SIE Unit 1
Which of the following phrases is not associated with a broker-dealer acting as a market maker?
Performs the transaction on behalf of the customer
When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in
Primary offering
Raising funds is generally accomplished by corporations through the issuance of stock (equity) or bonds (debt). This is done in
The capital market
All of the following names describe the Securities Act of 1933 except
The exchange act
Electronic communication networks (ECNs) are part of
The fourth market
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 issuer
An investor is long MJS stock. For this investor, which of the following is true?
The risk is that the stock falls in price.
The preliminary prospectus for an IPO indicates that the number of shares to be sold may be increased as much as 15% if market demand is sufficient. This is called
a Green Shoe option.
Your client, Alice Tate, lives in Irvine, California, and wishes to purchase some bonds that would be both state- and federal-tax free for her. You recommend some school district bonds from Costa Mesa. She then asks when she would need to pay for the bonds. You should tell her
trade date plus 2 business days.
A customer enters the following order: Sell 1,000 shares of XYZ at 23. Which of the following executions would the customer accept?
23.50
Securities sold in an issuer-related transaction would best be described as
A primary offering.
All of the following are exempt issuers under the Securities Act of 1933 except
ABC Broker-Dealer, which issues Treasury receipts.
All of the following issuers are exempt issuers except
ABC Railroad Power Systems, Inc.
A municipal advisor does which of the following activities?
Advises municipalities on selling securities
Which of the following will not be found in a final prospectus?
Agreement among underwriters
A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following?
Carrying Firm
A broker-dealer that executes trades and settles transactions for another broker-dealer is called
Carrying firm
The Securities Act of 1933 protects investors who buy new issues by doing all of the following except
requiring the licensing of persons affiliated with broker-dealers.
A market order to buy must be executed when and at what available price?
Immediately, at the lowest
In the capital markets, securities such as stocks and bonds can be
Offered by both public and private sectors.
If left unexecuted, a day order will automatically be canceled when?
On the close of the business day
A broker-dealer firm that maintains an inventory of a security and does transactions in the secondary market in that security is functioning in which of the following capacities?
Principle
A corporation enlists the services of a transfer agent, who would be expected to handle all of the following functions except
Registering the corporation's securities with the state.
An order that when triggered becomes a market order is called a
Stop order
Which of the following would be allowed during the cooling off period?
Taking indications of interest
If a customer's shares are held by and registered to the broker-dealer, the shares are said to be
Held in street name
ABC Corp stock is trading at BID 75.32, ask 75.35 5 x 12. What is the spread?
$.03
What is the maximum number of nonaccredited investors allowed in a Regulation D exempt transaction under Rule 506(b)?
35
The aftermarket prospectus requirement for the IPO of nonlisted securitie
90 days
Member firms violate rules regarding sales of new equity issues to restricted persons when they do which of the following? I. Sell a new issue to one of their own customers. II. Sell blocks of the new issue to accounts of partners or officers of the member firm. III. Sell shares to the grandparent of a member affiliate. IV. Sell to accountants or attorneys acting on behalf of the underwriters.
II and IV
Regarding primary and secondary offerings, which of the following are true? I. An offering can only be either a primary or secondary. II. An offering can be a combination of primary and secondary. III. An initial public offering (IPO) is a secondary offering. IV. An additional primary offerings (APO) is a primary offering.
II and IV
What is the maximum number of nonaccredited investors allowed in a Regulation D exempt transaction under Rule 506(c)?
None
Which of the following would be allowed during the cooling off period?
Placing a tombstone ad
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.
When investors open a position by going long the security, they can close the position by
Selling the security
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
Which of the following firms would not normally be part of an initial public offering (IPO)?
Third-market dealers
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.
Your customer opens a position at 45 and then closes it later at 47. This represents
a 2-point gain or loss.
An investor sold MJS stock, a stock not currently owned in her portfolio. This is
a bearish position.
A customer placed an order to purchase 20 GHI Corp. subordinated bonds at 102. The broker-dealer sourced the bonds from another broker-dealer that maintains an inventory of the bonds. The customer's firm acted as
a broker
A customer enters an order for ABC, Inc., common stock that includes instructions that it must be executed in its entirety when entered or canceled. This is known as
a fill-or-kill (FOK) order.
