Regulation- Series 7
All of the following statements can be made to customers about the trading of options EXCEPT:
-"Options involve a lower degree of risk than trading the underlying securities because the capital requirements are lower"
Rule 144 allows the sale, every 90 days, of:
-1% of the outstanding shares -the weekly average of the prior 4 weeks' trading volume
Under the Securities Act of 1933, new issues are not marginable until how many days have elapsed from the effective date?
-30 days
A seller who has filed Form 144 can sell 1% of the outstanding shares or the weekly average of the last 4 week's trading volume. This amount may be sold:
-4 times a year
Under Rule 144, no filing is required if the sale amount every 90 days does not exceed:
-5,000 shares worth a maximum of $50,000
This person can do so, without being subject to the Rule 144 volume limitations, after holding the
-6 months
A seller who has filed Form 144 can sell 1% of the outstanding shares or the weekly average of the last 4 weeks' trading volume. This amount can be sold every:
-90 days
Which options orders are permitted?
-A custodian selling calls against securities in a custodian account -An individual selling naked calls in a discretionary account -An investment company selling calls against securities in its portfolio
Which statements are TRUE about the use of a "red herring" preliminary prospectus?
-A preliminary prospectus may be sent to a prospective customer once the issue has entered into the 20 day cooling off period -The use of the preliminary prospectus does not constitute an offer to sell under the Securities Act of 1933
All of the following are permitted to purchase a 144A issue EXCEPT a(n):
-Accredited investor
If the Securities and Exchange Commission sets the effective date for a new issue in registration, which of the following statements are TRUE?
-All proper documents have been filed with the SEC -The issue may be offered to the public
Which of the following statements are TRUE about new registered stock offerings?
-Any purchaser who received a preliminary prospectus must also receive the final prospectus -Any purchaser will pay the Public Offering Price
Which statement is TRUE regarding Banker's Acceptances?
-Banker's Acceptances may be sold without a prospectus
Which of the following is an exempt issue?
-Fixed annuity contract
Which of the following is defined as options "advertising"
-Options website
All of the following must be sent to broker-dealer customers semi-annually EXCEPT a broker-dealer's:
-securities inventory amounts
The Securities Exchange Act of 1934 established "self regulatory organizations" (SROs) and empowered these organizations to:
-set guidelines for fair dealing with the public -handle complaints against broker-dealers for securities law violations -take administrative action against broker-dealers that violate industry regulations -establish arbitration procedures to settle intra-industry disputes
Under SEC Rule 145, all of the following corporate distributions by an issuer are exempt from the requirement to file a registration statement EXCEPT:
-stock spin off
Which of the following are non-exempt securities under the Securities Act of 1933?
-Commercial Paper maturing over 270 days -Variable Annuity Contracts
The Securities Exchange Act of 1934 regulates trading of all of the following EXCEPT:
-Commodities Futures
Under Regulation D, issuers must file which of the following with the SEC to obtain a private placement exemption?
-Copy of the proposed Offering Circular or Private Placement Memorandum
The Securities Exchange Act of 1934 regulates trading of which of the following?
-Corporate Stock -Corporate Bonds -Options
Which of the following issuers must report to the SEC under the Securities Exchange Act of 1934?
-Corporations -Investment Companies
Which of the following securities are EXEMPT from the registration requirements of the Securities Act of 1933?
-Eurodollar Debt -Foreign Government Debt -Municipal Debt
Intrastate offerings are exempt from:
-Federal registration
To sell restricted stock in compliance with the provisions of Rule 144, which of the following are required?
-Filing of a Form 144 -Issuer's representation that the corporation is current with all required SEC filings -Seller's representation that the securities have been held fully paid for 6 months -Broker's representation that it did not solicit the transaction
Which of the following are exempt issues under the Securities Act of 1933?
-Government Bonds -Municipal Bonds -State Chartered Bank Issues -Small Business Investment Companies
Which of the following securities is NOT exempt from the Securities Act of 1933?
-Industrial Company issues
Which of the following is a "QIB" under Rule 144A?
-Institution with at least $100 million of assets to invest
Which of the following statement(s) is (are) TRUE regarding options advertising that is not accompanied by the Options Disclosure Document?
-It must be approved prior to use by the designated Registered Options Principal -It must be filed prior to use with the exchange
Which of the following statements are TRUE regarding a broker-dealer holding margin and fully paid securities?
-Margin securities can be commingled with the securities of other customers and rehypothecated -Fully paid securities must be segregated and placed in safekeeping
Which of the following are true during the period that a non-exempt new issue is "in registration"?
-No advertising or sale of the issue is permitted -The SEC may issue a deficiency letter requesting additional information before allowing registration to become "effective" -The offering participants perform due diligence on the offering
Which of the following activities are allowed prior to the filing of a registration statement?
-None of the above
A prospective options customer must receive which of the following at, or before, the time that sales literature that includes recommendations is sent to the client?
