SIE 7
Rules regarding restricted persons state that each of the following is considered immediate family except A) an aunt or an uncle. B) a mother-in-law or a father-in-law. C) a brother or a sister. D) parents.
A) an aunt or an uncle.
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) obtain a written representation that the buyer is not a restricted person. B) obtain a statement witnessed by a notary representing that the buyer is not restricted. C) refuse to accept the order. D) obtain a list of all of the broker-dealer clients to determine eligibility.
A) obtain a written representation that the buyer is not a restricted person.
Sales for new issues of securities may be solicited A) during the cooling-off period. B) after the cooling-off period. C) before the cooling-off period. D) before, during, or after the cooling-off period, if done with a final prospectus.
B) after the cooling-off period.
Tombstone ads A) are disclosures detailing all the information shown in a prospectus. B) are permitted before the effective date. C) must be placed in all new offerings. D) are offers to sell securities to the public.
B) are permitted before the effective date.
During the cooling-off period the disclosure document that may be delivered to interested parties is called the A) summary prospectus. B) cool off period prospectus. C) final prospectus. D) preliminary prospectus.
D) preliminary prospectus.
During the cooling off period, underwriters would be allowed to do all of the following except A) publish a tombstone. B) distribute a preliminary prospectus. C) take indications of interest. D) take orders.
D) take orders.
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 A) 15 days. B) 14 days. C) 8 days. D) 20 days.
B) 14 days.
Which of the following calls for the underwriters to buy securities from the issuer acting as an agent, not as principal? A) Firm commitment underwriting B) Best efforts underwriting C) Follow-on offering D) Initial public offering
B) Best efforts underwriting
All of the following are exempt issuers except A) the City of Alta Loma. B) Modulux, Inc., a home manufacturer. C) the Southwest Railroad Co. D) Alta Loma Community Foundation.
B) Modulux, Inc., a home manufacturer.
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) Private (nonpublic) securities offering C) Additional public offering (APO) D) Initial public offering
B) Private (nonpublic) securities offering
An investor is viewing a company's prospectus on the Securities Exchange Commission's (SEC's) website. Which of the following is true? A) This satisfies the access equals delivery rule for a preliminary prospectus. B) This satisfies the access equals delivery rule for a final prospectus. C) This does not satisfy the access equals delivery rule for an aftermarket prospectus. D) Access equals delivery can only mean physical delivery of the prospectus and not viewing one on a website.
B) This satisfies the access equals delivery rule for a final prospectus.
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a regional investment banker based in Seattle, to run the sale. This is an example of A) an IPO. B) a secondary offering. C) a CRUT. D) an APO.
B) a secondary offering.
Shelf offerings are covered under which if the following? A) The Investment Company Act of 1940 B) The Trust Indenture Act of 1939 C) The Securities Act of 1933 D) The Bank Secrecy Act
C) The Securities Act of 1933
Modulux, Inc., a NYSE listed manufacturer, is offering 5,000,000 shares to the public, which will raise capital to build a new plant. The new technology and design should allow Modulux to increase market share significantly in the modular home business. This offer is A) a secondary offering. B) a venture offering. C) an APO. D) an IPO.
C) an APO.
A tombstone announcement may contain all of the following except A) type of security. B) number of shares offered. C) an offer to sell the securities. D) names of the underwriters.
C) an offer to sell the securities.
In a split offering, A) all shares are issued to the public from existing shareholders. B) shares are issued to existing shareholders only. C) shares are issued from the corporation and sold by existing shareholders. D) shares are sold by existing shareholders only.
C) shares are issued from the corporation and sold by existing shareholders.
A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in A) the secondary market. B) the funding market. C) the capital market. D) the currency market.
C) the capital market.
Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is A) the pre-filing period. B) the posteffective period. C) the cooling-off period. D) the mandated waiting period.
C) the cooling-off period.
All of the following are true of tombstone advertisements except A) they would be expected to show the number of shares to be offered. B) they are not an offer to sell or solicit sales for the securities. C) they are mandatory and must be placed during the cooling-off period. D) they can be placed by the underwriters.
C) they are mandatory and must be placed during the cooling-off period.
Certain investors are deemed accredited when they have a net worth of A) $1 million. B) $500,000, not including net equity in the primary residence. C) $200,000. D) $1 million, not including net equity in the primary residence.
D) $1 million, not including net equity in the primary residence.
A prospectus displays which of the following? A) The Securities and Exchange Commission (SEC) endorsement B) A guarantee insuring against loss C) Performance predictions for a minimum of three years D) Description of how the proceeds will be used
D) Description of how the proceeds will be used
The preliminary prospectus for the IPO of the Big Shoes Sneaker Company indicates that the number of shares sold may be increased as much as 15% if market demand is sufficient. This is called a A) Secondary IPO offering B) Shelf offering C) Flex offering D) Green Shoe option
D) Green Shoe option
For primary and secondary markets, which of the following is true? A) In the secondary market, securities transactions cannot take place on an exchange. B) In the primary market, securities are purchased from and sold to individual investors. C) In the secondary market, all sales proceeds go to the issuer. D) In the primary market, securities are sold to the public and the issuer receives the sale proceeds.
D) In the primary market, securities are sold to the public and the issuer receives the sale proceeds.