A customer enters an order that must be executed in its entirety when entered or canceled immediately. This is known as
a fill-or-kill (FOK) order.
An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase
a new issue initial public offering (IPO) at the public offering price.
The Securities Act of 1933 requires that
a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale.
For initial public offerings (IPOs) of common stock, all of the following would be considered restricted persons except
a person owning at least 5% of the member firm.
A corporation sells shares to the investing public in order to raise capital. This is known as
an issuer transaction.
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.
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 who is bullish on ABC would most likely
buy ABC long.
All of the following phrases are associated with a broker-dealer acting as a principal except
charges a commission for the transaction.
Irksome, Inc., a technology company, has shares selling at $40. Your customer is bearish. He would like to sell the stock short, but not until it retreats at least 10% from its current price. To catch the drop, he could
enter a sell short at stop 35.
All of the following are false descriptions of different securities offering types except
in a primary additional issue, underwriting proceeds go to the issuer.
A preliminary prospectus is used to solicit
indications of interest before the effective date
Rules to protect the investing public during the public offering process include all of the following except
limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees.
When an investor receives a final prospectus, the expectation should be that one of the following would not be found. Which is it?
the Securities and Exchange Commission's (SEC's) verification of accuracy
A market in which exchange-listed securities are traded in the over-the-counter (OTC) market would best be described as
the Third Market.
An underwriter is placing a tombstone advertisement for a company's new issue. A prospective investor might expect to see all of the following information on the advertisement except
the names of the company's officers.
Your client is buying municipal bonds and wants to know when payment is due. You should tell him
trade date plus 2 business days.
Your client is purchasing XYZ corporate bonds and wants to know when regular way settlement is. You should tell her
trade date plus 2 business days.
A market maker
trades in a proprietary account to facilitate trading of a security and provide liquidity.
All of the following are associated with being a carrying firm except
Being a fully disclosed firm.
The price an investor can sell a security is called the
Bid
All of the following are securities that are exempt from registration except
BigCity National Bank Holding Company, Inc., common stock.
Regarding a public offering and a private placement, which of the following statements is false?
Both are subject to the cooling-off period of 20 days found in the Securities Act of 1933.
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?
Broker
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.
A closing transaction can be
Buy or sell
A clearing corporation agent or depository for securities transactions
Can be a commercial bank.
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
A prospectus displays which of the following?
Description of how the proceeds will be used
After the filing of a registration for a new issue with the Securities and Exchange Commission (SEC), and still in the registration's cooling-off period, broker-dealers may
Give a red herring to prospective investors.
BuyStuff, Inc., common stock is listed on the NYSE. Great Plains Securities is an over-the-counter market maker and has a posted quote for BuyStuff common of 250.10-255.50. If Great Plains wants to enter a new quote, the smallest incremental change is
$.01
Certain investors are deemed accredited when they have a net worth of
$1 million, not including net equity in the primary residence.
The current quote for All American Motors Corp. stock is bid 52-ask 52.05 5 × 2. Your customer places an order to sell 300 shares. How much will he likely receive, before commission?
$15,600
The current quote for Generic Motors stock is bid 32-ask 32.05 5 × 2. Your customer places an order to sell 300 shares. How much will they likely receive, before commission?
$9,600
A trade of an equity option settles in ( ) days, while an exercise of an equity option must be completed in ( ) days.
1,2
Under the de minimis exemption, an initial public offering of common stock may be sold to an account where restricted persons have a beneficial interest as long as their interest in the account does not exceed
10%
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
14 days
After the issuer files a registration statement with the Securities and Exchange Commission (SEC), the time known as the cooling-off period begins. This allows a registration to become effective as early as
20 calendar days after the date the SEC has received it.
The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its third public offering of the company stock. 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?
40
For nonlisted and non-Nasdaq securities, a prospectus must be provided to all those who purchase securities as part of an APO for how many days after the effective date?
