SIE Unit 1

regulation s

-offers and sales made outside the US by US issuers, excluded from registration provisions

Which of the following transactions represents the greatest potential risk to an investment banker? A) A firm commitment offering B) A best efforts IPO C) A stock split D) A spin-off

A

An individual is defined by the SEC as an accredited investor if the individual has a net worth of A) Greater than $1 million, or has had an annual income of greater than $200,000 in each of the 2 most recent years B) $10 million or more, or has had an annual income of $100,000 or more in each of the 5 most recent years C) $5 million or more, or has had an annual income of $500,000 or more in each of the 2 most recent years D) $3 million or more, or has had an annual income of $200,000 or more in each of the 5 most recent years

A)

GEMCO Oil and Gas, listed on the NYSE, wishing to sell up to $300 million of convertible debt as market conditions permit, files a shelf registration statement with the SEC. Which of the following statements are TRUE? 1)For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale. 2)The registration statement is effective upon completion of the cooling-off period. 3)Shelf registration allows the issuer to sell portions of a registered shelf offering over a 2-year period without having to reregister the security. 4)Shelf registration allows the issuer to sell portions of a registered shelf offering over a 3-year period without having to reregister the security. A) II and III B) I and III C) I and IV D) II and IV

B

In most cases, the majority of private placements are sold to A) investment bankers B) institutional investors C) general public investors D) individuals who meet the definition of accredited investor

B

ABC Corporation has filed a registration statement with the SEC for the sale of 1 million shares of common stock. This will be the first public offering for ABC. Twelve days into the cooling-off period, ABC receives a deficiency letter from the SEC requesting further information. Five days later, ABC submits the required corrections. Assuming no other problems, this issue should become effective in A) 15 days B) 8 days C) 3 days D) 20 days

B)

Fed Reserve Board Impacting Money Supply

Buy treasuries to lower interest rates (EXPAND) -loosen money supply, money goes into economy, banks use money to give out loans Sell treasuries to raise interest rates (CONTRACT) -tightens money supply, money comes out of economy, banks lose money buying securities

The Federal Reserve is concerned that the economy is slowing. Which of the following actions would the Fed most likely engage in? A) Raise the margin requirements under Reg. T B) Engage in open market sales of T-Bills C) Pursue an easy money policy to lower interest rates D) Double the reserve requirements for member banks

C

official statement/ offering circular

Document associated with exempt securities

Discount rate

Member bank borrowing from FRB in short term Indicative of Frb monetary policy decreasing = easing of frb policy increasing = tightening of frb policy

federal funds rate

Member bank borrowing from member bank ($1mil+) Barometer for short term interest rates Most volatile

Federal reserve when market is speeding up

Raising interest rates or tightening money supply Contracts economy Bearish Fights Inflation

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 fully disclosed account B) a prime account C) a self-clearing account D) a clearing account

b

The Securities Exchange Act of 1934 allows for the creation of self-regulatory organizations (SROs) to write and in some instances enforce compliance by its member firms and persons associated with its member firms. Which of the following is NOT an SRO registered with the Securities Exchange Commission (SEC)? A) The MSRB B) The DTC C) FINRA D) The CBOE

b

FRB

consists of 12 regional banks, and hundreds of national and state banks

M1

currency, demand deposits, traveler's checks, and other checkable deposits, checking, savings accounts

Growth Industries

demand so strong they are largely unaffected by the stage of the business cycle. computers, bioengineering

biggest risk to investment banker

firm commitment offering

defensive industries

least effected ... food, pharma, utilities

Fourth Market

market for exchange-listed securities in which investors trade directly with other investors, usually through a computer network open 24hrs a day

regulation d

private placements

stagnation

prolonged periods of little economic growth and high unemployment

A business entity that performs the function of receiving and delivering payments and securities on behalf of both parties to a securities transaction is called A) a clearing agency B) a transfer agent C) a depository D) a broker-dealer

a

It is generally agreed that the most volatile interest rate in the U.S. economy is A) the fed funds rate B) the discount rate C) the call money rate D) the prime rate

a

Most economists would agree that rising employment would be found during periods of A) inflation B) stagnation C) deflation D) stagflation

a

Third Market

-Nasdaq Inter-Market -exchange listed securities are traded in the OTC -All securities on the NYSE and most securities listed on the regional exchanges are eligible for OTC trading as long as trades are reported to the Consolidated Tape within 90 seconds of execution

With regards to fiscal policy, it would be CORRECT to state that 1)fiscal policy is considered the most efficient means to solve short-term economic problems 2)fiscal policy is not considered the most efficient means to solve short-term economic problems 3)fiscal policy refers to governmental budget decisions enacted by our president and Congress 4)fiscal policy refers to governmental budget decisions enacted by our president and the cabinet 2 AND 4 1 AND 3 2 AND 3 1 AND 4

2 AND 3

clearing agency

An intermediary between the buy and sell sides in a securities transaction that receives and delivers payments and securities.

