SIE Unit 1
Which of the following would most closely match the meaning of a red herring?
A preliminary prospectus A preliminary prospectus is also known as a red herring. The red herring does not include key information about the issue such as price and the number of shares offered. The term is derived from the disclaimer printed in red on the cover page.
A term indicating that a security is tradable and all of the requirements of the contract to sell the security have been met and the security is ready to be transferred is
good delivery.
Ownership of a security indicates that one is
long the position and bullish
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 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.
All of the following are benefits of using a prime broker except cost savings. research. multiple executing brokers. consolidation of records.
research An institutional investor may select one firm (the prime broker) to provide custody and financing of securities while other firms, called executing brokers, handle all trades placed by the customer. It is not unusual for large companies to use dozens of executing broker-dealers. Trade confirmations from the many executing broker-dealers are consolidated and are provided along with account statements by the prime broker. Prime brokerage is efficient and saves the customer time and money. Research is not associated with prime brokerage accounts.
A market in which exchange-listed securities are traded in the over-the-counter (OTC) market would best be described as
the Third Market.
Which of the following could not be considered an institutional investor?
An accredited investor
The aftermarket prospectus requirement for the IPO of nonlisted securities is
90 days For the first 90 days following the IPO, a prospectus must be provided to purchasers in the secondary market.
The price an investor can sell a security is called the
bid. The bid is the price within a quote that an investor sells for. Ask and offer are the terms used for the price for purchasing a security. New issues are sold at the public offering price (POP).
Which of the following best describes a final prospectus?
Meets the full and fair disclosure requirements of the Securities Act of 1933
An opening transaction can be
either a buy or a sell
All of the following are false descriptions of different securities offering types except
in a primary additional issue, underwriting proceeds go to the issuer. As with all primary offerings, new issue (IPO), or additional issue, underwriting proceeds go to the issuing company.
When investors buy and sell securities to and from one another, these transactions occur
in the secondary market.
When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is
the effective date.
Certain investors are deemed accredited when they have a net worth of
$1 million, not including net equity in the primary residence. or has had an annual income of $200,000 or more in each of the two most recent years (or $300,000 jointly with a spouse) and who has a reasonable expectation of reaching the same income level during the current year.
A quote for Seabird Airlines (SBRD) is 17 B 17 ½ A 5 x 5. A customer would be able to sell how many shares and at what price?
500 shares at $17 a share. A quote is the bid and ask prices followed by the size on each side. A customer sells at the bid ($17) and the size is in round lots (5 × 100 = 500 shares).
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?
90
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). The first time that a company issues shares to the public, it engages in an IPO. Later offerings are known as subsequent primary offerings (SPOs) or APOs. The IPO and any SPO or APO are all issuer transactions and are, therefore, done in the primary market.
Regarding primary and secondary offerings, which of the following are true? An offering can only be either a primary or secondary. An offering can be a combination of primary and secondary. An initial public offering (IPO) is a secondary offering. An additional primary offerings (APO) is a primary offering.
An offering can be a combination of primary and secondary. An initial public offering (IPO) is a secondary offering. An offering can be a combination of primary and secondary. These are known as split offerings. Both IPOs and APOs are primary offerings, where the issuer receives the sale proceeds.
Your broker-dealer, rather than clear its own securities transactions, chooses to introduce its business to another firm that will clear, processes and handle all back-office operations for it. The firm receiving the business is known as
a carrying firm. A firm that chooses to introduce its customers' business to another firm to clear and process transactions, as well as handle all back-office tasks such as sending trade confirmations and taking custody of customer funds and securities, is known as an introducing or fully disclosed firm. The firm receiving the business is known as the carrying or clearing firm.
Your customer buys 300 shares of Steel Tools common stock on Tuesday and will be an owner of record as of the close of business that same Tuesday. This must be
a cash settlement trade. This is called a cash settlement trade. It states that the trade is a common stock, so not a mutual fund. There is no formal quick settlement trade.
A firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is
a clearing agent. A clearing agent is an intermediary between the buy and sell sides of a transaction that receives and delivers payments and securities on behalf of both parties. While some broker-dealers are self clearing (act as their own clearing agent), simply being a broker-dealer doesn't always include being able to provide the services of a clearing agent.
When a firm engages in proprietary trading, buying into and selling out of its own inventory for profit, it is acting as
a market maker.
A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is best described as
a market maker. Market makers can be individuals or broker-dealers with a line of business to stand ready to buy or sell securities (make markets) with the view of being profitable by buying low and selling high or selling high and buying low (short selling). Market making is risky. Firms that do this must demonstrate to Financial Industry Regulatory Authority (FINRA) that they can manage the operational and financial risk.
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.
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. A primary offering is one in which the proceeds raised go to the issuing corporation, municipality, or government. The corporation in this case looks to increase its liquid capital by offering bonds. Primary offerings of bonds may be made by an issuer publicly, as is the case, or privately. This question points to an additional public offering (APO) of securities, not an initial public offering.
An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is best described as
a trustee.
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
an investment banker. In this example, Seacoast is acting as an investment banker, assisting a person (Clarence) in a secondary offering.
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. It's nonbinding.
A tombstone advertisement would be expected to include all of the following information except
any inherent risks associated with the offering or the issuer offering the securities. While any inherent risks associated with the issuer or the securities the issuer is offering would be expected to be shown in a prospectus, they would not be expected to be found nor is it required that they be shown in a tombstone advertisement. Each of the remaining answer choices shows information expected to be shown in these ads.
Trading in the over-the-counter market occurs between whom?
Market makers OTC trading occurs between market makers in a decentralized electronic market.
An official statement is a disclosure document that would be used in connection with an offering of which of the following securities?
Municipal bonds An official statement serves as a disclosure document and contains any material information an investor might need about a municipal bond issue. Municipal bonds are exempt from registration under the Securities Act of 1933.
An investor sold MJS stock, a stock not currently owned in her portfolio. This is
a bearish position With no other position in MJS stock when the stock is sold, this is an opening short transaction. Now being short the stock, this is a bearish position—hoping that the stock falls in price so that it can be purchased back later at a lower price for a profit. The risk with a short position is that the stock can move upward in price, and because there is no limit on how high a security's price may rise, a short seller has unlimited loss potential.
If a customer's shares are held by and registered to the broker-dealer, the shares are said to be
held in street name.
When shares are held in street name, this refers to the shares being
held in the name of the broker-dealer for the beneficial owner. When shares are held in street name, they are being held in the name of the broker-dealer for the beneficial owner. This is done to facilitate payments and delivery. This does not encumber the shares regarding receipts of dividends or their transferability if sold.
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. If the SEC issues a deficiency letter suspending its review of the new issue, the 20-day cooling-off period is halted and resumes where it had left off once the corrected registration statement is received
All of the following would be secondary market transactions except
securities sold to the public by the issuer. Exchanges (like the NYSE and the OTC market) are part of the secondary market. The primary market is the issuer selling to the public
A customer is given a quote for ABC as: 17.00 - 17.25 6 × 12. This quote indicates the customer can
sell 600 shares for $17 per share. Customers can purchase at the offer (the lowest price someone else is willing to sell) and sell at the bid (the most someone else is willing to sell). With this in mind, the customer can buy up to 1,200 shares at $17.25 or sell up to 600 shares at $17.
Blaine Smith has owned XYZ stock for several years and believes it is time to take his profit and invest that money in another stock. He should
sell XYZ to close. When a client owns a stock and wants to get out of that position, he should sell the stock in a closing transaction.
All of the following are restricted persons except: individual owning 5% of a member firm. finders and fiduciaries acting on behalf of the underwriters. portfolio managers. employees of members.
individual owning 5% of a member firm. Rules prohibit member firms from selling public offering stock in equities to any account in which restricted persons are beneficial owners. Restricted persons include Financial Industry Regulatory Authority (FINRA) members, employees of member firms, finders and fiduciaries acting on behalf of the underwriters, portfolio managers, and any person owning 10% or more of a member firm. Also included are the immediate family members of any restricted persons.