40 days
An investor has her registered representative enter a sell stop limit order at 50. Following the order entry, trades occur at 52, 50, 49, 51, and 53. The investor would receive
51
To fill a customer buy order over the counter, your broker-dealer requests a quote from a market maker for 600 shares. The response is 20 bid, and ask 20.15. If the order is placed, the market maker must sell
600 shares at $20.15 per share.
An investor enters a sell stop limit order at 60. Following the order entry, trades occur at 62, 60, 59, 61, and 63. The investor will most likely receive
61
To fill a customer buy order, over-the-counter, your broker-dealer requests a quote from a market maker for 800 shares. The response is 15 bid, and ask 15.25. If the order is placed, the market maker must sell
800 shares at $15.25 per share.
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
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
A company's management team has agreed to issue additional shares of common stock in part to provide an employee stock ownership plan. It is agreed the issuance of the stock is not urgent and can wait until more favorable market conditions exist. What type of registration is most suitable under these conditions?
A shelf registration
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
Which of the following issues are exempt from registration under the Securities Act of 1933?
ABC Corporation commercial paper
The transfer agent for a corporation is responsible for each of the following except
Acting as an intermediary between the buy and sell sides of a transaction.
A customer's confirmation shows that they paid a commission of $74 on a purchase of 100 shares of a $35 stock. The broker-dealer is acting in what capacity?
Agency
Some issuers issue securities in electronic form, while some securities have been issued in physical form. Which of the following statements is true in relation to electronic or physical form?
All U.S. government securities are issued in book entry form
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).
A central, physical, marketplace where securities are traded through a designated market maker is
An exchange
Which of the following choices would best describe a follow-on offering
An issue of shares by a public company that is already listed on an exchange
Your client, Randall Stephens, has been bearish on LMN stock and sold it short several months ago. He now believes the company is in a good position for a turnaround and wants to change his strategy on LMN. What should he do to implement his new strategy?
Buy to close his existing position and open a new long position in the stock
Seacoast Securities, a member firm, filled a customer's sell order for BigTech Computers common stock and did not charge a commission. The firm most likely acted in what capacity?
Dealer
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?
Distribute a preliminary prospectus to the investing public.
During the cooling-off period, underwriters may not
Distribute sales literature or advertising material.
Narcissus, Inc., a social media company, has shares selling at $50. Your customer is bearish. He would like to sell the stock short, but not until it retreats at least 10% from its current price. In order to catch the drop he could
Enter a sell short at stop 45.
Which of the following is an exempt issue?
Fixed annuity
Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is not accurate?
For an additional issue if the security is non-Nasdaq there is no delivery requirement.
Which of these statements is true regarding shelf offerings?
For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale.
Which of the following would most likely indicate shares of stock were held in electronic form?
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.
Which of the following would be applicable to nonexempt securities (those that must be registered) being offered to the public by a corporate issuer? I. Securities Act of 1933 II. Prospectus III. Securities Act of 1934 IV. Secondary market
I and II
Which of the following orders need not be immediately filled in their entirety? I. Immediate or cancel (IOC) II. Fill or kill (FOK) III. Market at open IV. Buy stop limit
I and IV
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? I. 38 II. 39 III. 40 IV. 41
I, II, III, and IV
Your customer places a sell stop at 60 on ABC stock while it is trading at $63 per share. After the order is elected, your customer may sell her shares at which of the following prices? I. $58 II. $59 III. $60 IV. $61
I, II, III, 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.
II and III
An investor receives a quote of 22-22.15 for BuyStuff, Inc. common stock. Which of these is correct? I. Purchasing the stock will cost $22 per share. II. Purchasing the stock will cost $22.15 per share. III. The spread is $0.15. IV. The investor will receive $22.15 per share if selling.
II and III
During the 20-day cooling-off period, I. solicitations of sales can be made. II. solicitations of sales may not be made. III. deficiency letters, if issued, are sent to the issuer. IV. deficiency letters, if issued, are sent to the underwriters.
II and III
WRJ stock is quoted as 21 bid, 21.15 offer. For a customer order, which of the following is true? I. A purchase can be made at $21 per share if buying at the market. II. A purchase can be made at $21.15 per share if buying at the market. III. The spread is $0.15. IV. A sale can be made at $21.15 per share if selling at the market.
