Regulations: Securities Act of '33 Review Questions
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: A: 1 time a year B: 2 times a year C: 4 times a year D: 12 times a year
C: 4 times a year
Under the provisions of SEC Rule 144, how long must restricted stock be held, fully-paid, before it can be sold? A: 1 month B: 3 months C: 6 months D: 12 months
C: 6 months
"Access equals delivery" means that any purchaser of a new securities issue offered by prospectus: A: must be delivered a paper copy of the prospectus, at or prior to confirmation of sale B: must be delivered an electronic copy of the prospectus, at or prior to confirmation of sale C: can be delivered an electronic copy of the prospectus in lieu of a paper copy if the member firm knows that the customer has internet access D: can be delivered a paper copy of the prospectus in lieu of an electronic copy if the member firm knows that the customer has internet access
C: can be delivered an electronic copy of the prospectus in lieu of a paper copy if the member firm knows that the customer has internet access
Excluding the trading volume test, how much of the issuer's outstanding shares can be sold every 90 days under Rule 144? A: 1% B: 5% C: 10% D: 25%
A: 1%
If the Securities and Exchange Commission sets the effective date for a new issue in registration, which statement is FALSE? A: All proper documents have been filed with the SEC B: The SEC approves of the new issue C: The issue may be priced D: The issue may be offered to the public
B: The SEC approves of the new issue
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? A: The customer is permitted to buy these securities B: The customer is prohibited from buying these securities C: The customer can buy the securities if he spends at least 2 weeks per year in the state of Montana D: The customer can buy the securities if he files an affidavit of domicile in the state of Montana
B: The customer is prohibited from buying these securities
When the Securities and Exchange Commission sets the effective date for a new issue in registration, which statement is TRUE? A: The SEC has certified that the offering documents give full and fair disclosure B: The proper documents for registration have been filed with the SEC C: The SEC has approved the offering for sale to the public D: The SEC has established the final offering price
B: The proper documents for registration have been filed with the SEC
Which statement is TRUE regarding restricted shares? A: They are normally acquired through Rule 144 transactions B: They are normally acquired through Regulation D private placement transactions C: They can be sold freely after 3 months D: They can be sold publicly under a Rule 147 exemption
B: They are normally acquired through Regulation D private placement transactions
What securities offering must be registered with the SEC? A: Rule 144 B: Rule 144A C: Rule 506 D: Rule 415
D: Rule 415
Under Rule 144, no filing is required if the sale amount every 90 days does not exceed: A: 5,000 shares worth a maximum of $50,000 B: 5,000 shares worth a maximum of $500,000 C: 10,000 shares worth a maximum of $100,000 D: 10,000 shares worth a maximum of $1,000,000
A: 5,000 shares worth a maximum of $50,000
Prior to the filing of a registration statement, which activity is permitted? A: A member firm signing a syndicate agreement to become part of the underwriting group for the issue B: A member firm distributing preliminary prospect uses for the issue to customers C: A member firm taking indications of interest for the issue from customers D: A member firm selling the issue to customers
A: A member firm signing a syndicate agreement to become part of the underwriting group for the issue
Which of the following is NOT required to sell "144" stock? A: Buyer's representation letter B: Issuer's representation letter C: Broker's representation letter D: Seller's representation letter
A: Buyer's representation letter
Which statement is TRUE regarding Commercial Paper? A: Commercial Paper may be sold without a prospectus B: Commercial Paper must be sold with a prospectus C: Commercial Paper must be sold with an Official Statement D: Commercial Paper must be sold with an Offering Memorandum
A: Commercial Paper may be sold without a prospectus -exempt
Which of the following is NOT exempt under the Securities Act of 1933? A: Corporate Bonds B: Municipal Bonds C: U.S. Government Bonds D: Small Business Investment Companies
A: Corporate Bonds
All of the following are non-exempt issues under the Securities Act of 1933 EXCEPT: A: Fixed annuity contracts B: Variable annuity contracts C: Listed option contracts D: Listed common stock
