through the exercise of stock options D. trading is restricted to decisions based on publicly available information

C. purchase restrictions through the exercise of stock options

All of the following are covered under the Securities Exchange Act of 1934 EXCEPT: A. issuance of corporate annual reports B. registration of broker-dealers C. registration of new issues D. margin on securities

C. registration of new issues

Broker-dealers are required to report their computed Net Capital to customers: A. monthly B. quarterly C. semi-annually D. annually

C. semi-annually

Which of the following CANNOT be a stabilizing bid for a new issue that has a Public Offering Price of $30 per share? A. $29.00 B. $29.88 C. $30.00 D. $30.13

D. $30.13

Under Regulation M, which statement is FALSE regarding stabilizing bids entered by market makers? A. Only the syndicate manager places a stabilizing bid B. There is no time limitation on the period that a stabilizing bid can be maintained C. A stabilizing bid cannot be placed unless a "Notice of Stabilization" is included in the prospectus D. A stabilizing bid can be placed at any price that is reasonably related to the market

D. A stabilizing bid can be placed at any price that is reasonably related to the market

All of the following are considered to be "insiders" of ABC Corporation EXCEPT: A. ABC Corporation's President B. The spouse of ABC Corporation's President C. The in-house counsel of ABC Corporation D. An investor holding non-convertible senior ABC securities

D. An investor holding non-convertible senior ABC securities

Municipal market participants are subject to which of the following? A. Indenture requirements of the Trust Indenture Act of 1939 B. Issuer reporting requirements under the Securities Exchange Act of 1934 C. Prospectus delivery rules under the Securities Act of 1933 D. Anti-fraud Rule 10b-5 under the Securities Exchange Act of 1934

D. Anti-fraud Rule 10b-5 under the Securities Exchange Act of 1934

Under the provisions of the Securities Exchange Act of 1934, all of the following must be registered EXCEPT: A. Sales personnel of member firms B. Member firms C. Officers of member firms D. Clerical employees of member firms

D. Clerical employees of member firms

Fines assessed for convictions involving violations of insider trading laws are paid to the: A. Department of Justice B. Securities and Exchange Commission C. Securities Investor Protection Corporation D. Department of Treasury

D. Department of Treasury

All of the following are provided to shareholders in the annual reports of registered corporations EXCEPT: A. Income Statement B. Balance Sheet C. Statement of Changes in Stockholders' Equity D. Details regarding new product launches

D. Details regarding new product launches

A customer is opening a new account at a brokerage firm and has been recommended penny stocks by the representative, since these are suitable based on the customer's investment objectives and risk tolerance. Which additional form is needed to open the account? A. Risk Waiver Indemnification Agreement (RWIA) B. Margin agreement C. Form ADV D. Form 15g-2

D. Form 15g-2

Which statement is FALSE about listed securities? A. Under Regulation T, all listed securities are marginable B. Listed securities are subject to "Regulation SHO" C. Listed issuers must register any new issue offerings with the SEC D. Listed issuers must report their results to the FRB

D. Listed issuers must report their results to the FRB

Who is NOT required to be fingerprinted at a broker-dealer? A. Registered representative B. Securities trader C. Payroll processing clerk D. Secretary

D. Secretary

The Securities Exchange Act of 1934 registers all of the following EXCEPT: A. Exchanges B. Broker-Dealers C. Registered Representatives D. Securities

D. Securities

Which statement is FALSE regarding the "penny stock rule"? A. Before confirmation of a trade in a "penny stock" can be made with a new customer, a suitability determination must be completed, signed and returned B. Suitability statements are required for new customers who wish to purchase OTC equity securities valued at under $5 that are not included on NASDAQ C. Suitability statements are not required for customer purchases of low-priced NASDAQ listed and exchange listed securities D. Suitability statements are not required for customers who have either had cash or securities in custody of that firm for at least 6 months; or for customers who have bought 2 or more "penny stock" issues previously from that firm

D. Suitability statements are not required for customers who have either had cash or securities in custody of that firm for at least 6 months; or for customers who have bought 2 or more "penny stock" issues previously from that firm

An officer of a listed company calls his registered representative and tells him to sell the maximum amount of that company's common shares in accordance with Rule 144. Prior to placing the order to sell, the registered representative calls five of his customers and tells them to sell that company's stock. Which statement is TRUE? A. There is no violation of FINRA rules B. There is no violation of Securities and Exchange Commission rules C. This action violates the Securities Act of 1933 D. This action violates insider trading provisions

D. This action violates insider trading provisions

Which statement 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. can hold fully paid customer securities if they are segregated from other marginable securities and are kept in safekeeping

Stabilization of new issues is: A. a provision of the Securities Act of 1933 B. a provision of the Uniform Securities Act C. permitted at, or above, the Public Offering Price D. permitted at, or below, the Public Offering Price

D. permitted at, or below, the Public Offering Price

The Securities Exchange Act of 1934 is MOST concerned with: A. registration of new issues B. registration of market participants C. prevention of fraud in the primary market D. prevention of fraud in the secondary market

D. prevention of fraud in the secondary market