Unit 7
The aftermarket prospectus requirement for the IPO of nonlisted securities is A) 25 days. B) 90 days. C) not specified in the Securities Act of 1933. D) 40 days.
B) 90 days.
Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 except A) access equals delivery rule. B) Regulation D. C) Rule 147. D) Regulation A+.
A) access equals delivery rule.
For a new issue that qualifies for Nasdaq listing, a prospectus must be provided to all purchasers within how many days after the effective date? A) 90 days B) 25 days C) 40 days D) 60 days
B) 25 days
A company's board of directors has agreed that the company should be prepared to have shares of common stock ready to be issued that are intended to be distributed in the form of a one-time employee bonus. Not knowing exactly when the one-time bonus plan will be implemented and the shares will be needed, the type of registration or offering that would best suit the scenario is A) a shelf registration. B) a shadow registration. C) an ESOP registration. D) a bonus share plan.
A) a shelf registration.
During the cooling off period, underwriters would be allowed to do all of the following except A) advertise the issue. B) publish a tombstone. C) distribute a preliminary prospectus. D) take indications of interest.
A) advertise the issue.
A company that offers sales of another company's securities in a primary market transaction would best be described as A) an underwriter. B) a market maker. C) a transfer agent. D) an issuer.
A) an underwriter.
During the cooling-off period, underwriters may not A) distribute sales literature or advertising material. B) distribute a preliminary prospectus. C) place a tombstone advertisement. D) take indications of interest.
A) distribute sales literature or advertising material.
Which of the following securities is exempt from the Securities Act of 1933? A) Common stock B) Municipal note C) Preferred stock D) Debenture
B) Municipal note
Which of the following would be allowed during the cooling off period? A) Taking orders B) Taking indications of interest C) Allocating shares to investors D) Distributing a prospectus
B) Taking indications of interest
Regarding the issuance of new securities to the public, which of the following is true? A) Registrations become effective within 10 business days of Securities and Exchange Commission (SEC) filing. B) The Securities Act of 1933 provides criminal penalties for fraud. C) Underwriters are permitted to accept orders for securities during the Securities and Exchange Commission (SEC) review period. D) The Securities and Exchange Commission (SEC) review of a new issues filing must always be longer than 20 days.
B) The Securities Act of 1933 provides criminal penalties for fraud.
Tombstone ads A) must be placed in all new offerings. B) are permitted before the effective date. C) are disclosures detailing all the information shown in a prospectus. D) are offers to sell securities to the public.
B) are permitted before the effective date.
The aftermarket prospectus requirement following an APO for exchange-listed securities is A) 0 days. B) 90 days. C) 40 days. D) 25 days.
A) 0 days.
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? A) 40 days B) 10 days C) 60 days D) 30 days
A) 40 days
Which of the following will not be found in a final prospectus? A) Agreement among underwriters B) Business plan and use of the proceeds C) Statement that the Securities and Exchange Commission (SEC) neither approves nor disapproves of the issue D) Effective date and offering price
A) Agreement among underwriters
Which of the following choices would best describe a follow-on offering? A) An issue of shares by a public company that is already listed on an exchange B) An offering to the employees of the issuing company C) The common stock that is issued attached to a rights offering D) An initial public offering (IPO) that has additional shares added by the issuer on the effective date
A) An issue of shares by a public company that is already listed on an exchange
Which of the following would be allowed during the cooling off period? A) Distributing a red herring B) Allocating shares to investors C) Taking orders D) Distributing a prospectus
A) Distributing a red herring
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. a combination offering. II. a primary offering. III. a secondary offering. IV. an initial primary offering (IPO). A) I only B) II and IV C) I and IV D) II and III
A) I only
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. A) II and III B) I and III C) II and IV D) I and IV
A) II and III
For primary and secondary markets, which of the following is true? A) In the primary market, securities are sold to the public and the issuer receives the sale proceeds. 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 secondary market, all sales proceeds go to the issuer
A) In the primary market, securities are sold to the public and the issuer receives the sale proceeds.