Private placements are primarily sold to
institutional investors
A private placement is nonexempt and must be register under the Act of 1933. is exempt from registration under the Act of 1933. can be sold to individual accredited investors. can be sold to institutional investors only.
is exempt from registration under the Act of 1933. can be sold to individual accredited investors. A private placement is exempt from registration. While securities offered in a private placement are generally sold to institutional investors, they can also be sold to small groups of wealthy individuals who meet net worth and income criteria, known as accredited investors.
Assets offered and traded in the securities markets can include all of the following except life insurance. currencies. equities. derivative products.
life insurance Equities (stocks), bonds, currencies, and derivative products like options can be offered and traded in the financial markets. Insurance is not an asset that can be traded in the financial markets.
Each of the following may be traded on an exchange except
life insurance. All types of financial assets and investment instruments are traded among buyers and sellers on securities exchanges. Stocks (equity securities), bonds (debt securities), options (derivative securities), currencies, and more are traded on exchanges and other securities markets every business day. Life insurance is not a security and may not be traded.
For margin transactions taking place through introducing broker-dealers, those who do not clear their own transactions, extension requests are
made by the clearing firm. Broker-dealers who are self-clearing will make their own extension requests. For those that are not self-clearing, known as introducing broker-dealers, the extension request must be made by the clearing firm.
Carrying firms may not
mix customer funds and securities with their own. Carrying firms can do trade executions, clear and settle transactions, and handle all back-office tasks, such as sending trade confirmations and statements. While they can take custody of customer funds and securities, they may not commingle them with those belonging to the firm. Abiding by the rule is known as segregating customer funds and securities.
In a combination (or split) offering,
new shares are issued from the corporation and existing shares are sold by shareholders. In a split offering, shares are issued to the public. These shares come from both the corporation and existing shareholders—hence the split.
Underwriters have been taking indications of interest for shares of an upcoming new issue. Indications of interest are
nonbinding on all parties. Indications of interest are not binding on either buyers (investors) or sellers (underwriters).
Underwriters for an IPO of Seabird Airlines stock have been taking indications of interest for shares of an upcoming new issue. These indications of interest are
nonbinding on all parties. Indications of interest are not binding on either buyers (investors) or sellers (underwriters). There are no binding indications of interest.
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%. Restricted persons will be able to have an interest in an account (one that is not wholly their own) that purchases new equity issues as long as no more than 10% of the account's beneficial owners are restricted persons.
Regarding a tombstone advertisement, all of the following are accurate statements except they are required by and filed with the SEC in order to announce a new issue to the investing public. it is the only type of advertisement permitted between the time the registration statement is filed with the SEC and the effective date. they are limited to the information that may be contained in them. all such advertisements must contain an advisory stating that the ad is neither an offer to sell nor a solicitation of an offer.
they are required by and filed with the SEC in order to announce a new issue to the investing public.
As participants in a firm commitment underwriting agreement, the underwriters know that
they, the underwriters, will be acting as principals buying the securities from the issuer. In a firm commitment, the underwriters contract with the issuer to buy the securities from them and thus are acting as principals rather than agents. In this type of underwriting, it is the underwriters who are at risk for any shares they cannot sell to the public, not the issuer. The issuer knows that ultimately all of the securities will be sold and all of the capital needed will be raised.
Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him
trade date plus 2 business days. When purchasing or selling an option, the settlement is the next business day. When an option is exercised the resulting stock transaction is 2 business days following exercise.
During the 20-day cooling-off period, solicitations of sales can be made. solicitations of sales may not be made. deficiency letters, if issued, are sent to the issuer. deficiency letters, if issued, are sent to the underwriters.
solicitations of sales may not be made. deficiency letters, if issued, are sent to the issuer. No solicitations of sales are permitted during the cooling-off period. If a deficiency letter is issued by the Securities and Exchange Commission (SEC) halting the review of the registration, it is sent to the issuer who is responsible for correcting the deficiency.