II and III
For primary and secondary markets, which of the following is true?
In the primary market, securities are sold to the public and the issuer receives the sale proceeds.
When investors buy and sell securities to and from one another, these transactions occur
In the secondary market.
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 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 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
Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933?
Private (nonpublic) securities offerings
In a prime brokerage account, the prime broker
Provides custody and clearing services, as well as margin loans.
Which of these will be found in the final prospectus but is not in the preliminary prospectus?
Public offer price
An investor receives a quote of 62.55—62.60 for Fontana Steel Corp. common stock. Which of these is true?
Purchasing the stock will cost $62.60 per share.
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.
Primary market transactions would include which of the following?
Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter
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
Which of the following would take place in the primary market?
Securities sold to the public by the issuer
Carrying firms, those that carry customer accounts, must
Segregate customer funds and securities from the firms' funds and securities.
In order to qualify to invest in a Regulation A Tier 2 offering, a customer must do which of the following?
Self-certify that they meet the requirements
The market for Dizzy Rides Inc., is at $52 per share. Your customer would like to sell his shares for $55, and believes the stock will climb to that level in the next two to three weeks. What order should he place?
Sell limit 55 GTC
The Depository Trust Company (DTC)
Serves the custody needs of securities industry participants.
Under the Securities Act of 1933, which of the following is a nonexempt security?
Shares issued by a U.S. government bond fund
Shelf offerings are covered under which if the following?
The Securities Act of 1933
The ATOP Company is planning to offer shares of both common and preferred stock to the investing public in order to raise operating capital intended to be used for expansion. Which of the following laws enacted by Congress would be the most relevant when issuing these equity securities to the public?
The Securities Act of 1933
Which of the following acts requires the registration of most new issues?
The Securities Act of 1933
What is the spread on a stock quote?
The difference between the bid price and the ask price or offer
A broker-dealer firm purchases 400 shares of ABC Corporation common stock on behalf of a customer at a price of $40 per share. The firm charges the customer $40 for this transaction. Which of the following is true?
The firm is acting as an agent.
Electronic market centers designed primarily for institutional investors describes
The fourth market.
Which of the following would not be expected to be found in a tombstone advertisement for a new issue?
The intended purpose for which to use the sales proceeds
Which of the following best describes how a market order to buy would fill if placed when the market price of the stock was at 40?
The next available price
Which of the following best describes how a market order to sell would fill if placed when the price of the stock is a 40?
The next available price
Which of the following best describes how a buy stop at 39 would fill?
The next available price after the market price rises to 39
John Christensen places a buy limit order at 42 when the market price of the stock is at 45. Which of the following best describes how the order would fill?
The order can only be filled at a price of 42 or lower
A GTC order is left unexecuted at the end of the trading day on the last business day of April. Which of the following is true?
The order will be handled according to the procedures of the broker dealer.
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
You quote ABC stock to a customer 67 bid for 1,000 shares, 700 offered at 67.10. Which of the following is true?
The quote's inside spread is 0.10.
Securities regulations that are called blue-sky laws refer to those at
The state level
Regarding primary offerings, which of the following is true?
There is no limit to the number of primary offerings a corporation can issue.
Capital markets can be characterized by all of the following except
They are utilized by the public sector only.
An issuer that is already a publicly traded company wants to register new securities without selling any of the shares until later when it anticipates it will be retooling all of its existing manufacturing plants. Which of the following applies?
This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later.
A company is engaging in a securities offering that is a combination of a primary and secondary offering. Which of the following is true?
This combination is known as a split offering where the issuer receives some of the proceeds and existing shareholders receive some of the proceeds from the sale.
An investor is viewing a company's prospectus on the Securities Exchange Commission's (SEC's) website. Which of the following is true?
This satisfies the access equals delivery rule for a final prospectus.
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.
An individual who purchases securities for a personal account is called
a retail investor.
An offering in which one or more stockholders in the corporation are selling all or a portion of their own shares to the investing public for the first time is known as
a secondary offering.