An official statement is a disclosure document that would be used in connection with an offering of which of the following securities? A) Municipal bonds B) Limited partnership interests C) U.S. Treasury notes D) Common of preferred stock offered privately
A) Municipal bonds
Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933? A) Private (nonpublic) securities offerings B) Shelf offerings C) Initial public offerings (IPOs) D) Additional public offerings (APOs)
A) Private (nonpublic) securities offerings
For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable? A) Securities Act of 1933 regulating issues that must be offered by prospectus B) Securities Act of 1933 regulating securities traded in the secondary market C) Securities Act of 1934 regulating securities that must be offered by prospectus D) Securities Act of 1934 regulating issues that must be offered by prospectus
A) Securities Act of 1933 regulating issues that must be offered by prospectus
Shelf offerings are covered under which if the following? A) The Securities Act of 1933 B) The Bank Secrecy Act C) The Investment Company Act of 1940 D) The Trust Indenture Act of 1939
A) 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? A) The Securities Act of 1933 B) The Investment Company Act of 1940 C) The Trust Indenture Act of 1939 D) The Securities Investors Protection Act of 1970
A) The 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 Investment Company Act of 1940 C) The Securities Investors Protection Act of 1970 D) The Trust Indenture Act of 1939
A) The Securities Act of 1933
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 names of the investment bankers underwriting the issue B) The expected price range of the offering C) The total number of shares being offered D) The name of the issuer
A) The names of the investment bankers underwriting the issue
Regarding primary offerings, which of the following is true? A) There is no limit to the number of primary offerings a corporation can issue. B) After its initial public offering (IPO), a corporation can have only one more primary offering—its subsequent primary offering (SPO). C) A corporation can have only one primary offering—the initial public offering (IPO). D) A corporation can have two primary offerings—the initial public offering (IPO) and an additional public offering (APO).
A) There is no limit to the number of primary offerings a corporation can issue.
An investor is viewing a company's prospectus on the Securities Exchange Commission's (SEC's) website. Which of the following is true? A) This satisfies the access equals delivery rule for a final prospectus. B) Access equals delivery can only mean physical delivery of the prospectus and not viewing one on a website. C) This satisfies the access equals delivery rule for a preliminary prospectus. D) This does not satisfy the access equals delivery rule for an aftermarket prospectus.
A) This satisfies the access equals delivery rule for a final prospectus.
A new registered representative receives a memo discussing the distribution of a red herring. The registered representative knows that the memo is referencing A) a preliminary prospectus. B) a registration statement. C) a final prospectus. D) a tombstone advertisement.
A) a preliminary prospectus.
A company is looking to raise additional capital to fund an expansion plan. The company's senior management chooses to issue additional bonds to the general public. The best expression to explain this type of offering would be A) a primary offering. B) a private securities offering. C) a secondary offering. D) an initial public offering (IPO).
A) a primary offering.
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 A) never exceed the number of shares authorized. B) always be greater than the number of shares issued. C) always equal the number shares authorized. D) never equal the number of shares issued.
A) never exceed the number of shares authorized.
In the capital markets, securities such as stocks and bonds can be A) offered by both public and private sectors. B) purchased and sold by individuals only. C) purchased and sold by institutions only. D) offered by the public sector only.
A) offered by both public and private sectors.
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.
During the cooling-off period the disclosure document that may be delivered to interested parties is called the A) preliminary prospectus. B) summary prospectus. C) final prospectus. D) cool off period prospectus.
A) preliminary prospectus.
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 A) resumes where it had left off. B) considered over allowing the registration to be effective. C) is increased by 10 business days to accommodate review of the new information. D) begins anew.
A) resumes where it had left off.
Raising funds is generally accomplished by corporations through the issuance of stock (equity) or bonds (debt). This is done in A) the capital market. B) the currency market. C) the secondary market. D) the funding market.
A) the capital 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 A) the names of the company's officers. B) the number of shares to be sold. C) the names of the underwriting members. D) the type of security to be sold (stock or bond).
A) the names of the company's officers
Regarding the sale of a new issue, a customer is considered a restricted person if the person is A) working as a salesperson who works for the issuing firm's underwriter. B) working as a private investigator collecting information on the issuing firm's competitors. C) a grandparent of an associated person of a member firm. D) working as a salesperson for a supplier of the issuing corporation.
A) working as a salesperson who works for the issuing firm's underwriter.
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. A) II and IV B) II and III C) I and IV D) I and III
C) I and IV
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 A) 5%. B) 10%. C) 25%. D) 20%.
B) 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 A) 20 days. B) 14 days. C) 15 days. D) 8 days.
B) 14 days.