A document that substitutes for the owners signatures on the back of a stock or bond certificate is called a
stock or bond power. A stock (or bond) power signed by the owners may be used in lieu of the customer's signature on the back of the certificate.
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, also known as the Prospectus Act.
Electronic market centers designed primarily for institutional investors describes
the fourth market The market centers that operate through electronic communication networks are known as the fourth market. These centers were created to serve large institutional investors like mutual funds and pension plans. The fourth market reduces the transparency of trading activity by these organizations and allows them to trade more efficiently.
All of the following are acceptable choices to function as a depository and intermediary for transactions between buyers and sellers of securities except
credit unions.
A closing transaction can be
either a buy or a sell
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?
Private (nonpublic) securities offering Issuers wanting relief (exemption) from the registration provisions of the Securities Act of 1933 can offer securities privately. These securities offerings are often called private placements.
The Securities Act of 1933 requires that all of the following be offered by a prospectus except
Treasury bonds.
A registration statement for a new debt offering of BuyStuff, Inc., a well-known seasoned issuer, has been filed with the Securities and Exchange Commission (SEC). The accuracy and adequacy of the registration statement is the responsibility of the underwriters. the issuer. the exchanges where the shares will trade. the SEC.
the issuer. Even though the underwriters assist the issuer in preparing the registration statement that must be filed with the SEC, the issuer (BuyStuff, Inc., in this case) is ultimately responsible for the accuracy and adequacy of these documents. Remember that the SEC neither approves nor disapproves of anything within the registration statement. The fact that this is a debt issue, or that the issuer is a well-known seasoned issuer, is not relevant to the question.
Your customer purchases 5 JIM 50 calls at 3. Funds must be deposited in the account to pay for the trade no later than
the next business day.
Sandal manufacturer Achilles, Inc., had registered to sell shares of its stock to the public for the first time. The company has several different uses for the money to be raised—first among them is the building of a new manufacturing plant outside of Troy, Michigan. This sale would be part of
the primary market. The company is selling its stock to raise money for its growth. This is a primary market transaction. The issuer is the person selling the security. The secondary market is where others buy and sell securities. The issuer is not normally involved in a secondary market transaction. The OTC market is part of the secondary market. The spot market involves the trading of foreign currency.
Securities regulations that are called blue-sky laws refer to those at
the state level. These are state laws that pertain to the issuance and trading of securities within that state. They are known as blue-sky laws because of a statement made by a Kansas Supreme Court justice who referred to "speculative schemes that have no more basis than so many feet of blue sky."
Great Plains Securities, an OTC market maker, holds inventory and provides liquidity for Modulux Homes, an NYSE listed company. This is an example of
the third market.
Underwriters in a firm commitment offer
will act as principals.
A trade of an equity option settles in ( ) days, while an exercise of an equity option must be completed in ( ) days.
1,2 An option trade settles next business day (T+1); the exercise of an equity option settles in two days from exercise.
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
If your client, Marvin Blackwell, places a sell stop order at 38 when ABC is trading at 40, at which of the following prices could the order be filled? 38 39 40 41
38 39 40 41 A sell stop order is an instruction to sell at the market when a trade occurs at or below the stop price. If ABC stock's price drifted down and trades at 38, the stop is triggered. Even if it leaps over 38 to 37.95, for example, the stop would trigger. Remember that a stop, when triggered, becomes a market order. Market orders may fill at any price.
Which of the following would be a secondary market transaction?
A broker-dealer arranges for a customer's order to be executed on the NYSE IPOs, APOs, and mutual fund transactions involve the issuer selling to the public, which are primary market transactions. Secondary market transactions are between investors (which is what takes place on the NYSE as well as other exchanges and the OTC market).
Your client, Mary Quinn, wants to place an order to sell a stock in her portfolio when the current price is 45, but she is only willing to sell if she can sell for at least 47. Which order should she place?