Which of the following types of broker-dealer would most likely have correspondent firms? A) Introducing B) Fully disclosed C) Self-clearing D) Market maker

C

FDIC

Covers up to $250,000 per depositor

All of the following would decrease the U.S. balance of payments deficit EXCEPT A) a decrease in imports of foreign goods into the United States B) an increase in exports of domestic goods from the United States C) a decrease in dividend payments by U.S. companies to foreign investors D) a decrease in purchases of U.S. securities by foreign investors

D)

Surplus US Balance of Payments

High interest rates Dollar is weak Foreign currency buys more US goods

fiscal policy

Inefficient for short term problems Govt can control unemployment/inflation by adjusting demand for goods president and congress

A broker-dealer that concentrated its business efforts on proprietary trading would most likely be functioning as A) an investment adviser B) an underwriter C) an investment banker D) a market maker

d

Decreasing the US Balance of Payments

Low interest rates Dollar is strong US currenct buys more foreign goods

Federal Reserve when market is slowing

Lowering interest rates or loosening money supply Expands economy Bullish Risk=Inflation

M2

M1 plus savings accounts, certificates of deposit, mutual funds, overnight repos, time deposits less than 100k

sros registered with finra

Msrb FINRA CBOE

Tombstone Ad

Name of issuer, type of security, number of shares, public offering prace, names of underwriting members

M3

The broadest component of the money supply. Equal to M2 plus large time deposits (100k+)

prime rate

US money banks charge creditworthy corporate borrowers for unsecured loans

A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in A) the secondary market B) the capital market C) the funding market D) the currency market

b

capital markets

stock and bond markets

issuer

the individual or business organization offering a security for sale to the public

The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of the following statements comply with those rules for initial (IPO) and additional (APO) public offerings? 1)An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. 2)An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. 3)An APO of a stock listed on the NYSE requires delivery for a period of 25 days. 4)An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. 3 AND 4 2 AND 3 1 AND 4 1 AND 2

1 AND 4

It would be reasonable to expect an increase in exports from the United States if 1)the dollar strengthened against the euro 2)the yen strengthened against the dollar 3)the Swiss franc weakened against the dollar 4)the dollar weakened against the British pound 1 and 4 ---2 and 4 ------ 1 and 3 -----2 and 3

1 and 4

Which one of the following is NOT a tool used by the Federal Reserve Board (FRB) to impact the money supply? A) Changing the prime rate B) Changing the discount rate C) Changing the reserve requirements D) Open market operations of the FOMC

A

monetary policy

FRB influences money supply Money supply: capital available to be lent to consumers and spent in economy

The enforcement of MSRB rules upon broker-dealers is performed by A) OCC B) FINRA C) MSRB D) NYSE

b

call money rate

banks charge broker deals for money they borrow to lend % point above short term

Both exempt and nonexempt securities have full disclosure documents available to the investing public so that an informed investment decision can be made. The document associated with exempt securities would be A) a prospectus or offering circular B) an official statement or registration statement C) an official statement or offering circular D) a prospectus or disclosure document

c

Producers would generally report rising inventories during which period of the business cycle? A) Expansion B) Recovery C) Contraction D) Peak

c

An investment banker primarily engages in which of the following activities? A) Offering high net worth investors private banking services B) Helping banks find appropriate investments for excess reserves C) Assisting wealthy individuals manage their investment portfolios D) Helping issuers to raise capital through securities issuances

d

First Amalgamated Bank of Buffalo, a large commercial bank, is a member of the Federal Reserve System. Should the bank need to increase its reserves, it could 1)borrow from the FRB and pay the discount rate 2)borrow from the FRB and pay the federal funds rate 3)borrow from another member bank and pay the discount rate 4) borrow from another member bank and pay the federal funds rate 1 AND 3 2 AND 4 2 AND 3 1 AND 4

d

The ABC Chemical Corporation wishes to advertise its upcoming offering of common stock in a tombstone advertisement that they, the issuer, will place. When placing the tombstone advertisement, which of the following would be least likely to appear? A) The name of the issuer B) The total number of shares being offered C) The expected price range of the offering D) The names of the investment bankers underwriting the issue

d

deflation

general decline in prices, Usually occurs during severe recessions when unemployment rises

inflation

general increase in prices, reduces buying power

keynesian theory

govt involvement vital through taxes/spening Demand for goods controls employment/prices

supply-side economics

govt should allow market forces to determine price of goods

cyclical industries

industries with above-average sensitivity to the state of the economy. heavy machinery, raw materials

monetarist theory

money supply determines price levels Too much money, not enough goods=inflation Well controlled moderately increasing money supply leads to price stabilize

issue sold in more than one state

must be regisetered with sec as well as each state coordination

spo's and apo's

no limit on how many there are

fully disclosed broker dealer

not a clearing firm, introduces business to other clearing/carrying firms

SIPC

protects investors against losses of up to $500,000, resulting from securities firm failures.

Securities Act of 1933

requires firms issuing new stock in a public offering to file a registration statement with the SEC, educate consumers

regulation 147

securities offered and sold exclusively intrastate

regulation a+

small and medium corporate offerings

secondary market

the market in which previously issued securities are traded among investors

primary market

the securities market where new securities are sold to the public, usually with the help of investment bankers

stagflation

unusual combo of inflation and high unemployment Economy isn't growing, lack of demand, prices good and still rising