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? A) 60 days B) 25 days C) 40 days D) 90 days
B) 25 days
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) An expansion registration B) A shelf registration C) An employee stock ownership plan (ESOP) registration D) A shadow registration
B) A shelf registration
A municipal advisor does which of the following activities? A) Advises institutions on buying municipal bonds B) Advises municipalities on selling securities C) Advises institutions on selling municipal bonds D) Advises municipalities on buying securities
B) Advises municipalities on selling securities
Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is not accurate? A) For an IPO if listed on an exchange or Nasdaq the delivery requirement is 25 days. B) For an additional issue if the security is non-Nasdaq there is no delivery requirement. C) For an initial public offering (IPO) if non-Nasdaq the delivery requirement is 90 days. D) For an additional issue listed on an exchange or Nasdaq there is no delivery requirement.
B) For an additional issue if the security is non-Nasdaq there is no delivery requirement.
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. A) I and III B) II and III C) II and IV D) I and IV
B) II and III
During the cooling-off period, underwriters of new securities may I. accept orders to purchase shares. II. not accept orders to purchase shares. III. not accept indications of interest regarding potential purchases of shares. IV. accept indications of interest regarding potential purchases of shares. A) II and III B) II and IV C) I and IV D) I and III
B) II and IV
Issuance and trading of securities are regulated at more than one governmental level. These would include regulations at which of the following? I. County level II. City level III. Federal level IV. State level A) I and IV B) III and IV C) II and III D) I and II
B) III and IV
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? A) Underwriting group B) Issuing corporation C) Both the underwriters and the issuing corporation D) Lead underwriter
B) Issuing corporation
Which of the following would be allowed during the cooling off period? A) Distributing a final prospectus B) Placing a tombstone ad C) Taking orders D) Allocating shares to investors
B) Placing a tombstone ad
Which of the following would not be expected to be found in a tombstone advertisement for a new issue? A) The number of shares to be offered B) The intended purpose for which to use the sales proceeds C) The name of the issuer or those of the underwriters D) The type of security to be offered (equity or debt)
B) The intended purpose for which to use the sales proceeds
Which of the following situations may not be disclosed to a potential buyer while a security is in registration? A) There will be a road show in New York City in May. B) The issue is expected to be priced in early June. C) A brokerage report shows the security is properly undervalued. D) The issue is being offered through ABC Investment Bank.
C) A brokerage report shows the security is properly undervalued.
A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised? A) Municipal bond market B) Secondary market C) Capital market D) Government bond market
C) Capital market
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. A) II and IV B) II and III C) I and III D) I and IV
C) I and III
Regarding a shelf registration filed with the Securities and Exchange Commission (SEC), which of the following statements are true? I. A supplemental prospectus must be filed before each sale. II. This registration is for issuers who want to issue securities for the first time. III. Portions of a shelf offering can be sold over a 10-year period without having to reregister the security. IV. Portions of a shelf offering can be sold over a three-year period without having to reregister the security. A) II and IV B) II and III C) I and IV D) I and III
C) I and IV
The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these comply with those rules for initial (IPO) and additional (APO) public offerings? I. An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. II. An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. III. An APO of a stock listed on the NYSE requires delivery for a period of 25 days. IV. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. A) III and IV B) II and III C) I and IV D) I and II
C) I and IV
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) All U.S. exchanges are primary markets where securities are offered at a public offering price. C) Issuer transactions occur in the primary market, and securities are offered at a public offering price. D) All U.S. exchanges are primary markets where price is determined by supply and demand.
C) Issuer transactions occur in the primary market, and securities are offered at a public offering price.
Which of the following is true regarding the primary market? A) Price is determined by supply and demand. B) It is regulated by the Securities Act of 1934. C) Issuer transactions occur in the primary market. D) The NYSE is an example of a primary market.
C) Issuer transactions occur in the primary market.
An investor requests a preliminary prospectus for a new issue. Regarding the document which of the following is true? A) It can be deemed an offer to sell securities to the public. B) Receipt of it is a commitment that the underwriters will sell securities to the recipient. C) It is made available between the registration date and the effective date. D) The final price for the securities is published within it.
C) It is made available between the registration date and the effective date.
Which of the following statements is true? A) Only corporations can raise funds in the capital markets. B) Only municipalities can raise funds in the capital markets. C) Municipalities, the federal government, and corporations can raise funds in the capital markets. D) Only the federal government and municipalities can raise funds in the capital markets.
C) Municipalities, the federal government, and corporations can raise funds in the capital markets.