A sell limit order Sell limit orders are placed above the current market price and fill at the stated price or higher. Market orders fill at the next available price. Sell stop and sell stop limit orders are not triggered until the market drops to or through the stop price.
A municipal advisor does which of the following activities?
Advises municipalities on selling securities
Your customer notes the amount of commission they paid your broker-dealer firm for their purchase of 500 shares of DEF, Inc., common stock. On this trade your firm most likely acted in what capacity? Dealer Underwriter Broker Market maker
Broker When a BD is acting as a broker (agent, agency), they are assisting their customer in buying a security from a securities dealer or selling securities to a dealer, or they are acting for the customer on an exchange. The BD will charge a commission for performing this service.
Institutional trading desks that place trades away from the visible markets in order to avoid impacting public quotes and revealing trading strategies are using which of the following?
Dark pools of liquidity Institutional trading desks that choose to use dark pools are able to execute large block orders without impacting public quotes or price or revealing their investment strategy for any of their holdings. Additionally, orders can be placed anonymously so that the identity of the entity placing the order—along with the volume and price for the transaction—is unknown to the general investing public.
A prospectus displays which of the following?
Description of how the proceeds will be used
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
For primary and secondary markets, which of the following is true? In the primary market, securities are purchased from and sold to individual investors. In the secondary market, securities transactions cannot take place on an exchange. In the primary market, securities are sold to the public and the issuer receives the sale proceeds. In the secondary market, all sales proceeds go to the issuer.
In the primary market, securities are sold to the public and the issuer receives the sale proceeds. In the secondary markets, such as an exchange or over-the-counter (OTC) securities trade between investors, one sells securities to another, and the issuer is not involved in the transaction.
A broker-dealer's business model allows for only the purchase and sale of securities for retail customer accounts. It does not execute, settle, or clear its customer's transactions, nor does it tend to any back-office functions such as sending trade confirmations or forwarding proxies. This broker-dealer would best be described as what type of firm?
Introducing/fully disclosed A fully disclosed introducing broker-dealer is what the word implies—it introduces its customer's business to a clearing firm. Clearing firms (often called carrying firms or agents) hold funds and securities and settle transactions (clear and process) for their correspondent introducing firms. Essentially, the clearing firm acts as the introducing firm's back office.
A broker-dealer has a line of business restricted solely to the purchase and sale of securities with trade executions being handled by another member firm. Which of the following would best describe this type of firm?
Introducing/fully disclosed A fully disclosed introducing broker-dealer is what the word implies—it introduces its customers to a clearing firm. Clearing firms (often referred to as carrying firms) hold their customer's funds and securities as well as those of their correspondent introducing firms. Essentially, the clearing firm acts as the introducing firm's back office. Because the risk associated with holding customer funds and securities is not present, net capital requirements are much lower for introducing firms than they are for self-clearing or carrying broker-dealers.
Regulation for a firm that offers advice on securities for a fee on a regular basis is based on which of the following?
Investment Advisers Act of 1940
For the primary market, which of the following is true?
Issuer transactions occur in the primary market, and securities are offered at a public offering price. The primary market, regulated by the 1933 Securities Act, is where securities are offered by issuers (issuer transactions) at an offering price. The sales proceeds of these transactions go to the issuer.
describe a prospectus
It is a full and fair disclosure of all material information and facts regarding the issuance of securities.
The Sierra Verde Coffee Company files a registration statement with the SEC for the sale of new securities. While reviewing the registration statement, the SEC determines that it has not been filed properly and issues a deficiency letter. Sierra Verde submits a corrected registration statement. Which of the following is trueregarding the 20-day cooling-off period?
It is halted on the day the deficiency letter is issued and may resume where it left off on the day the corrected registration is received.
Your customer notes that the amount of commission they paid your broker-dealer firm for their purchase of 100 shares of DEF, Inc., common stock is about 1% of the purchase price. On this trade your firm most likely acted in what capacity?
