SIE Unit 1: Individual Securities - Equities

Squidco, Inc., is issuing 100 million dollars in 4 ½% bonds maturing in 20 years. When purchased at issue, the buyers will receive an additional security that allows them to purchase 20 shares of Squidco common stock at $50 a share, anytime in the next 10 years. Squidco common is currently trading at $29.95 a share. This is an example of a A) warrant. B) stock right. C) call. D) follow-on offering.

A) warrant. - warrant issued to fixed-income security; attract more interest in debt - longer-term - higher exercise price than current stock price

Under Rule 144, which of these sales are subject to volume limitations on the number of shares sold? I. Control person selling registered stock held for 1 year II. Control person selling restricted stock held for 2 years III. Nonaffiliate selling registered stock held for 1 month IV. Nonaffiliate selling restricted stock held for more than 6 months A) I and II B) III and IV C) I and IV D) II and III

A) I and II - control persons always subject to volume limitations - nonaffiliates have no volume (or other restrictions) in sale of registered stock - if shares are restricted, volume limits for nonaffiliated = 6 months - registered shares have no Form 144 filing requirement

American Liquidators Corporation (the ticker is LQDT) has 100 million outstanding common shares. The company would like to raise capital by selling 100 million new shares. In order to do this they must give their existing shareholders an opportunity to buy shares sufficient to maintain the shareholders percentage of ownership. In order to accomplish this they would A) offer stock rights to existing shareholders. B) perform a stock split. C) offer warrants to existing shareholders. D) suggest that existing shareholders go to the market and double their existing position.

A) offer stock rights to existing shareholders.

Jon owns 100 shares of the Bayside Fishing Company. Bayside has 1,000,000 shares outstanding and operates under a statutory voting system. At the next election for the board, there are two open seats. All of these are true except A) Jon has a right to freely transfer his shares. B) Jon has control of 200 votes, which he can cast any way he likes among the two open seats. C) Jon owns 1/10000 of the Bayside Fishing Company. D) Jon has control of 200 votes, and he can cast up to 100 of those votes for each open seat.

B) Jon has control of 200 votes, which he can cast any way he likes among the two open seats.

The United States Supreme Court decision that provided our current definition of a security is A) County of San Francisco v. State of California B) SEC v. Howey C) SEC v. Lorenzo D) Hawkins v. Florida

B) SEC v. Howey - Rule 144

Another term for stocks and bonds is A) taxable and tax-free. B) equity and debt. C) voting and nonvoting. D) shares and units.

B) equity and debt.

For this election cycle, Big Trucks, Inc., has three open board seats. Big Trucks operates under a cumulative voting system. Your customer owns 300 participating preferred shares of Big Trucks. He has A) 300 votes each for the open seats. B) no voting rights. C) 900 votes he can divide anyway he wants among the three seats. D) 300 votes total to spread among the three open seats.

B) no voting rights. - preferred stock carries no voting rights

In 2011, RST Corp. had both common stock and $100 par value 4% noncumulative preferred stock, outstanding. The preferred stock, like the common stock, pays dividends on a quarterly basis. Because of financial difficulties, the company stopped paying dividends after 2011. After resolving its problems in 2015, the company resumed dividend payments in 2016. Before paying the first quarterly common stock dividend that year, the company would have to pay a quarterly dividend to the preferred stockholders of A) $20.00. B) $1.00. C) $17.00. D) $4.00.

B) $1.00.

Your customer, MJ, has a strong preference for investing in equity securities; however, she is hoping to increase the amount of current income her portfolio generates. Which of these is the least suitable for her? A) BuyMore, Inc., a big-box retailer with a long history of healthy dividend payments B) Duratech common stock, an exciting new tech manufacturer C) Generic Motors, Inc., 4 ¾% preferred stock D) Long Beach Electric, a utility

B) Duratech common stock, an exciting new tech manufacturer - new companies tend to pay little or no dividends

An american depository receipt is a A) foreign security representing a domestic security in foreign markets. B) domestic security representing a foreign security in U.S. markets. C) foreign security trading in U.S. markets. D) domestic security trading in foreign markets.

B) domestic security representing a foreign security in U.S. markets.

Mary owns 8% of Doyle Inc., a publically traded publishing company. She has recently married John, a doctor who owns 3% of Doyle. John wants to sell some of his shares to pay off the debt from the wedding and honeymoon. When he does so he will need to A) not file Form 144 because only owns 3% and is not a control person. B) not file Form 144 due to the spousal exception. C) file Form 144 because he is a control person. D) file Form 144 because he is a doctor.

C) file Form 144 because he is a control person. - together, they own 11% of the company

Included under the term, equity security, would be A) debentures. B) equipment trust certificates. C) participating preferred. D) collateral trust certificates.

C) participating preferred. - if it is modifying a preferred stock, it's an equity security - other choices represent debt instrument

Which of these securities would likely provide the greatest potential for capital appreciation? A) A convertible bond B) A preferred stock C) A U.S. Treasury STRIP D) A common stock

D) A common stock

Which of these would most likely require shareholder approval? A) Hiring a new CFO B) Firing the CEO C) Declaring a dividend D) Changing the corporation's name

D) Changing the corporation's name

All of the following are considered securities except A) Treasury bonds. B) common stock of XYZ corporation. C) 15 British pound put contracts. D) U.S. minted gold coins.

D) U.S. minted gold coins.

All of the following statements regarding penny stocks are true except: A) established customers of the firm need not sign a suitability statement. B) if an account holds penny stocks, broker/dealers must provide a monthly account statement to the customer. C) the SEC rules require that prospects, before their initial transaction in a penny stock, be given a copy of a risk disclosure document. D) penny stock rules apply to both solicited and unsolicited transactions.

D) penny stock rules apply to both solicited and unsolicited transactions. - special penny stock rules only applied to solicited transactions - greater perceived risk... required to disclose risks associated - signed suitability statement not required for established customers - monthly account statements provided

Equity is to debt as A) stock is to preferred stock. B) stock is to mutual fund. C) hedge fund is to mutual fund. D) stock is to bond.

D) stock is to bond.

All of these dates are declared by the board of directors of a corporation except the A) declaration date. B) payable date. C) record date. D) ex-dividend date.

D) ex-dividend date. - ex-dividend date declared by regulator that controls trading location - DERP

Your client holds ADRs of Daikon Motors, Inc., an automobile manufacturer based in Asia. All of these are true about the position except A) the security may be traded in U.S. markets. B) they have the right to request the underlying common shares be issued to them directly. C) they will receive dividends in U.S. dollars. D) they have the same voting rights as an owner of the common stock.

D) they have the same voting rights as an owner of the common stock. - American Depositary Receipt (ADR): facilitate US investing w/ foreign trade

Big Company, Inc., an NYSE listed manufacturer of large objects, has declared a 50-cent-per-share-dividend payable next month. Big Company also has options available for trade. The actual ex-dividend date will be declared by a. NYSE b. FINRA c. the OTC d. the CBOE

a. NYSE