Regarding the registration of securities with the Securities Exchange Commission (SEC) which of the following is true? A) All securities offerings, public or private, are exempt from registration. B) Public securities offerings are generally exempt from registration. C) Private securities offerings are generally exempt from registration. D) No securities offering can ever be exempt from registration.
C) Private securities offerings are generally exempt from registration.
Primary market transactions would include which of the following? A) Sale of $10 million of municipal bonds by a broker-dealer acting as a market maker B) Sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker C) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter D) Sale of $10 million of corporate stock by a broker-dealer acting as a market maker
C) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter
All of the following names describe the Securities Act of 1933 except A) The Full and Fair Disclosure Act. B) The Truth in Securities Act. C) The Exchange Act. D) The Prospectus Act.
C) The Exchange Act.
Which of the following acts requires the registration of most new issues? A) The Securities Investor Protection Act of 1970 B) The Securities Exchange Act of 1934 C) The Securities Act of 1933 D) The Securities Market Improvement Act of 1975
C) The Securities Act of 1933
Rules to protect the investing public during the public offering process include all of the following except A) securities industry insiders may not take advantage of their insider status to gain access to new issues for their own benefit. B) member firms may not withhold securities in a public offering for their own benefit. C) limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees. D) members must offer the securities at the public offering price.
C) limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees.
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 A) is the disclaimer placed by the underwriters in a tombstone advertisement. B) mandated by the Financial Industry Regulatory Authority (FINRA) to be placed in both the preliminary and final prospectus. C) mandated to be in the final prospectus by the Securities and Exchange Commission (SEC). D) placed by the issuer in the preliminary prospectus.
C) mandated to be in the final prospectus by the Securities and Exchange Commission (SEC).
A preliminary prospectus (red herring) A) may not be distributed during the cooling-off period. B) will show the final offering price. C) may be used to gather indications of interest. D) if requested by an investor serves as a binding order to purchase shares.
C) may be used to gather indications of interest.
The primary purpose of the Securities Act of 1933 is to A) regulate all persons associated with industry member firms. B) provide a basis for the regulation of exchanges and electronic trading venues. C) require full and fair disclosure in connection with the sale of securities to the public. D) authorize the designated self-regulatory organizations (SROs) to enforce securities rules and regulations.
C) require full and fair disclosure in connection with the sale of securities to the public.
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 Securities and Exchange Commission's (SEC's) verification of accuracy D) the effective or offering date
C) the Securities and Exchange Commission's (SEC's) verification of accuracy
When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is A) the time upon which the SEC approves the securities. B) the exudate. C) the effective date. D) the due date.
C) the effective date.
A final prospectus contains all of the following except A) the use of the proceeds. B) description of the management. C) history of the business. D) SEC approval.
D) SEC approval.
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) Investment Company Act of 1940 B) Uniform Securities Act C) Securities Exchange Act of 1934 D) Securities Act of 1933
D) Securities Act of 1933
Which of the following would take place in the primary market? A) Securities sold on both the OTC and NYSE B) Securities bought and sold on the OTC C) Securities bought and sold on the NYSE D) Securities sold to the public by the issuer
D) Securities sold to the public by the issuer
Under the Securities Act of 1933, which of the following is a nonexempt security? A) Municipal bonds B) Commercial paper C) U.S. government bonds D) Shares issued by a U.S. government bond fund
D) Shares issued by a U.S. government bond fund
The Securities Act of 1933 requires that all of the following be offered by a prospectus except A) mutual fund shares. B) unit investment trusts. C) variable annuities. D) Treasury bonds.
D) Treasury bonds.
An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase A) closed-end funds on the secondary market. B) a municipal bond in a state where the officer does not reside. C) call or put options on a stock in the secondary market. D) a new issue initial public offering (IPO) at the public offering price.
D) a new issue initial public offering (IPO) at the public offering price.
Securities sold in an issuer-related transaction would best be described as A) a balance of payments. B) a secondary offering. C) a split offering. D) a primary offering.
D) a primary offering.
When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in A) an initial public offering. B) a private securities offering. C) a secondary offering. D) a primary offering.
D) a primary offering.
Sales for new issues of securities may be solicited A) before, during, or after the cooling-off period, if done with a final prospectus. B) before the cooling-off period. C) during the cooling-off period. D) after the cooling-off period.
D) after the cooling-off period.
An indication of interest given by an investor during the cooling-off period is A) an investor's binding commitment to purchase some of the issue after the security comes out of registration. B) an investor's binding commitment to purchase some of the issue immediately. C) an investor's declaration of potential interest in purchasing some of the issue immediately. D) an investor's declaration of potential interest in purchasing some of the issue after the security comes out of registration.
