Unit 7 Quiz

Under the provisions of Rule 144, what percentage of outstanding stock may a control person sell every 90 days? A) 0.01. B) 0.04. C) 0.05. D) 0.03.

A) 0.01.

All of the following are covered under the Securities and Exchange Act of 1934 EXCEPT: A) trust indentures. B) short sales. C) proxy solicitation. D) margin.

A) trust indentures

To be designated as an accredited investor under Regulation D, a married couple investing in a joint account must have income of at least: A) $100,000. B) $500,000. C) $300,000. D) $200,000.

C) $300,000

Which of the following acts requires publicly traded corporations to issue annual reports? A) Trust Indenture Act of 1939. B) Investment Company Act of 1940. C) Securities Exchange Act of 1934. D) Securities Act of 1933.

C) Securities Exchange Act of 1934.

If a broker/dealer is assisting in the registration of a stock issue, a registered representative of the firm may: A) perform a private transaction for a customer. B) promise a specific number of shares. C) accept an indication of interest. D) accept an order.

C) accept an indication of interest

A customer requests information on a new mutual fund and asks her registered representative to circle the important information in the prospectus and information he thinks will be of special interest to her. This is permitted: A) if accompanied by an unmarked prospectus. B) if approved by a principal. C) under no circumstances. D) without restriction.

C) under no circumstances.

A customer must present a signed representation letter stating that he is not a restricted purchaser prior to buying a new issue of: A) U.S. government bonds. B) municipal bonds. C) corporate bonds. D) common stock.

D) Common stock

Which of the following is typically the largest component of a corporate underwriting spread? A) Concession. B) Underwriting fee. C) Reallowance. D) Manager's fee.

A) Concession

Which of the following acts requires full and fair disclosure of all material information about equity and debt securities offered for the first time to the public? A) Securities Act of 1933. B) Securities Investor Protection Act of 1970. C) Securities Exchange Act of 1934. D) Trust Indenture Act of 1939.

A) Securities Act of 1933

Each of the following persons is (are) accredited under Regulation D EXCEPT: A) a person with a net worth of $200,000 or more. B) an officer of the issuer. C) a person with annual income of $200,000 or more. D) an institution.

A) a person with a net worth of $200,000 or more.

The Act of 1933 applies to all of the following EXCEPT: A) regulation of insider trading. B) prospectus preparation. C) registration of new issues . D) full and fair disclosure.

A) regulation of insider trading.

Which of the following statements regarding a red herring is NOT true? A) The final offering price does not appear in a red herring. B) An agent may accept funds to be placed in escrow until the effective date if the request to do so is made by a potential purchaser. C) Additional information may be added to a red herring at a later date. D) A red herring is used to accept indications of interest from investors.

B) An agent may accept funds to be placed in escrow until the effective date if the request to do so is made by a potential purchaser.

Which of the following acts requires corporate public issuers to send annual reports to their shareholders? A) Trust Indenture Act of 1939. B) Securities Exchange Act of 1934. C) Securities Investors Act of 1970. D) Securities Act of 1933.

B) Securities Exchange Act of 1934.

A company is offering a private placement with the intent of selling shares to nonaccredited investors up to the 35 allowed for in Regulation D. Which of the following is TRUE? A) Anyone may be solicited B) The offering may not be advertised C) While the offering can be advertised to anyone, only accredited investors could be solicited to purchase shares D) The offering can be advertised to all except the 35 nonaccredited investors

B) The offering may not be advertised

All of the following would be excluded from raising capital under Regulation A+ EXCEPT A) a venture capital firm raising money for small and medium size companies B) a small manufacturing company C) a private equity fund D) a hedge fund specializing in small startup companies

B) a small manufacturing company

All of the following are unlawful EXCEPT: A) representing that the SEC has approved of a broker/dealer or a security being sold. B) giving written notification to a customer that the broker/dealer is acting as a principal for the trade. C) omitting a statement of a material fact. D) selling new issues on margin.

