Unit 1

A tombstone announcement may contain all of the following except A) type of security. B) an offer to sell the securities. C) names of the underwriters. D) number of shares offered.

B) an offer to sell the securities.

A customer purchased shares of stock into her account. This action is known as A) selling short. B) buying long. C) selling long. D) buying short.

B) buying long.

Rules to protect the investing public during the public offering process include all of the following except A) members must offer the securities at the public offering price. B) limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees. C) securities industry insiders may not take advantage of their insider status to gain access to new issues for their own benefit. D) member firms may not withhold securities in a public offering for their own benefit.

B) limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees.

A broker-dealer designated as a carrying firm would be expected to do all of the following except A) perform back-office functions, such as sending trade confirmations to customers. B) maintain a lower net capital than noncarrying broker-dealers. C) take custody of customer funds and securities. D) clear transactions for customer accounts.

B) maintain a lower net capital than noncarrying broker-dealers.

In the capital markets, securities such as stocks and bonds can be A) purchased and sold by institutions only. B) offered by both public and private sectors. C) offered by the public sector only. D) purchased and sold by individuals only.

B) offered by both public and private sectors.

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 A) self-clearing account. B) prime account. C) clearing account. D) fully-disclosed account.

B) prime account.

In a prime brokerage account, the prime broker A) provides execution services only, while another broker clears transactions and provides any other account services required. B) provides custody and clearing services, as well as margin loans. C) provides custody and clearing, but no margin financing. D) subcontracts out all services to other brokers.

B) provides custody and clearing services, as well as margin loans.

Carrying firms, those that carry customer accounts, must A) maintain levels of net capital equal to or lower than noncarrying firms. B) segregate customer funds and securities from the firms' funds and securities. C) not disclose its net capital if it is higher than noncarrying firms. D) commingle customer funds and securities with the firms' funds and securities.

B) segregate customer funds and securities from the firms' funds and securities.

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 A) the number of shares to be sold. B) the names of the company's officers. C) the names of the underwriting members. D) the type of security to be sold (stock or bond).

B) the names of the company's officers.

Sales for new issues of securities may be solicited A) before the cooling-off period. B) before, during, or after the cooling-off period, if done with a final prospectus. C) after the cooling-off period. D) during the cooling-off period.

C) after the cooling-off period.

Each of the following may be traded on an exchange except A) bonds. B) equities. C) life insurance. D) options.

C) life insurance.

In the capital markets, securities such as stocks and bonds can be A) offered by the public sector only. B) purchased and sold by institutions only. C) offered by both public and private sectors. D) purchased and sold by individuals only.

C) offered by both public and private sectors.

Under the Uniform Practice Code, regular-way transactions for common stock settle on A) the seventh business day following the trade date. B) the third business day following the trade date. C) the second business day following the trade date. D) the same day as the trade date.

C) the second business day following the trade date.

Unless otherwise specified, the size of a firm quote is A) 500 shares. B) 1,000 shares. C) 10,000 shares. D) 100 shares.

D) 100 shares.

A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following? A) A depository trust B) A fully disclosed introducing firm C) An investment company D) A carrying firm

D) A carrying firm

All of the following are exempt issuers under the Securities Act of 1933 except A) the U.S. Treasury. B) the State of Montana. C) Helpful Charities, Inc. D) ABC Broker-Dealer, which issues Treasury receipts.

D) ABC Broker-Dealer, which issues Treasury receipts.

A shelf registration A) is good for three years and requires a prospectus to be filed only once. B) is good for four years and requires a supplemental prospectus be filed before each sale. C) is good for four years and requires a prospectus to be filed only once. D) is good for two years and requires a supplemental prospectus be filed before each sale.

D) is good for two years and requires a supplemental prospectus be filed before each sale.

Assets offered and traded in the securities markets can include all of the following except A) equities. B) currencies. C) derivative products. D) life insurance.

D) life insurance.

When an investor receives a final prospectus, the expectation should be that one of the following would not be found. Which is it? A) all known risks to purchasers of the stock B) the intended use of the proceeds raised in the offering C) the effective or offering date D) the Securities and Exchange Commission's (SEC's) verification of accuracy

D) the Securities and Exchange Commission's (SEC's) verification of accuracy

The spread a dealer makes is best described as A) none of these. B) the ask plus the bid. C) the total commission. D) the ask minus the bid.

D) the ask minus the bid.

Electronic market centers designed primarily for institutional investors describes A) the OTC market. B) the third market. C) the exchanges. D) the fourth market.

D) the fourth market.