D) an investor's declaration of potential interest in purchasing some of the issue after the security comes out of registration.
A registered representative provides financial support and housing at her home for her grandfather. Regarding the purchase of new issues, A) the registered representative is restricted, but her grandfather is not. B) neither are considered restricted. C) the grandfather is restricted, but the registered representative is not. D) both persons are considered restricted.
D) both persons are considered restricted.
All the following are exempt from the Securities Act of 1933 except A) debt securities issued by religious organization. B) U.S. Treasury securities. C) fixed annuity contracts. D) limited partnership.
D) limited partnership.
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) all or none (AON). B) firm commitment. C) de minimis. D) mini-max.
D) mini-max.
Regarding the purchase of new equity issues (IPOs), restricted persons may A) purchase shares of a new issue only if they work for a bank. B) purchase shares of a new issue only if they are employed by a broker-dealer as a registered representative. C) purchase shares of a new issue only in amounts that are not substantial in relation to the total number of shares being issued. D) not purchase shares of a new issue.
D) not purchase shares of a new issue.
Regarding the purchase of a new equity issue, an account where a restricted person has a beneficial interest would be allowed to purchase the new shares at the public offering price A) never. B) only if the interest exceeds 15%. C) without restriction. D) only if the interest does not exceed 10%.
D) only if the interest does not exceed 10%.
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 A) distribute sales literature with the preliminary prospectus. B) give a red herring to prospective investors. C) take binding indications of interest received from prospective investors. D) never publish tombstone advertisements.
B) give a red herring to prospective investors.
All of the following are restricted persons except A) finders and fiduciaries acting on behalf of the underwriters. B) individual owning 5% of a member firm. C) portfolio managers. D) employees of members.
B) individual owning 5% of a member firm.
Private placements are primarily sold to A) general public investors. B) institutional investors. C) investment bankers. D) individuals who do not meet the definition of accredited investor.
B) institutional investors.
Assets offered and traded in the securities markets can include all of the following except A) equities. B) life insurance. C) derivative products. D) currencies.
B) life insurance.
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. A) II and IV B) I and III C) I and IV D) II and III
A) II and IV
Underwriters acting as principals and committing to purchase any unsold shares for the syndicate account would best be described as being engaged in A) a firm commitment. B) an initial public offering (IPO). C) a primary. D) a best efforts.
A) a firm commitment.
In a split offering, A) shares are issued from the corporation and sold by existing shareholders. B) all shares are issued to the public from existing shareholders. C) shares are issued to existing shareholders only. D) shares are sold by existing shareholders only.
A) shares are issued from the corporation and sold by existing shareholders.
During the cooling off period, underwriters would be allowed to do all of the following except A) take orders. B) publish a tombstone. C) distribute a preliminary prospectus. D) take indications of interest.
A) take orders.
A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in A) the capital market. B) the funding market. C) the secondary market. D) the currency market.
A) the capital market.
The access equals delivery rule applies to A) the final prospectus and aftermarket delivery obligations. B) the final prospectus delivery requirements during the cooling-off period. C) all prospectuses delivered before the registration date. D) the preliminary prospectus delivery requirements during the cooling-off period.
A) the final prospectus and aftermarket delivery obligations.
Which of the following calls for the underwriters to buy securities from the issuer acting as an agent, not as principal? A) Initial public offering B) Best efforts underwriting C) Follow-on offering D) Firm commitment underwriting
B) Best efforts underwriting
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? A) Make a binding offer to sell the securities. B) Distribute a preliminary prospectus to the investing public. C) Solicit orders from investors to purchase the securities. D) Mail sales literature to those who have expressed an interest in purchasing the securities.
B) Distribute a preliminary prospectus to the investing public.
A company with previously issued shares outstanding wants to issue more shares to the public. These new shares are issued in what is known as A) a secondary registration. B) an initial public offering (IPO). C) An additional public offering (APO). D) a secondary market offering.
C) An additional public offering (APO).