A: Fixed annuity contracts
Who is an accredited investor under Regulation D? A: Officer or director of the issuer B: Individual with a $200,000 Net Worth C: Trust with $2,000,000 of Assets D: Employee Benefits Fund with $1,000,000 of assets
A: Officer or director of the issuer -Accredited Investors are: --individuals with $200,000 annual income --married couple w/ $300,000 annual income --individual or couple w/ $1,000,000 new worth --institution w/ at least $5,000,000 available funds --officer or director of the issuer
Which statement is TRUE regarding Rule 144A? A: Rule 144A allows qualified institutional buyers to buy and trade between themselves large blocks of privately placed issues B: Rule 144A limits the amount of restricted securities that can be sold in the public markets C: Rule 144A permits issuers to sell tradeable private placement units to all institutional buyers D: Rule 144A permits issuers to sell tradeable private placement units to very wealthy individual investors
A: Rule 144A allows qualified institutional buyers to buy and trade between themselves large blocks of privately placed issues
Exempted issuers are defined under the: A: Securities Act of 1933 B: Securities Exchange Act of 1934 C: Trust Indenture Act of 1939 D: Investment Company Act of 1940
A: Securities Act of 1933
The Chief Executive Officer of PDQ Company is married and has a husband who owns 5% of the common equity of PDQ. Which statement is TRUE regarding the husband and his PDQ stock holdings? A: The husband is considered to be an "affiliate" under Rule 144 B: The husband is not permitted to sell any shares since his wife is CEO and any sale would be considered insider trading. C: To sell PDQ securities, the CEO and her husband must obtain the permission of the PDQ Board of directors D: To sell PDQ securities, the husband is not required to file a Form 144
A: The husband is considered to be an "affiliate" under Rule 144
A new issue private placement offering is: A: exempt under Regulation D and is allowed to be sold to a maximum of 35 non-accredited investors B: exempt under Regulation D and is limited to a maximum sale of $50,000,000 within 1 year C: exempt under Regulation A and is allowed to be sold to a maximum of 35 non-accredited investors D: exempt under Regulation A and is limited to a maximum sale of $50,000,000 within 1 year
A: exempt under Regulation D and is allowed to be sold to a maximum of 35 non-accredited investors
Under Rule 147, intrastate offerings cannot be resold out of state for how long following completion of the initial offering? A: 3 months B: 6 months C: 12 months D: 24 months
B: 6 months
Which of the following is subject to the registration requirements of the Securities Act of 1933? A: Eurodollar Debt B: American Depositary Receipts C: Municipal Debt D: Foreign Government Debt
B: American Depositary Receipts
Which of the following is NOT defined as a "QIB" under the provisions of Rule 144A? A: Insurance Company with $1.5 billion of assets available for investment B: Individual with $1 billion of assets available for investment C: Small Business Investment Company with $1.5 billion of assets available for investment D: 503(c)(3) Charity with $1 billion of assets available for investment
B: Individual with $1 billion of assets available for investment
What risk is the greatest concern in a Rule 144A transaction? A: Inflation risk B: Marketability risk C: Interest rate risk D: Credit risk
B: Marketability risk
Which of the following actions on the part of a corporation would require registration statement filing with the SEC under Rule 145? A: Stock dividend distribution B: Merger with another publicly held company C: 3 for 2 Stock split D: 1 for 4 Reverse Stock split
B: Merger with another publicly held company
An "accredited investor questionnaire" is required when which type of offering is made to investors? A: Rule 147 B: Regulation D C: Regulation A D: Rule 144
B: Regulation D
Which of the following is an exempt security under the Securities Act of 1933? A: Unit Investment Trust B: Small Business Investment Company C: Open-End Investment Company D: Closed-End Investment Company
B: Small Business Investment Company
Which of the following activities is NOT permitted after the registration statement is filed? A: Solicitation of indications of interest for the issue in registration B: Solicitation of orders for the issue in registration C: Sending a preliminary prospectus to a customer about the issue in registration D: Publishing a tombstone announcement for the issue in registration
B: Solicitation of orders for the issue in registration