B) giving written notification to a customer that the broker/dealer is acting as a principal for the trade.

Private placements A) may never be advertised under any circumstance B) may be advertised if all of those solicited are accredited investors C) may be advertised under all circumstances D) can only be advertised when 35 or fewer of the investors are nonaccredited

B) may be advertised if all of those solicited are accredited investors

Within a firm commitment underwriting, which document details the responsibilities and liabilities of each firm? A) Underwriting agreement. B) Registration statement. C) Agreement among underwriters. D) Letter of intent.

C) Agreement among underwriters.

A customer owns 1,000 shares of ABC corporation. Which of the following actions on the part of ABC would dilute her equity? A) Payment of a 10% stock dividend. B) Registered secondary offering of shares. C) Registered primary offering of shares. D) 2-1 stock split.

C) Registered primary offering of shares.

A member firm receives an order from an investment adviser to purchase shares in a common stock IPO. Regarding restricted persons, the member must: A) refuse to accept the order. B) obtain a list of the client(s) whose account(s) will be credited with the shares in order to determine eligibility. C) obtain a representation from the conduit that the purchaser is not a restricted person. D) obtain a list of all of the adviser's clients to determine eligibility.

C) obtain a representation from the conduit that the purchaser is not a restricted person.

Your customer is interested in purchasing shares of a new issue where the demand for shares has already exceeded the number of shares the issuer intends to offer. Which of the following options might you look for that could allow your customer to receive shares? A) Firm commitment offering B) Selling group C) Regulation A offering D) Over-allotment (Green Shoe Provision)

D) Over-allotment (Green Shoe Provision)

If a customer owns 7% of a publicly traded company's stock and his spouse owns 6% and wants to sell her shares, which of the following statements is TRUE? A) The spouse is not an affiliate and Rule 144 applies. B) The spouse is an affiliate and Rule 144 does not apply. C) The spouse is not an affiliate and Rule 144 does not apply. D) The spouse is an affiliate and Rule 144 applies.

D) The spouse is an affiliate and Rule 144 applies.

During the 20-day cooling-off period for an initial public offering, all of the following are permitted EXCEPT: A) mailing a red herring to a customer. B) accepting indications of interest. C) publishing a tombstone advertisement. D) accepting a deposit from a customer to purchase the new issue.

D) accepting a deposit from a customer to purchase the new issue.

The Securities Act of 1934 deals with all of the following EXCEPT: A) marking sales long or short on an order ticket. B) monitoring accounts for insider trading violations. C) filing of financial statements by broker/dealers. D) filing an updated prospectus

D) filing an updated prospectus

Alpha Securities is the managing underwriter for a new issue of 1 million shares of ABC common on a firm-commitment basis. If part of the ABC issue remains unsold and results in a loss, the loss will be divided proportionately among the: A) underwriting firms and the issuer. B) selling group firms. C) underwriting firms and the selling group firms. D) underwriting firms.

D) underwriting firms

Which of the following two are NOT included in a preliminary prospectus? I. Final public offering price II. Effective (release) date. III. Intended purpose for the funds being raised. IV. Financial statements and history of the company.

I. Final public offering price II. Effective (release) date.

Which of the following actions of XYZ Corporation would raise additional capital? I. Issue callable preferred stock. II. Declare a stock dividend. III. Make a rights offering. IV. Encourage convertible bondholders to convert to common stock.

I. Issue callable preferred stock. III. Make a rights offering.

A prospectus must be delivered to customers who purchase which of the following new issues? I. U.S. government bonds. II. Corporate bonds. III. Fixed annuities. IV. Unit Investment Trusts.

II. Corporate bonds. IV. Unit Investment Trusts.

Which of the following are TRUE of an over-allotment option or provision for a new issue? I. One is found in every underwriting agreement. II. It allows the underwriters to sell up to 15% more than the original number of shares offered. III. It allows the underwriters to sell up to 2 times the original number of shares offered. IV. It is a way for underwriters to address demand exceeding the number of shares originally offered.

