1.4 Registration of Securities

Which of the following is NOT included in a preliminary prospectus? A) Final offering price. B) A written statement in red citing that the prospectus may be subject to change and amendment and that a final prospectus will be issued. C) The intended purpose for the funds being raised. D) Financial statements and history of the company.

A) Final offering price.

Under the USA, each of the following materials may be distributed if an issuing company has applied for registration but is not yet cleared for sale EXCEPT: A) an application with a request for a down payment. B) tombstone advertising. C) a red herring. D) a preliminary prospectus.

A) an application with a request for a down payment.

The first of the federal securities acts was the Securities Act of 1933. This act requires persons selling a new offering to their clients to: A) deliver an effective (final) prospectus no later than with confirmation of the sale. B) deliver a preliminary (red herring) prospectus prior to the sale. C) deliver a copy of the registration statement no later than with confirmation of the sale. D) be properly registered prior to making the offer.

A) deliver an effective (final) prospectus no later than with confirmation of the sale. **The Securities Act of 1933, sometimes referred to as the "paper act", requires that an effective, or final prospectus be delivered to all purchasers of a new offering no later than with confirmation of the sale. It is not required that purchasers receive a red herring prospectus and only the SEC gets copies of the registration statement. Yes, they must be properly registered to make the offer (and sale), but that comes under the "people act", the Securities Exchange Act of 1934.

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) Additional information may be added to a red herring at a later date. C) 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. D) A red herring is used to accept indications of interest from investors.

C) 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. An agent is not permitted to accept funds from potential purchasers of a new issue before the effective date.

Under the Securities Act of 1933, the Securities and Exchange Commission has the authority to: issue stop orders. approve new issues. review standard registration forms. A) I and II. B) II and III. C) I, II and III. D) I and III.

D) I and III. During the cooling-off period, the SEC reviews registration statements and may issue stop orders. The SEC does not approve securities; it only clears them for distribution to the public.

A broker/dealer is the lead underwriter in a new issue. During the period this new security issue is in registration, which of the following will usually be distributed? Subscription forms enabling clients to place a down payment on the issue. A red herring prospectus. The company's latest research report on that stock. Indication of interest forms. A) I and II. B) II and III. C) III and IV. D) II and IV.

D) II and IV. During the period a new securities issue is in registration, the underwriters usually prepare and distribute the red herring prospectus along with forms to indicate interest in the issue. No firm orders or payment may be accepted prior to the date the issue is effective for sale.

Charlotte is an agent of Gibraltar Securities. Her most active customer told Charlotte that he is thinking about buying 10,000 shares of a retailer's stock for which Gibraltar will be participating in the underwriting syndicate. The SEC release date for the stock is anticipated within 10 business days. What may Charlotte send to the client today? A) The preliminary prospectus and a reprint of a popular advertisement placed by the issuing corporation. B) An order request. C) The final prospectus. D) The preliminary prospectus.

D) The preliminary prospectus.

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

D) does not approve or disapprove of the issue.

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 approved by a principal. B) if accompanied by an unmarked prospectus. C) without restriction. D) under no circumstances.

D) under no circumstances.

Under federal law, a registered agent could offer securities for sale during the underwriting period and before the effective date of registration in which of the following circumstances? A) Never. B) With the use of a red herring. C) If the securities are not exempt. D) Only if a bona fide registration statement has been properly filed with the state Administrator and the SEC.

Under federal law, a registered agent could offer securities for sale during the underwriting period and before the effective date of registration in which of the following circumstances? A) Never.