A market maker A) can only be an institution doing proprietary trading. B) acts as an agent to buy and sell for public customers who will hold their own securities. C) trades in a customer's account standing ready to buy or sell at their own discretion. D) trades in a proprietary account to facilitate trading of a security and provide liquidity.

D) trades in a proprietary account to facilitate trading of a security and provide liquidity.

Six days into the cooling-off period, an issuer receives a deficiency letter from the Securities and Exchange Commission (SEC) requesting clarification and corrections. Once the issuer submits these, and assuming that they satisfy the deficiency, the cooling-off period will resume. With no other deficiencies arising, the issue should become effective in A) 14 days. B) 20 days. C) 15 days. D) 8 days.

A) 14 days.

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? A) 500 shares at $17 a share B) 1,750 shares at $5 a share C) 5 shares at $17 a share D) 500 shares at $17.50 a share

A) 500 shares at $17 a share

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? A) Dealer B) Agent C) Underwriter D) Broker

A) Dealer

For the primary market, which of the following is true? A) Issuer transactions occur in the primary market, and price is determined by supply and demand. B) Issuer transactions occur in the primary market, and securities are offered at a public offering price. C) All U.S. exchanges are primary markets where price is determined by supply and demand. D) All U.S. exchanges are primary markets where securities are offered at a public offering price.

A) Issuer transactions occur in the primary market, and price is determined by supply and demand.

Which of the following best describes the size of a quote? A) It tells the number of shares the broker-dealer is willing to buy or sell at that price. B) It tells the number of shares that were traded in the OTC market the prior day. C) It tells the number of shares the broker-dealer has in inventory. D) It tells the number of shares that were traded on the NYSE that day.

A) It tells the number of shares the broker-dealer is willing to buy or sell at that price.

An investor receives a quote of 62.55—62.60 for Fontana Steel Corp. common stock. Which of these is true? A) Purchasing the stock will cost $62.60 per share. B) Purchasing the stock will cost $62.55 per share. C) The investor will receive $62.60 per share if selling. D) The spread is $0.15.

A) Purchasing the stock will cost $62.60 per share.

Ensuring that the investing public is fully informed about a security and its issuing company when shares are first sold in the primary market is covered under which of the following federal acts? A) Securities Act of 1933 B) Securities Exchange Act of 1934 C) Investment Company Act of 1940 D) Uniform Securities Act

A) Securities Act of 1933

The XYZ Company is looking to offer shares of its common stock to the public. Which of the following laws enacted by Congress would have the most relevance to the issuance of these securities? A) The Securities Act of 1933 B) The Securities Investors Protection Act of 1970 C) The Investment Company Act of 1940 D) The Trust Indenture Act of 1939

A) The Securities Act of 1933

In an underwriting where fixing a minimum dollar amount to be sold in order to move forward with the entire offering is most commonly referred to as A) mini-max. B) all or none (AON). C) de minimis. D) firm commitment.

A) mini-max.

State registration is not required if the transaction is exempt. An example of an exempt transaction would be A) one that is unsolicited. B) one involving municipal bonds. C) one that is solicited. D) one involving U.S. government bonds.

A) one that is unsolicited.

The Securities Act of 1933 protects investors who buy new issues by doing all of the following except A) requiring the licensing of persons affiliated with broker-dealers. B) providing criminal penalties for fraud in the issuance of new securities. C) requiring an issuer to provide full and fair disclosure. D) regulating the underwriting and distribution of primary and secondary issues.

A) requiring the licensing of persons affiliated with broker-dealers.

When investors open a position by going long the security, they can close the position by A) selling the security. B) buying the security. C) opening a new position in the security. D) selling the security short.

A) selling the security.

A customer enters an order that must be executed in its entirety when entered or canceled immediately. This is known as A) an immediate or cancel (IOC) order. B) a fill-or-kill (FOK) order. C) an all-or-none (AON) order. D) a day order.

B) a fill-or-kill (FOK) order.

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 A) an immediate of cancel. B) an all or none (AON). C) a firm commitment. D) a mini-max.

B) an all or none (AON).