A select pair or group of companies organized to underwrite corporate or municipal securities is best known as
a syndicate
Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 except
access equals delivery rule.
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
The Interstate Pension Trust manages over $1 billion in assets. The trust is seeking to purchase a large block of the stock of a Nasdaq-listed company with the assistance of a large broker-dealer. In this example, the trust is
an institutional investor.
The founder of a large, publicly traded company is looking to sell a very large number of shares of their personal holdings of the company stock. They enlisted the help of Great Plains Investments, LLC, a FINRA member broker-dealer based in Omaha, to run the sale. Great Plains is acting as
an investment banker.
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
A tombstone announcement may contain all of the following except
an offer to sell the securities.
A customer purchased shares of stock into her account. This action is known as
buying long.
Private placements are primarily sold to
institutional investors.
A fully disclosed broker-dealer
is one that introduces its business to a carrying firm to clear transactions.
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.
Seabird Airlines common stock is listed on the NYSE. Appalachia Securities is an over-the-counter market maker and has a posted quote for Seabird of 55.25-55.50. If Appalachia wants to enter a new quote, the smallest incremental change is
$.01
Trading hours on the New York Stock Exchange are
9:30 am to 4:00 pm Eastern Time.
Which of the following transactions would take place in the secondary market?
A broker-dealer selling securities out of its inventory to the public
All the following are exempt from the Securities Act of 1933 except
Limited partnership.
An opening transaction can be
Either a buy or a sell.
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?
25 days
An order is entered by a customer to sell at 30 stop limit. Once the order is entered, the stock trades in the following sequence: 32, 29, 31, and 33. The order would be executed and the investor would receive a price of
31
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
How long can a good 'til canceled order remain in force without being reconfirmed by the customer?
6 months
Your customer purchases shares of a common stock of a major exchange in a trade that settles the same day. This is an example of which type of trade?
A cash settlement trade
Which of the following would most closely match the meaning of a red herring?
A preliminary prospectus
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
I only
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
A shelf registration
Is good for two years and requires a supplemental prospectus be filed before each sale.
An underwriting group is currently assisting an issuer with the preparation and filing of the registration statement for a new issue. Who is responsible for the accuracy of the information within the registration statement?
Issuing corporation
An official statement is a disclosure document that would be used in connection with an offering of which of the following securities?
Municipal bonds
Which of the following is not an exempt issuer?
National Bank Holding Company
A corporation increases capitalization by selling shares of stock which can either come from a new issue or previously authorized but unissued shares. Total stock outstanding must
Never exceed the number of shares authorized.
All of the following would be secondary market transactions except
Securities sold to the public by the issuer.
Selling long is equivalent to which of the following?
Selling to close
Which of the following would not be found in a final prospectus?
The list of all investors in the offering
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
The ask price represents
The price the broker-dealer is willing to sell for.
Which of the following statements regarding capital markets is false?
They are used only by the private sector.
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.
BigBox Stores, Inc., common stock is a New York Stock Exchange-listed security. If an over-the-counter dealer makes a market in the stock, this activity is taking place in which market center?
Third market
It would be appropriate to refer to any of the following as an issuer transaction except
an REPO
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.
A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place?
Friday, July 5
Who must reconfirm a good 'til canceled order for it to stay in force more than six months?
The customer who placed the order
Which of the following would be required for a good 'til canceled order to remain in force for more than six months?
The customer would need to reconfirm the order
An investor requests a preliminary prospectus for a new issue. Regarding the document which of the following is true?
It is made available between the registration date and the effective date.
Which of the following best describes the size of a quote?
It tells the number of shares the broker-dealer is willing to buy or sell at that price.
On Tuesday, July 3, your customer bought 15 SBRD 30 September calls at 4. On Friday, August 10, the calls are in the money and your customer issues exercise instructions. On which days did the trade and the exercise settle?
July 5 and August 14
Great Plains Investment is a member firm that maintains an inventory in BigBox Stores, Inc., common stock. When transacting business in BigBox stock, the firm is most likely acting in what capacity?
