Investment Banking

Under the Review of the Committee on Corporate Financing, a finder's fee paid to an underwriter would NOT be considered to be unreasonable if it consisted of:

"Free stock," which means "freely transferable The underwriter can receive options or warrants exercisable at or above the Public Offering Price (never below) can receive cash compensation can buy stock from the issuer at below market prices ("cheap stock")

Regulation AC

(Analyst Certification) covers research analyst opinions, where the analyst must certify that the opinion given is unconflicted.

Regulation MA

(Mergers/Acquisitions) covers required disclosures to shareholders of a target company in a takeover or merger.

trigger an "Emergency" report under Rule 17a-11?

-where the firm needs a minimum of $250,000 of capital and only has $200,000). -firm's ratio of aggregate indebtedness to net capital exceeds 1,500% after the first year of business; -or where the firm's ratio of subordinated loans to total capital exceeds 70% for over 90 days. -Under Early Warning, a broker dealer whose net capital is below 120% of the minimum or whose ratio of aggregate indebtedness to net capital exceeds 1,200% (12 to 1 AI/NC ratio) must give electronic notice within 24 hours and must file any reports requested by FINRA

Insiders must report their trades in that company's stock to the SEC:

2 days after the event on Form 4

can buy stock from the issuer at below market prices ("cheap stock")

270 days

Under Sarbanes-Oxley, the statute of limitations for bringing a suit alleging fraud in connection with an offering of securities is

5 years

If the new issue will trade on the OTCBB or OTC Pink Market, the period is

90 days

SOX requires that signing officers must certify that they have reviewed all periodic financial reports

90 days and have reported on their findings.

Which of the following individuals is eligible to purchase a new equity issue at the POP?

A limited business broker/dealer is one engaged solely in the purchase and sale of investment company/variable contract securities and/or direct participation programs.

Each of the following would likely be considered "restricted" from purchasing any of the shares during the offering period

An "immediate family member" means a person's parents, mother-in-law or father-in-law, spouse, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children, and any other individual to whom the person provides material support. Aunts and uncles, cousins and other more distant relations

Alpha Securities, a member firm based in the US, has a correspondent relationship with Delta Securities, a non-US based broker/dealer

FALS If Delta visits its clients in the US, it must be accompanied by Alpha. FALSE Delta can enter buy and sell orders directly into Nasdaq Book for its clients. TRUE Delta can issue a research report in the US under the name of Alpha. FALSE Delta can join a syndicate underwriting non-exempt securities in the US

The process for determining the price of a new issue that will first begin trading on NASDAQ is called the:

IPO Cross

ule 144 applies to the sale of unregistered securities owned by affiliates or nonaffiliates and the sale of control stock

It does not apply to the sale of registered securities by nonaffiliated persons.

The opening price for IPOs of NASDAQ issues is set by the:

NASDAQ IPO Cross NOT THE OPENING CROSS

free writing prospectuses issued by a WKSI under Rule 405

They can be used at any time They must be filed with the SEC at or prior to first use

FINRA Rule 5122 requires that at least 85% of the proceeds of a private placement offering goes to the issuer.

This means that all offering costs, including legal, accounting and underwriting fees, cannot exceed 15% of the offering proceeds.

Tier 1 limits an issuer to the sale $20,000,000 of its own securities within a 12-month period. In addition, selling security holders are limited to a maximum of $6,000,000 of securities under the exemption. Regulation A

Tier 2 limits an issuer to the sale $50,000,000 of its own securities within a 12-month period. In addition, selling security holders are limited to a maximum of $15,000,000 of securities under the exemption. Tier 2 offerings are also called Regulation A+ offerings because of their larger size. Regulation A

Rule 147

To qualify, 100% of the offering must be sold to residents of the state in which the offering is conducted. It is not necessary for an individual to own property in a state to be a resident of that state. Similarly, simply owning property in a state does not make an individual a resident of that state. A business entity (corporation, partnership, institutional investor) is deemed a resident for purposes of Rule 147 if the principal office of the business is located in the state in which the offering is made.

1% of outstanding shares Or the greater Amount of the precedilng 4 weeks trading volume

When an officer wants to sell stock

The Securities Act of 1933 regulates

activities appertaining to new issues of corporate securities offered and sold to the public. to require full, written disclosure about new issues

"Stand by" underwritings

are used when a company attempts to sell additional shares to its existing shareholders through a rights offering. f all the existing shareholders do not subscribe, the company will not achieve all of the additional funding that it desired. The company will have an underwriter "stand by" on a firm commitment basis to "pick up" the unsubscribed shares The underwriter can then reoffer the shares.

FINRA Rule 5130 only applies to the initial public offering of equity securities.

employees of member firms are prohibited from purchasing which of the following new issues?

a member firm is permitted to trade a NASDAQ listed security that is the subject of an IPO when

first trade in that security occurs on NASDAQ

Rule 147

intrastate offerings. registration with the Securities and Exchange Commission is not required.

For new issues that qualify for listing on an exchange or Nasdaq, the prospectus delivery requirement period

is 25 days

Advertisements for private placements are only allowed if the advertising

is limited to potential qualified investors, in this case an investment seminar open only to accredited investors.

Rule 144 does not pertain to primary offerings;

it affects secondary market transactions in restricted or control securities.

Distribution of promotional materials in a Regulation A offering is:

permitted prior to the filing of the Form 1-A and all through the 20-day SEC review period

Rule 5130,

rule prohibits member firms from selling initial equity public offering stock to any account in which restricted persons are beneficial owners. FINRA members, employees of member firms, finders and fiduciaries acting on behalf portfolio managers any person owning 10% or more of a member firm. immediate family members.

Regulation SK details

the disclosures that an issuer must make in its registration statement for offerings of securities.

The Securities Act of 1934 points to

the registration of stock exchanges and ATSs as well as provides for the examination of member firms and sanctions for violations of the securities laws.

Regulation SX details

the requirements for audited financial statements that are included in a registration statement.

Under SEC rules, Form 8-K must be filed

within 4 business days of the event