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 Securities Investors Protection Act of 1970 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
The ABC Chemical Corporation wishes to advertise its upcoming offering of common stock in a tombstone advertisement that they, the issuer, will place. When placing the tombstone advertisement, which of the following would be least likely to appear? A) The name of the issuer B) The expected price range of the offering C) The total number of shares being offered D) The names of the investment bankers underwriting the issue
D) The names of the investment bankers underwriting the issue
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? A) 25 days B) 60 days C) 90 days D) 40 days
A) 25 days
Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147? A) 80% of the issuer's customers must be located in the state of California. B) 80% of the issuer's assets are located in the state of California. C) 80% of the issuer's proceeds will be used in the state of California. D) 80% of the issuer's revenue must be generated from the state of California.
A) 80% of the issuer's customers must be located in the state of California.
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) Distribute a preliminary prospectus to the investing public. B) Make a binding offer to sell the securities. C) Mail sales literature to those who have expressed an interest in purchasing the securities. D) Solicit orders from investors to purchase the securities.
A) Distribute a preliminary prospectus to the investing public.
The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its first public offering. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days? A) Buyers in the secondary market are never entitled to the IPO prospectus B) 25 C) 90 D) 40
C) 90
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) Municipal bond market B) Government bond market C) Capital market D) Secondary market
C) Capital market
The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these comply with those rules for initial (IPO) and additional (APO) public offerings? I. An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. II. An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. III. An APO of a stock listed on the NYSE requires delivery for a period of 25 days. IV. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days.
C) I and IV
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. A) I and III B) I and IV C) II and III D) II and IV
C) II and III
Which of these may be found in the final prospectus that is not in the preliminary prospectus? I. Next year's sales II. Public offer price III. Release date IV. Planned use of the proceeds A) II and IV B) I and IV C) II and III D) I and II
C) II and III
An investor requests a preliminary prospectus for a new issue. Regarding the document which of the following is true? A) The final price for the securities is published within it. B) It can be deemed an offer to sell securities to the public. C) It is made available between the registration date and the effective date. D) Receipt of it is a commitment that the underwriters will sell securities to the recipient.
C) It is made available between the registration date and the effective date.
During the cooling-off period, underwriters may not A) place a tombstone advertisement. B) distribute a preliminary prospectus. C) distribute sales literature or advertising material. D) take indications of interest.
C) distribute sales literature or advertising material.
The Mod Family Foundation is a $500,000,000 charitable foundation headed by Clarence Mod. The foundation is seeking to purchase a large block of WeariTech, Inc., a Nasdaq listed company, for the foundation's portfolio. Seacoast Securities is assisting with this secondary market transaction. In this example, the Mod Family Foundation is A) a retail investor. B) an issuer. C) an institutional investor. D) a venture capitalist.
C) an institutional investor.
A company that offers sales of another company's securities would best be described as A) a market maker. B) a transfer agent. C) an underwriter. D) an issuer.
C) an underwriter.
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? A) 10 days B) 60 days C) 30 days D) 40 days
D) 40 days
A new registered representative receives a memo discussing the distribution of a red herring. The registered representative knows that the memo is referencing A) a tombstone advertisement. B) a registration statement. C) a final prospectus. D) a preliminary prospectus.
D) a preliminary prospectus.
During the cooling off period, underwriters would be allowed to do all of the following except A) take indications of interest. B) publish a tombstone. C) distribute a preliminary prospectus. D) advertise the issue.
D) advertise the issue.
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a FINRA member broker-dealer based in Seattle, to run the sale. Seacoast Securities is acting as A) a dealer. B) an owner. C) an issuer. D) an investment banker.
D) an investment banker.
GEMCO Oil and Gas, a non-NMS stock, wishing to sell up to $100 million of convertible debt as market conditions permit, files a shelf registration statement with the SEC. Which of these statements are true? I. For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale. II. The registration statement is effective upon completion of the cooling-off period. III. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 2-year period without having to reregister the security. IV. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 4-year period without having to reregister the security.
A) I and III
An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase A) a new issue initial public offering (IPO) at the public offering price. B) a municipal bond in a state where the officer does not reside. C) call or put options on a stock in the secondary market. D) closed-end funds on the secondary market.
A) a new issue initial public offering (IPO) at the public offering price.
When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in A) a primary offering. B) an initial public offering. C) a private securities offering. D) a secondary offering.
A) a primary offering.
An indication of interest given by an investor during the cooling-off period is A) an investor's declaration of potential interest in purchasing some of the issue after the security comes out of registration. B) an investor's binding commitment to purchase some of the issue after the security comes out of registration. C) an investor's binding commitment to purchase some of the issue immediately. D) an investor's declaration of potential interest in purchasing some of the issue immediately.
A) an investor's declaration of potential interest in purchasing some of the issue after the security comes out of registration.
A tombstone advertisement placed before the effective date can A) be placed by the issuer directly or by the underwriters. B) only be placed by the issuing company. C) only be placed by those assisting the issuing company in the underwriting. D) always be deemed to be an offer to sell the securities.
A) be placed by the issuer directly or by the underwriters.
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 effective or offering date B) the Securities and Exchange Commission's (SEC's) verification of accuracy C) all known risks to purchasers of the stock D) the intended use of the proceeds raised in the offering
B) the Securities and Exchange Commission's (SEC's) verification of accuracy
When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is A) the due date. B) the effective date. C) the time upon which the SEC approves the securities. D) the exudate.
B) the effective date.
Primary market transactions would include which of the following? A) 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 stock by a broker-dealer acting as a market maker C) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter D) Sale of $10 million of municipal bonds by a broker-dealer acting as a market maker
C) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter
In the capital markets, securities such as stocks and bonds can be A) purchased and sold by institutions only. B) purchased and sold by individuals only. C) offered by the public sector only. D) offered by both public and private sectors.
D) offered by both public and private sectors.