On an agency basis When a BD is acting as a broker (agent, agency), they are assisting their customer in buying a security from a securities dealer, or selling securities to a dealer, or acting for the customer on an exchange. The BD will charge a commission for performing this service.
Which of these may be found in the final prospectus that is not in the preliminary prospectus? Next year's sales Public offer price Release date Planned use of the proceeds
Public offer price Release date The public offer price may vary up until the release date. The SEC determines the release date, not the issuer. Next year's sales are counted next year, and could not be in the prospectus. Planned use of the proceeds is in both documents.
James Thomas calls and is interested in buying some GNMA certificates and wants to know when payment will be due. You should tell him
Regular way settlement is T + 2 for everything except treasuries, money market securities, and options
Public offerings of securities are regulated under
Securities Act of 1933
For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable?
Securities Act of 1933 regulating issues that must be offered by prospectus Nonexempt securities are those that must be registered with the Securities and Exchange Commission (SEC) under the Securities Act of 1933. The Securities Act of 1933 mandates that offerings of these securities must be made by prospectus.
Member firms violate rules regarding sales of new equity issues to restricted persons when they do which of the following? Sell a new issue to one of their own customers. Sell blocks of the new issue to accounts of partners or officers of the member firm. Sell shares to the grandparent of a member affiliate. Sell to accountants or attorneys acting on behalf of the underwriters.
Sell blocks of the new issue to accounts of partners or officers of the member firm. Sell to accountants or attorneys acting on behalf of the underwriters. Rules prohibit the sale of a new equity issue to other brokers, partners, officers, employees of firms in the syndicate or selling group offering the issue, and their immediate or supported family members. For purposes of this rule, aunts, uncles, and grandparents are not considered immediate family.
The market for Sierra Verde Coffee Company stock is at $72 per share. Your customer would like to sell his shares for $75, and believes the stock will climb to that level in the next two to three weeks. Which order should he place?
Sell limit 75 GTC Only the good-til-canceled (GTC) order will live past today. All the others will cancel if unexecuted by the end of the day. If there is no qualifier, then it is a day order. Fill-or-kill (FOK) orders cannot be filled immediately or canceled. An all-or-none (AON) order would need to also be marked GTC to go into the next day.
Which of the following statements with regard to the issuance of securities is true?
The Securities Act of 1933 provides criminal penalties for fraud. The Securities Act of 1933 (also known as the Paper Act, Full Disclosure Act, New Issues Act, Truth in Securities Act, and Prospectus Act) ensures that the investing public is fully informed about a security and its issuer when the security is offered on the primary market. The act provides criminal penalties for fraud in the issuance of new securities. The SEC review period, known as the cooling-off period, must last a minimum of 20 days before the SEC releases the securities for sale to the public (effective date). Solicitations and the acceptance of orders may never occur before the effective date.
What is the spread on a stock quote?
The difference between the bid price and the ask price or offer
Which of the following best describes how a sell stop at 39 order would be filled?
The next available price after the market price falls to 39 Sell stop orders are placed below the current market price and become market orders once the price touches or passes through the stop price.
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?
The officer may not purchase a new issue because he is considered a restricted person.
Which of the following firms would not normally be part of an initial public offering (IPO)?
Third-market dealers To facilitate a public offering, issuers will use the services of investment bankers and broker-dealers (also called underwriters) of the securities. Third-market dealers function in the over-the-counter market (secondary market), not the primary market.
Which of the following is true if a member firm is acting in both a principal and an agency basis on the same trade?
This activity is not allowed.
A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle
Tuesday, April 6 T+2
To qualify as an exempt transaction under Tier 1 of Regulation A, an issuer may offer a maximum of which of the following?
Up to $20 million in securities in a 12-month period
A company is already public with several major stockholders. The company proposes an offering where 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 as well as to the corporation. This is a combination offering. a primary offering. a secondary offering. an initial primary offering (IPO).
a combination offering. Anytime proceeds are going to the selling shareholders rather than the issuer, it is a secondary offering. Because the company is already public (has shares in the hands of stockholders), this offering of those shares to the investing public would be an APO rather than an IPO. The best description of this offering is a combination offering.
