7.1 The Primary Markets
Regarding the purchase of new equity issues by restricted persons, which statements are true?
An investment club is permitted to buy a new equity issue at the offering price. and 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.
Which of the following choices would best describe a follow-on offering?
An issue of shares by a public company that is already listed on an exchange
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
10%
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
An additional public offering
In a combination (or split) offering,
new shares are issued from the corporation and existing shares are sold by shareholders.
Regarding the purchase of new equity issues (IPOs), restricted persons may
not purchase shares of a new issue.
In the capital markets, securities such as stocks and bonds can be
offered by both public and private sectors.
In a split offering,
shares are issued from the corporation and sold by existing shareholders.
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
Only if the interest does not exceed 10%
Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933?
Private (nonpublic) securities offerings
All of the following names describe the Securities Act of 1933 except
The exchange act
A prospectus displays which of the following?
description of how the proceeds will be used
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
never exceed the number of shares authorized.
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
obtain a written representation that the buyer is not a restricted person.
The Securities Act of 1933 protects investors who buy new issues by doing all of the following except
requiring the licensing of persons affiliated with broker-dealers.
Which of the following is true regarding the primary market?
Issuer transactions occur in the primary market.
Which of the following best describes a prospectus?
It is a full and fair disclosure of all material information and facts regarding the issuance of securities.
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?
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?
The Securities Act of 1933
When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in
a primary offering
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 primary offering.
A registered representative provides financial support and housing at her home for her grandfather. Regarding the purchase of new issues,
both persons are considered restricted.
An offering is defined as the sale of a security. Regarding offerings, all of the following are true except
corporate securities can only be offered in public securities offerings.
The primary purpose of the Securities Act of 1933 is to
require full and fair disclosure in connection with the sale of securities to the public.
Regarding the sale of a new issue, a customer is considered a restricted person if the person is
working as a salesperson who works for the issuing firm's underwriter.
For primary and secondary markets, which of the following is true?
In the primary market, securities are sold to the public and the issuer receives the sale proceeds.
Private placements are primarily sold to
Institutional investors
For the primary market, which of the following is true
Issuer transactions occur in the primary market, and securities are offered at a public offering price
Which of the following statements is true?
Municipalities, the federal government, and corporations can raise funds in the capital markets.
For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable?
Securities Act of 1933 regulating issues that must be offered by prospectus
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?
Securities act of 1933
Member firms violate rules regarding sales of new equity issues to restricted persons when they do which of the following?
Sell blocks of the new issue to accounts of partners or officers of the member firm. and Sell to accountants or attorneys acting on behalf of the underwriters.
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?
The officer may not purchase a new issue because he is considered a restricted person.
Regarding primary offerings, which of the following is true?
There is no limit to the number of primary offerings a corporation can issue.
An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase
a new issue initial public offering (IPO) at the public offering price.
The Securities Act of 1933 requires that
a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale.
Securities sold in an issuer-related transaction would best be described as
a primary offering
Rules regarding restricted persons state that each of the following is considered immediate family except
an aunt or an uncle.
A corporation sells shares to the investing public in order to raise capital. This is known as
an issuer transaction.
All of the following are restricted persons except
individual owning 5% of a member firm.
A private securities transaction
is exempt from registration under the Act of 1933 and can be sold to individual accredited investors
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
is not a restricted account and will be allowed to purchase equity shares of an initial public offering (IPO).
Assets offered and traded in the securities markets can include all of the following except
life insurance
Each of the following may be traded on an exchange except
life insurance
Public offerings of securities are regulated under
the Securities Act of 1933.
Raising funds is generally accomplished by corporations through the issuance of stock (equity) or bonds (debt). This is done in
the capital market
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?
capital market
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?
Private (nonpublic) securities offering
Restricted persons are not allowed to purchase an IPO of common stock. All of the following are restricted persons except
The grandparent of a restricted person