Which type of underwriting is characterized by the broker-dealer buying the entire issue from the issuer and then reoffering it to the public? A) All-or-none B) Best efforts C) Firm commitment D) Mini max
C) Firm commitment
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 A) II and III B) II and IV C) I and II D) III and IV
C) I and II
Which of the following best describes a prospectus? A) It is a document, required by securities law, which offers limited information about an issuer's securities to be offered to the public. B) It is a truth-in-lending document required whenever a loan is made to an issuer via the purchase of its debt securities. C) It is a full and fair disclosure of all material information and facts regarding the issuance of securities. D) It is a useful but not mandatory document showing detailed information intended to offer investors adequate reason to purchase shares.
C) It is a full and fair disclosure of all material information and facts regarding the issuance of securities.
The Securities Act of 1933 requires that A) all new issues be exempted from registration with the Securities and Exchange Commission (SEC) so that they may be sold to the public. B) registration with the Securities and Exchange Commission (SEC) before public sale can be made be an option for all new issues. C) a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale. D) both exempt and nonexempt new issues be registered with the Securities and Exchange Commission (SEC) before public sale.
C) a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale.
A preliminary prospectus is used to solicit A) indications of interest before the registration filing date. B) sales after the effective date. C) indications of interest before the effective date. D) sales before the effective date.
C) indications of interest before the effective date.
Certain investors are deemed accredited when they have a net worth of A) $1 million. B) $500,000, not including net equity in the primary residence. C) $200,000. D) $1 million, not including net equity in the primary residence.
D) $1 million, not including net equity in the primary residence.
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? A) 40 B) 25 C) Buyers in the secondary market are never entitled to the IPO prospectus D) 90
D) 90
A prospectus displays which of the following? A) Performance predictions for a minimum of three years B) A guarantee insuring against loss C) The Securities and Exchange Commission (SEC) endorsement D) Description of how the proceeds will be used
D) Description of how the proceeds will be used
The preliminary prospectus for the IPO of the Big Shoes Sneaker Company indicates that the number of shares sold may be increased as much as 15% if market demand is sufficient. This is called a A) Shelf offering B) Secondary IPO offering C) Flex offering D) Green Shoe option
D) Green Shoe option
Which of these may be found in the final prospectus that is not in the preliminary prospectus? I. Next year's sales II. Public offer price III. Release date IV. Planned use of the proceeds A) I and IV B) II and IV C) I and II D) II and III
D) II and III
Modulux, Inc., a NYSE listed manufacturer, is offering 5,000,000 shares to the public, which will raise capital to build a new plant. The new technology and design should allow Modulux to increase market share significantly in the modular home business. This offer is A) a venture offering. B) a secondary offering. C) an IPO. D) an APO.
D) an APO.
Rules regarding restricted persons state that each of the following is considered immediate family except A) a mother-in-law or a father-in-law. B) a brother or a sister. C) parents. D) an aunt or an uncle.
D) an aunt or an uncle.
The requirement for a supplemental prospectus to be filed before each sale is applicable to A) sales of shares in the secondary market. B) additional issues. C) initial public offering sales. D) shelf registration sales.
D) shelf registration sales.
Restricted persons are not allowed to purchase an IPO of common stock. All of the following are restricted persons except A) any person owning 10% or more of a member firm. B) broker-dealers. C) registered representatives. D) the grandparent of a restricted person.
D) the grandparent of a restricted person.
Securities regulations that are called blue-sky laws refer to those at A) neither the state nor the federal level. B) both the state and the federal level. C) the federal level. D) the state level.
D) the state level.
All of the following are true of tombstone advertisements except A) they can be placed by the underwriters. B) they are not an offer to sell or solicit sales for the securities. C) they would be expected to show the number of shares to be offered. D) they are mandatory and must be placed during the cooling-off period.
D) they are mandatory and must be placed during the cooling-off period.
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 A) 20 business days after the date the SEC has received it. B) 20 calendar days after the date the SEC has received it. C) 40 business days after the date the SEC has received it. D) 40 calendar days after the date the SEC has received it.
B) 20 calendar days after the date the SEC has received it.
Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147? A) 80% of the issuer's customers must be located in the state of California. B) 80% of the issuer's proceeds will be used in the state of California. C) 80% of the issuer's revenue must be generated from the state of California. D) 80% of the issuer's assets are located in the state of California.
A) 80% of the issuer's customers must be located in the state of California.
Which of the following would most closely match the meaning of a red herring? A) A preliminary prospectus B) A registration statement C) Prospectus D) A tombstone advertisement
A) A preliminary prospectus
Which of the following could not be considered an institutional investor? A) An accredited investor B) QIB C) Insurance company D) Bank
A) An accredited investor
A member firm receives an order to purchase shares in a common stock initial public offering (IPO) from another broker-dealer for a customer. Regarding restricted persons, the member must A) obtain a list of all of the broker-dealer clients to determine eligibility. B) obtain a written representation that the buyer is not a restricted person. C) obtain a statement witnessed by a notary representing that the buyer is not restricted. D) refuse to accept the order.