II. It allows the underwriters to sell up to 15% more than the original number of shares offered. IV. It is a way for underwriters to address demand exceeding the number of shares originally offered.

An affiliate of a corporation wants to sell 80 calls covered by 8,000 shares of Rule 144 stock she owns. This transaction is: A) not allowed because an affiliate of a corporation may not trade options in the company's stock. B) not allowed because Rule 144 stock may not be sold unrestricted by an affiliate. C) allowed because the 8,000 shares of stock may be sold unrestricted. D) allowed because the calls will be considered covered by the stock.

B) not allowed because Rule 144 stock may not be sold unrestricted by an affiliate.

An affiliate or insider holding unregistered shares can sell under Rule 144: A) 2 times a year. B) 12 times a year. C) 4 times a year. D) 1 time a year.

C) 4 times a year

All of the following identify exemptions from the registration statement and prospectus provisions of the Securities Act of 1933 EXCEPT: A) Rule 147. B) Regulation D. C) Regulation U. D) Regulation A.

C) Regulation U

An affiliate holding restricted stock wishes to sell shares under Rule 144. He has held the shares, fully paid, for 6 months, and the issuer has 2.4 million outstanding shares. Form 144 is filed on Monday, April 10, and the average weekly trading volume for the last four weeks is 24,500 shares per week. The maximum number of shares the customer can sell with this filing is: A) 24,250. B) 24,000. C) 23,000. D) 24,500.

D) 24,500

Which of the following securities is NOT exempt from the registration provisions of the Securities Act of 1933? A) An equity security issued in only one state solely to residents of that state. B) A high-quality corporate zero-coupon bond maturing in 180 days. C) A U.S. government bond. D) A new stock being offered in three states.

D) A new stock being offered in three states.

Alpha is the managing underwriter for a new issue of 1 million shares of ABC common. While Alpha has agreed to sell as much stock as possible in the market, ABC will cancel the offering if any portion of the stock remains unsold. This arrangement is known as what type of underwriting? A) Mini-max. B) Best efforts. C) Standby. D) All-or-none.

D) All-or-none

Which of the following characteristics describes a final prospectus? A) Filed with the SEC semiannually. B) Filed with the SEC and not available to the general public. C) Used to solicit indications of interest in a new issue D) Complies with the full and fair disclosure requirements of the Securities Act of 1933.

D) Complies with the full and fair disclosure requirements of the Securities Act of 1933.

When the SEC rules that an offering has become effective, the SEC has: A) not verified the accuracy of each statement in the registration statement but has approved of the offering. B) approved the offering for registration. C) verified the accuracy of the statements in the registration statement. D) cleared the offering for sale.

D) cleared the offering for sale.

In reviewing prospectuses and registration statements, the SEC: A) certifies the accuracy of the disclosures made in a prospectus. B) passes on the merits of a particular security covered by a registration statement. C) guarantees the adequacy of the disclosures made in a prospectus. D) does not approve or disapprove of the issue.

D) does not approve or disapprove of the issue.

A due diligence meeting occurs between: A) the FINRA member firm and FINRA's Corporate Finance Department to discuss the fairness of the underwriting spread on a pending public offering. B) All of these. C) the underwriter and the SEC before the issuance of a final prospectus to insert the public offering price and make any last minute changes at the SEC's request. D) the issuing corporation and the underwriters to review and reexamine the full details of the pending underwriting and negotiate final terms to be included in the formal underwriting contract.

D) the issuing corporation and the underwriters to review and reexamine the full details of the pending underwriting and negotiate final terms to be included in the formal underwriting contract.

Smith and Company, a FINRA member firm, is preparing to underwrite securities to be issued by KLC Corporation for a new business venture. For which of the following will Smith and Company be responsible? I. Filing the registration statement with the SEC and state regulatory bodies. II. Providing advice on the type of security to be issued. III. Distributing the security to the public. IV. Providing advice on how KLC can best utilize the funds raised.

II. Providing advice on the type of security to be issued. III. Distributing the security to the public.