A firm designated as self-clearing can act in a back-office capacity for an introducing firm. not act in a back-office capacity for an introducing firm. clear and settle transactions executed by other firms. only clear transactions it executed.
act in a back-office capacity for an introducing firm. clear and settle transactions executed by other firms. Self-clearing firms not only clear and settle their own executions (transactions) but can clear the executions of other firms that would be considered introducing or fully disclosed firms. In this light, fully disclosed firms are those that introduce their business to clearing firms. Clearing and settling transactions includes providing any back-office functions needed.
A customer placed an order to purchase 100 shares of Sierra Verde Corp. common stock. The broker-dealer sourced the shares from another broker-dealer that maintains an inventory in the stock. The customer's firm acted as
agent
A central, physical, marketplace where securities are traded through a designated market maker is
an exchange
WRJ stock is quoted as 21 bid, 21.15 offer. For a customer order, which of the following is true? A purchase can be made at $21 per share if buying at the market. A purchase can be made at $21.15 per share if buying at the market. The spread is $0.15. A sale can be made at $21.15 per share if selling at the market.
A purchase can be made at $21.15 per share if buying at the market. The spread is $0.15. A quote always represents the bid and an ask (offer) price. Investors pay the current ask price when purchasing (21.15) and receive the current bid price when selling (21). The spread is the difference between the bid and the ask price which in this quote is 0.15.
A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place?
Friday, July 5 (T+2, skipped over the holiday)
A final prospectus must include certain information. Which of the following is not required to be included?
The underwriting contract and a list of all underwriters named in the contract While a description of the underwriting is required (this would include a list of the underwriters provided in the preliminary prospectus) the actual underwriting contract is not required in a final prospectus.
Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 except
access equals delivery rule. Securities offerings may qualify for exemption from the registration statement and prospectus requirements of the Securities Act of 1933 under Regulation A, Regulation D, Rule 147 and Regulation S.
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).
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
an institutional investor. We know that they are not acting as a venture capitalist because the company is already trading, and these shares are to be purchased in the secondary markets.
All of the following are associated with being a carrying firm except being a fully disclosed firm. accepting customer securities. accepting customer funds. being able to clear customer transactions.
being a fully disclosed firm.
Regarding a public offering and a private placement, all of the following are true except
both are subject to the registration requirements found in the Securities Act of 1933. A key difference is that private placements are generally exempt from the registration requirements of the Securities Act of 1933. They are similar in that both public offerings and private placements are methods utilizing the services of investment bankers (underwriters) to offer securities to the public and with each, securities can be sold to individuals, but the number of individual investors is limited with private placements.
Two months ago your customer sold short 200 shares of Seabird Airlines at $15 a share. Today, the stock is trading at $10 a share. In order to close out the position your customer would
buy 200 shares of Seabird. A customer would need to buy the shares in order to close this short position. Borrowing the shares does not close the short, nor does buying the call. They could buy the call and then exercise, but the buy, alone, does not close the position. If they closed the position at $10 they would have a gain.
A customer who is bullish on ABC would most likely
buy ABC long.
Your customer purchased 300 shares of XYZ stocks six months ago and sold the shares last week. The actions your customer took in relation to XYZ were to
buy long and sell long. The purchase of the stock is a long buy. The subsequent sale of the long position is a long sale
All of the following phrases are associated with a broker-dealer acting as a dealer except "trades with customers from own inventory." "maintains inventory." "charges a commission for the transaction." "profits on spread."
charges a commission for the transaction. When a BD acts as a principal (dealer, market maker), they are selling securities from the firm's inventory to a customer or buying a security from a customer for the dealer's inventory. The firm profits on the difference between what the firm paid for the security and what the customer pays, which is called the spread (or mark-up). There is no commission when a firm acts in a principal capacity.