-Options. Disclosure Document
The anti-fraud provisions of the Securities Exchange Act of 1934 apply to which of the following?
-Persons trading exempt securities in the secondary market -Persons trading non-exempt securities in the secondary market
The Securities Exchange Act of 1934 regulates all of the following markets EXCEPT:
-Primary
Which of the following rules allows securities offerings of up to $5,000,000 within 12 months to be exempted from full SEC registration?
-Regulation A
Which statements are TRUE regarding intrastate offerings under Rule 147?
-Resale of the securities is permitted within that state immediately following the initial offering -Resale of the securities is not permitted outside that state for 9 months following the initial offering
"Qualified Institutional Buyers" are permitted to buy and trade large blocks of unregistered securities among themselves under:
-Rule 144A
Which of the following activities are prohibited during the "cooling off" period?
-Sale of the issue to the public -Distribution of an advertisement
Which of the following are exempt issues under the Securities Act of 1933
-Savings and Loan Issues -U.S. Government Bonds
Exempted issuers are defined under the:
-Securities Act of 1933
The Securities and Exchange Commission is empowered to administrate which of the following Acts?
-Securities Act of 1933 -Securities Exchange Act of 1934 -Trust Indenture Act of 1939
The Securities and Exchange Commission was created by the:
-Securities Exchange Act of 1934
Which of the following activities are permitted after the registration statement is filed?
-Solicitation of indications of interest for the issue in registration -Sending a preliminary prospectus to a customer about the issue in registration -Publishing a tombstone announcement for the issue in registration
Which of the following is defined as options "sales literature"?
-Standard option worksheet -Lecture on options investing
Intrastate offerings are subject to:
-State registration -FINRA regulation
Which of the following statements are TRUE regarding corporate reports sent to shareholders?
-The 10K report consists of the annual financial statements -The 10Q report consists of the quarterly financial statements
A registered representative wishes to appear in a television commercial about options strategies. Which statement is TRUE?
-The commercial must be approved in advance by the designated Registered Options Principal
A customer who has his primary residence in Montana, has a vacation home in Colorado. An intrastate offering is being made in the state of Montana. Which statement is TRUE regarding the customer purchasing this securities offering?1
-The customer is permitted to buy these securities
A customer who has his primary residence in Colorado, has a vacation home in Montana. An intrastate offering is being made in the state of Montana. Which statement is TRUE regarding the customer purchasing this securities offering?
-The customer is prohibited from buying these securities
A registered representative completes the firm's standard options worksheet for a customer to illustrate the potential profits and risks of a covered call writing strategy
-The customer must receive the latest Options Disclosure Document
Under the provisions of the Securities Exchange Act of 1934, which of the following must be registered?
-The exchanges that trade securities -Exchange member firms -Sales employees of exchange member firms -Officers of exchange member firms
Which of the following statements are TRUE regarding the Securities Exchange Act of 1934?
-The general provisions of the Act apply to non-exempt securities only -The anti-fraud provisions of the Act apply to both exempt and non-exempt securities
Which of the following statements are TRUE regarding indications of interest received during the "cooling off" period for a registered initial public offering?
-The indication is not binding on the customer -The indication is not binding on the underwriter
Which of the following statements are TRUE about a Regulation D private placement?
-The offering may be made to a maximum of 35 non-accredited investors -The offering may be made to an unlimited number of accredited investors
All of the following statements are true during the period that a non-exempt new issue is "in registration" EXCEPT:
-The preliminary prospectus with the final public offering price is distributed
A customer that regularly purchases new common stock issues from her broker-dealer sends an e-mail to her registered representative asking that all prospectuses be forwarded to her electronically at her e-mail address. Which statement is TRUE?
-The registered representative can follow the customer's instructions by forwarding the request to the member firm's operations department
A registered representative has prepared a research report about a new issue that is "in registration." Which statement is TRUE?
-The research report may not be sent
Which of the following statements are TRUE about Rule 147?
-The rule exempts intrastate issues from Federal registration -Both the issuer and all purchasers must be state residents -Resale is permitted to state residents only, for the 270 day period following the offering
A wealthy customer has been asked by his neighbor to invest in the private placement of a "start-up" technology company as a venture capital investor. This is the first time that the customer has considered such an investment. The customer contacts his registered representative and asks: "Aside from the investment risk associated with a "start-up" company, what are the other issues that I should consider before making such an investment." The registered representative should inform the customer that:
-There is no public resale market for these securities unless the company "goes public" and is current in SEC filings -These securities must be held for at least 6 months before a public resale is permitted under the provisions of Rule 144
Which of the following statements are TRUE regarding restricted shares?
-They are normally acquired through Regulation D private placement transactions -They can be sold publicly under a Rule 144 exemption
A corporation files a registration statement with the SEC to issue 300,000 shares out of its authorized stock and to sell 200,000 shares of restricted stock held by officers of the corporation. Which statements are TRUE?