B) obtain a written representation that the buyer is not a restricted person.
The federal law requiring companies offering public equity or debt securities to provide a prospectus to investors is known as A) the Securities Exchange Act of 1934. B) the Securities Act of 1933. C) the Securities Investors Protection Act of 1970. D) the Trust Indenture Act of 1939.
B) the Securities Act of 1933.
Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is A) the pre-filing period. B) the cooling-off period. C) the mandated waiting period. D) the posteffective period.
B) the cooling-off period.
An issuer that is already a publically 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? A) This can be accomplished by utilizing a new initial public offering, which is necessary for registration of all new shares. B) This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later. C) This can be accomplished by utilizing an additional issue offering, which is specifically for publically traded companies wanting to register new shares to be issued later. D) This cannot be done because newly registered securities must be made available for sale immediately.
B) This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later.
When an issuing company sells securities to primarily institutional investors and a small number of wealthy individuals, as opposed to the general investing public in an exempt offering, this is known as A) a secondary offering. B) a private placement. C) a secondary placement. D) a primary placement.
B) a private placement.
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) a subsequent offering. B) a secondary offering. C) a primary offering. D) an initial public offering.
B) a secondary offering.
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 regional investment banker based in Seattle, to run the sale. This is an example of A) a CRUT. B) a secondary offering. C) an IPO. D) an APO.
B) a secondary offering.
A select pair or group of companies organized to underwrite corporate or municipal securities is best known as A) a market maker. B) a syndicate. C) an investment club. D) an introducing broker-dealer.
B) a syndicate.
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 A) an issuer. B) an investment banker. C) an owner. D) a dealer.
B) an investment banker.
A corporation sells shares to the investing public in order to raise capital. This is known as A) a secondary market transaction. B) an issuer transaction. C) an exchange market execution. D) a primary, or investor-to-investor, transaction.
B) an issuer transaction.
A tombstone announcement may contain all of the following except A) type of security. B) an offer to sell the securities. C) number of shares offered. D) names of the underwriters.
B) an offer to sell the securities.
A tombstone advertisement would be expected to include all of the following information except A) an advisory that the advertisement is neither an offer to sell nor a solicitation of an offer for any of these securities. B) any inherent risks associated with the offering or the issuer offering the securities. C) the price or price range at which the securities are expected to be offered. D) the name of the issuer and underwriters if they are being used to assist in the offering.
B) any inherent risks associated with the offering or the issuer offering the securities.
A tombstone advertisement placed before the effective date can A) always be deemed to be an offer to sell the securities. B) be placed by the issuer directly or by the underwriters. C) only be placed by those assisting the issuing company in the underwriting. D) only be placed by the issuing company.
B) be placed by the issuer directly or by the underwriters.
Each of the following may be traded on an exchange except A) equities. B) life insurance. C) bonds. D) options.
B) life insurance.
In a combination (or split) offering, A) shares are issued from existing shareholders only. B) new shares are issued from the corporation and existing shares are sold by shareholders. C) shares are issued to existing shareholders only. D) all shares are issued from existing shareholders to the public.
B) new shares are issued from the corporation and existing shares are sold by shareholders.
The Securities Act of 1933 protects investors who buy new issues by doing all of the following except A) providing criminal penalties for fraud in the issuance of new securities. B) requiring the licensing of persons affiliated with broker-dealers. C) requiring an issuer to provide full and fair disclosure. D) regulating the underwriting and distribution of primary and secondary issues.
B) requiring the licensing of persons affiliated with broker-dealers.
Capital markets can be characterized by all of the following except A) securities traded in them can be bought and sold by both individuals and institutions. B) they are utilized by the public sector only. C) entities can utilize them to finance both long- and short-term capital needs. D) they would include stock and bond markets.
B) they are utilized by the public sector only.