Market Maker
ABC Brokers, a FINRA member firm, filled a customer's buy order for DEF common stock and did not charge a commission. The firm most likely acted in what capacity?
Market maker
ABC Securities is a FINRA member broker-dealer that maintains an inventory in BigTech Computing stock. When transacting business in BigTech stock, ABC is most likely acting in what capacity?
Market maker
Trading in the over-the-counter market occurs between whom?
Market makers
Secondary market transactions would include all of the following except
Market makers are broker-dealer who sell out of their own account in the secondary market. Underwriters are broker-dealers who help issuers bring their securities to market in the primary market.
Subject to market liquidity, which of the following orders is most likely to be executed immediately?
Market order
Which of the following securities is exempt from the Securities Act of 1933?
Municipal note
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
An institutional customer, such as a hedge fund, utilizes the services of a broker-dealer who provides custody of securities, as well as other back-office functions, while allowing the customer to establish relationships with other broker-dealers for the purpose of executing orders. This account would be known as a
Prime account
All of the following are true regarding the term market except
it is unique to the U.S. securities industry
An investor with no other positions in LMN stock purchases 400 shares at the market. This investor is
long LMN stock and bullish.
Ownership of a security indicates that one is
long the position and bullish.
The statement "These securities have not been approved or disapproved nor have any representations been made about the accuracy or the adequacy of the information" is
mandated to be in the final prospectus by the Securities and Exchange Commission (SEC).
Regular way settlement for the purchase of an equity option occurs
one business day after the trade date.
In a split offering,
shares are issued from the corporation and sold by existing shareholders.
The prospectus delivery requirement, access equals delivery, is satisfied when
The final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see.
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.
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
Cash settlement trade
On Tuesday, December 10 your customer Bought 5 OEX (S&P 100 Index) 230 March calls at four. On Tuesday, March 10 the calls are in-the-money and your customer issues exercise instructions. On what days did the trade and the exercise settle?
December 11 and March 11
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.
I and III
Regarding the purchase of new equity issues by restricted persons, which statements are true? I. An investment club is permitted to buy a new equity issue at the offering price. II. An investment club is not permitted to buy a new equity issue at the offering price. III. An investment club that has eight members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price. IV. An investment club that has 12 members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price.
I and IV
An investor with no other positions in LMN stock purchases 600 shares at the market. This investor is
Long LMN stock and bullish.
Seacoast Securities, a broker-dealer, maintains an inventory in DEF, Inc., common stock. When transacting business in DEF stock, Seacoast is most likely acting in what capacity?
Market maker
Underwriters have been taking indications of interest for shares of an upcoming new issue. Indications of interest are
Nonbinding on all parties
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.
Correspondent firms would be likely to have relationships with which of the following types of broker-dealers?
Self-clearing
Your client, Jane Anderson, has owned QRS for a few years but has now turned bearish on QRS. What transaction would you recommend?
Sell QRS to close
A stock's market value is directly determined by which of the following?
Supply and demand
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?
The Securities Act of 1933
What does the BID represent?
The highest amount that someone can sell the security
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.
A cash settlement trade settles
The same day as the trade.
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
Potential risks of owning common stock include all of the following except
Unlimited liability
A customer placed an order to purchase 300 shares of DEF Corp. preferred stock. The broker-dealer sourced the shares from another broker-dealer that makes a market in the stock. The customer's firm acted as
a broker
During the cooling-off period of a new registration filed with the Securities and Exchange Commission (SEC)
a red herring may be given to prospective investors.
An offering is defined as the sale of a security. Regarding offerings, all of the following are true except
corporate securities can only be offered in public securities offerings.
Regarding the purchase of new equity issues (IPOs), restricted persons may
not purchase shares of a new issue.
Restricted persons are not allowed to purchase an IPO of common stock. All of the following are restricted persons except
the grandparent of a restricted person.
All of the following are true of tombstone advertisements except A) they are mandatory and must be placed during the cooling-off period. B) they can be placed by the underwriters. C) they would be expected to show the number of shares to be offered. D) they are not an offer to sell or solicit sales for the securities.
they are mandatory and must be placed during the cooling-off period.