-This is a primary distribution of 300,000 shares -Proceeds from the sale of 300,000 shares will go to the company
Which of the following statements are TRUE regarding Rule 415?
-This rule allows seasoned issuers to file a blanket registration which covers a 3 year period -The issuer avoids the 20 day cooling off period and is allowed to issue the securities 2 business days after filing
The provisions of the Securities Exchange Act of 1934 apply to which of the following activities?
-Trading rules for non-exempt securities -Anti-fraud rules for exempt securities -Anti-fraud rules for non-exempt securities
Which of the following are defined as "accredited investors" under Regulation D?
-Trust with assets in excess of $5,000,000 whose purchase is directed by a sophisticated person -A bank or savings and loan institution
Which of the following securities are exempt from the registration provisions of the Securities Act of 1933?
-U.S. Government issues -U.S. Government agency issues -General Obligation Bonds -Industrial Revenue Bonds
Which of the following are non-exempt issues under the Securities Act of 1933?
-Variable annuity contracts -Listed option contracts -Listed common stock
To claim a private placement exemption:
-a Form D must be filed with the SEC
All of the following activities are prohibited during the "cooling off" period EXCEPT:
-accepting an indication of interest from the customer for part of the issue
Under SEC rules, the purchaser of a Regulation D private placement must complete and sign a(n):
-accredited investor questionnaire
The President of PDQ Corporation donates restricted PDQ shares to the United Way after holding them for 3 months fully paid. United Way can sell the stock without restriction:
-after holding the securities for 3 months
All of the following options communications require written approval of a designated Registered Options Principal prior to use EXCEPT:
-an internal memo to be distributed to registered representatives within the broker-dealer
Under Regulation D regarding private placements, how many accredited investors are allowed to invest in the offering?
-an unlimited number
U.S. Government agency securities:
-are exempt securities under the Securities Act of 1933
Under Rule 144, the Form 144 is filed:
-by the seller of the restricted shares -at, or prior to, the placement of the order
If the SEC sends a deficiency letter to the issuer regarding an issue in registration,:
-disclosure is not considered to be adequate
The Securities Exchange Act of 1934 established "self regulatory organizations" (SROs) and empowered these organizations to do all of the following EXCEPT:
-establish commission rates to be charged to the public
A new issue private placement offering is:
-exempt under Regulation D -allowed to be sold to a maximum of 35 non-accredited investors
All of the following statements about the Securities Exchange Act of 1934 are true EXCEPT the:
-general provisions of the Act apply to exempt securities
The President of PDQ Corporation donates restricted PDQ shares to the United Way after holding them for 3 years fully paid. United Way can sell the stock without restriction:
-immediately
A husband owns 20% of the equity of a listed corporation, with his wife holding a 5% equity position in that corporation. If the wife wishes to sell her holding, she:
-is considered to be an "affiliate" under Rule 144 -must file a Form 144 to sell
The Self Regulatory Organizations (SROs) are:
-membership organizations
Commercial Paper is a:
-money market instrument exempt from the Securities Act of 1933
Banker's Acceptances are:
-money market instruments exempt from the Securities Act of 1933
Rule 144 applies to:
-sales of control stock -sales of restricted stock
An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares:
-there is no holding period requirement -a Form 144 must be filed with the SEC
Restricted securities can be sold under Rule 144 if:
-they are sold on an agency basis -solicitation of orders to buy is restricted to customers expressing interest within the past 10 days -the issuer is reporting currently to the SEC
Which of the following securities are exempt from registration under the Securities Act of 1933?
-Insurance company issues -Bank issues -Savings and loan issues -Common carrier issues
Which statements are TRUE regarding intrastate offerings?
-Intrastate offerings are subject to State registration -Intrastate offerings are exempt from Federal registration
Municipal market participants are subject to which of the following rules?
- Anti-fraud Rule 10b-5 under the Securities Exchange Act of 1934
A registered representative sends a prospecting letter to customers stating that significant profits can be achieved by purchasing call options in a rising market. This claim:
-must be balanced by a statement that trading options can also result in significant losses
A foreign broker-dealer that is not SEC registered is permitted to deal with clients in the United States:
-only if the clients are major institutional investors
All of the following are accredited investors EXCEPT:
-person buying $150,000 of the issue within 5 years
The Securities Exchange Act of 1934 is MOST concerned with:
-prevention of manipulation and fraud in the secondary market
When the Securities and Exchange Commission sets the effective date for a new issue in registration, this means that the:
-proper documents for registration have been filed with the SEC
Standards for options advertising that is not preceded by delivery of the ODD (Options Disclosure Document) allow all of the following EXCEPT:
-referring to a specific option contract
The announcement appears in the Wall Street Journal. This offering is a
-registered distribution -primary distribution
The announcement appears in the Wall Street Journal. This offering is a(n):
-registered primary distribution
All of the following statements are true about Regulation A offerings EXCEPT:
-sales are limited to purchasers who are "resident" in the state where the issuer resides