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? A) Initial public offering B) Additional public offering (APO) C) Shelf offering D) Private (nonpublic) securities offering
D) Private (nonpublic) securities offering
Which of the following statements with regard to the issuance of securities is true? A) While the Securities and Exchange Commission (SEC) is reviewing a registration statement for a new offering of securities, the underwriters are permitted to solicit and accept orders for the securities from the public. B) Once a registration statement has been filed with the Securities and Exchange Commission (SEC) it should be expected that the securities could be sold to the public within two business days. C) The Securities Act of 1933 provides criminal penalties for fraud. D) The cooling-off period beginning when a registration statement is filed with the Securities and Exchange Commission (SEC) can't last longer than 20 days.
C) The Securities Act of 1933 provides criminal penalties for fraud.
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 no banking rules prohibit it. B) The officer may purchase a new issue because anyone is allowed to purchase new issues. C) The officer may not purchase a new issue because he is considered a restricted person. 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.
C) The officer may not purchase a new issue because he is considered a restricted person.
A person who looks to provide advice to a city government concerning the issuance of municipal debt securities would best be described as A) a municipal securities representative. B) a market maker. C) a municipal advisor. D) an investment adviser.
C) a municipal advisor.
During the cooling-off period of a new registration filed with the Securities and Exchange Commission (SEC) A) sales literature may be distributed with the preliminary prospectus. B) indications of interest received are binding on the broker-dealers. C) a red herring may be given to prospective investors. D) tombstone advertisements may not be published.
C) a red herring may be given to prospective investors.
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) a firm commitment. C) an all or none (AON). D) a mini-max.
C) an all or none (AON).
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 A) a venture capitalist. B) a retail investor. C) an institutional investor. D) an issuer.
C) an institutional investor.
An offering is defined as the sale of a security. Regarding offerings, all of the following are true except A) offerings can be identified by who is selling the securities issuer or investor. B) offerings of stocks can be made to the investing public. C) corporate securities can only be offered in public securities offerings. D) offerings of bonds can be made to the investing public.
C) corporate securities can only be offered in public securities offerings.
Mrs. Jones is an employee of a member firm and as such is a restricted person regarding the purchase of new issues. She belongs to an investment club and has a 1% interest in the club's brokerage account. The investment club A) is a restricted account but will be allowed to purchase equity shares of an IPO. B) is a restricted account and will not be allowed to purchase equity shares of an IPO. C) is not a restricted account and will be allowed to purchase equity shares of an initial public offering (IPO). D) is not a restricted account but will not be allowed to purchase equity shares of an IPO.
C) is not a restricted account and will be allowed to purchase equity shares of an initial public offering (IPO).
The prospectus delivery requirement, access equals delivery, is satisfied when A) a red herring is initially sent by mail to investors during the cooling-off period. B) the final prospectus has been filed with Financial Industry Regulatory Authority (FINRA) and is available on FINRA's website for investors to see. C) 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. D) the preliminary prospectus has been filed with FINRA and is therefore available on FINRA's website for investors to see.
C) 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.
Which of the following best describes a final prospectus? A) Must be refiled with the SEC on an annual basis B) Filed with the Securities and Exchange Commission (SEC) but is never made available to the general public C) Used to solicit indications of interest in a new issue during the cooling-off period D) Meets the full and fair disclosure requirements of the Securities Act of 1933
D) Meets the full and fair disclosure requirements of the Securities Act of 1933
Indications of interest taken during the cooling-off period are I. binding on the selling issuer and underwriters. II. nonbinding on the issuer and underwriters. III. binding on the investor. IV. nonbinding on the investor. A) I and III B) I and IV C) II and III D) II and IV
D) II and IV
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. A) I and IV B) I and II C) I and III D) II and IV
D) II and IV
All of the following are exempt issuers except A) Alta Loma Community Foundation. B) the Southwest Railroad Co. C) the City of Alta Loma. D) Modulux, Inc., a home manufacturer.
D) Modulux, Inc., a home manufacturer.
Public offerings of securities are regulated under A) Financial Industry Regulatory Authority (FINRA)'s communications with the public rules. B) the Securities Act of 1934. C) the Consumer Protection Act. D) the Securities Act of 1933.
D) the Securities Act of 1933.
Regarding the registration statement filed with the Securities and Exchange Commission (SEC) when new securities are to be issued, all of the following are true except A) the names and addresses of company officers and directors, their salaries, and a five-year business history of each must be shown. B) a description of how the proceeds raised from the sale will be used must be disclosed. C) underwriters may assist the issuer in preparing and filing the registration statement. D) the accuracy and adequacy of the registration documents is the responsibility of the underwriters.
D) the accuracy and adequacy of the registration documents is the responsibility of the underwriters.