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? A) All U.S. government securities are issued with physical paper certificates B) All U.S. government securities are issued in book entry form C) Corporate bonds have always been issued in electronic form D) Corporate stocks can only exist in electronic form

B) All U.S. government securities are issued in book entry form

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) II and IV B) I only C) II and III D) I and IV

B) I only

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? A) Agent B) Principal C) Agency D) Broker

B) Principal

Primary market transactions would include which of the following? A) Sale of $10 million of corporate stock by a broker-dealer acting as a market maker B) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter C) Sale of $10 million of municipal bonds by a broker-dealer acting as a market maker D) Sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker

B) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter

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? A) The Securities Investors Protection Act of 1970 B) The Securities Act of 1933 C) The Trust Indenture Act of 1939 D) The Investment Company Act of 1940

B) The Securities Act of 1933

Which of the following is not a requirement for a security to be sold under Rule 147, the interstate offering rule? A) The company is based in the state where the offering will be made. B) The company receives at least 80% of its revenue from the home state. C) All investors are residents of the state. D) The offering takes place in the home state.

B) The company receives at least 80% of its revenue from the home state.

What is the spread on a stock quote? A) The broker-dealer's commission charges for the transaction B) The difference between the bid price and the ask price or offer C) The range of prices the stock has shown over the course of one trading day D) The profit margin for an individual trade

B) The difference between the bid price and the ask price or offer

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? A) The officer may purchase a new issue because anyone is allowed to purchase new issues. B) The officer may not purchase a new issue because he is considered a restricted person. C) The officer may purchase a new issue because no banking rules prohibit it. D) The officer may not purchase a new issue unless the amount he wishes to purchase is considered small in relation to the total offering.

B) The officer may not purchase a new issue because he is considered a restricted person.

All of the following are examples of issuer transactions except A) an SPO. B) a CFO. C) an APO. D) an IPO.

B) a CFO.

What does the BID represent? A) The highest amount that someone may buy the security for B) The lowest amount some may buy the security for C) The highest amount that someone can sell the security D) The lowest amount that someone can sell the stock at

C) The highest amount that someone can sell the security

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 A) 600 shares at $20 per share. B) 600 shares at no more than $20 per share. C) 600 shares at $20.15 per share. D) 100 shares at $10.15 per share.

C) 600 shares at $20.15 per share.

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? A) Market maker B) Dealer C) Broker D) Underwriter

C) Broker

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? A) Broker B) Agent C) Dealer D) Underwriter

C) Dealer

An official statement is a disclosure document that would be used in connection with an offering of which of the following securities? A) U.S. Treasury notes B) Common of preferred stock offered privately C) Municipal bonds D) Limited partnership interests

C) Municipal bonds

Selling long is equivalent to which of the following? A) Selling short B) Selling to open then buying to close C) Selling to close D) Selling to open

C) Selling to close

Who must reconfirm a good 'til canceled order for it to stay in force more than six months? A) No one; they will remain in force until the customer cancels it B) The customer who placed the order C) The broker-deaker who accepted the order D) The specialist on the NYSE

C) The broker-deaker who accepted the order

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 A) enter a sell long at 50. B) enter a buy stop at 45. C) sell calls at strike price of 45. D) enter a sell short at stop 45.

D) enter a sell short at stop 45.

The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these is correct regarding the rules for initial public offerings (IPOs) and additional public offerings (APOs)? A) An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. B) An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 90 days. C) An APO of a stock listed on the NYSE requires delivery for a period of 25 days. D) An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days.

D) An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days.

A) Shelf registration allows the issuer to sell portions of a registered shelf offering over a five-year period without having to reregister the security. B) Shelf registration allows the issuer to sell portions of a registered shelf offering over a four-year period without having to reregister the security. C) The registration statement is effective upon completion of the cooling-off period. D) For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale.

D) For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale.

For primary and secondary markets, which of the following is true? A) In the secondary market, all sales proceeds go to the issuer. B) In the primary market, securities are purchased from and sold to individual investors. C) In the secondary market, securities transactions cannot take place on an exchange. D) In the primary market, securities are sold to the public and the issuer receives the sale proceeds.

D) In the primary market, securities are sold to the public and the issuer receives the sale proceeds.

An investor requests a preliminary prospectus for a new issue. Regarding the document which of the following is true? A) The final price for the securities is published within it. B) It can be deemed an offer to sell securities to the public. C) Receipt of it is a commitment that the underwriters will sell securities to the recipient. D) It is made available between the registration date and the effective date.

D) It is made available between the registration date and the effective date.

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? A) Agent B) Underwriter C) Broker D) Market maker

D) Market maker

Trading in the over-the-counter market occurs between whom? A) Retail investors B) Specialists C) Institutions D) Market makers

D) Market makers

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) a depository. B) a broker-dealer. C) a transfer agent. D) a clearing agent.

D) a clearing agent.

Which of the following orders need not be immediately filled in their entirety? Immediate or cancel (IOC) Fill or kill (FOK) Market at open Buy stop limit

Immediate or cancel (IOC) and Buy stop limit