To claim a private placement exemption: A: a registration statement must be filed with the SEC B: a Form D must be filed with the SEC C: a Form 144 must be filed with the SEC D: no filing is required with the SEC
B: a Form D must be filed with the SEC
Credit can be extended on new issues: A: immediately after the offering is complete B: after 30 days have elapsed from the completion of the offering C: after 60 days have elapsed from the completion of the offering D: after 90 days have elapsed from the completion of the offering
B: after 30 days have elapsed from the completion of the offering -new issues not eligible for margin until 30 days post offering
U.S. Government securities: A: trades settle "regular way" in 3 business days B: are exempt securities under the Securities Act of 1933 C: are sold through prospectus offerings D: are implicitly backed by the U.S. Government
B: are exempt securities under the Securities Act of 1933
If the SEC sends a deficiency letter to the issuer regarding an issue in registration, then: A: it disapproves of registering the issue B: disclosure is not considered to be adequate C: the underwriters have failed to establish the Public Offering Price D: due diligence has not been performed by the underwriters
B: disclosure is not considered to be adequate
An indication of interest for a new stock offering is normally taken: A: before the 20 day cooling off period B: during the 20 day cooling off period C: after the 20 day cooling off period D: either before, during, or after the 20 day cooling off period
B: during the 20 day cooling off period
Common carrier issues are: A: exempt from the Securities Act of 1933 but required to be sold with a prospectus B: exempt from the Securities Act of 1933 and not required to be sold with a prospectus C: subject to the Securities Act of 1933 but required to be sold with a prospectus D: subject to the Securities Act of 1933 and not required to be sold with a prospectus
B: exempt from the Securities Act of 1933 and not required to be sold with a prospectus -securities issued by railroads, airlines, trucking corps
A PIPE transaction under Regulation D: A: permits the flow through of both gain and loss to accredited investors under conduit tax treatment B: is when an accredited investor makes a private Regulation D investment in a company that is publicly trading C: is limited to a maximum of 35 non-accredited investors under Regulation D D: is only available for issuers that intend to go public within the upcoming year
B: is when an accredited investor makes a private Regulation D investment in a company that is publicly trading -Private Investment in Public Equity (PIPE)
Which of the following is a non-exempt security under the Securities Act of 1933? A: Government National Mortgage Association Mortgage Pass Through Certificates B: Small Business Investment Company Shares C: Commercial Paper maturing in over 270 days D: Fixed Annuity Contracts
C: Commercial Paper maturing in over 270 days -if maturity under 270 days, would be exempt
Under Regulation D, issuers must provide which of the following to investors to obtain a private placement exemption? A: Copy of the Prospectus B: Copy of the Official Notice of Sale C: Copy of the Offering Circular or Private Placement Memorandum D: Copy of the Official Statement
C: Copy of the Offering Circular or Private Placement Memorandum
Which of the following securities is NOT exempt from the Securities Act of 1933? A: Municipal revenue bond issues B: Common carrier issues C: Income bond issues D: U.S. Government bond issues
C: Income bond issues
Which statement is TRUE regarding intrastate offerings? A: Intrastate offerings are subject to federal registration only B: Intrastate offerings are exempt from state registration only C: Intrastate offerings are subject to "Blue Sky" laws D: Intrastate offerings are subject to both state and federal registration
C: Intrastate offerings are subject to "Blue Sky" laws
All of the following are exempt issues under the Securities Act of 1933 EXCEPT: A: U.S. Government Bonds B: Savings and Loan Issues C: Real Estate Investment Trusts D: Municipal Revenue Bonds
C: Real Estate Investment Trusts
Who is subject to Rule 144? A: Buyer of restricted stock B: Buyer of unrestricted stock C: Seller of restricted stock D: Seller of unrestricted stock
C: Seller of restricted stock
What offering method would allow a company to sell its securities over the next 2 years? A: Primary offering B: Secondary offering C: Shelf offering D: Registered offering
C: Shelf offering
During the period that a non-exempt new issue is "in registration," all of the following statements are correct EXCEPT: A: No advertising or sale of the issue is permitted B: The SEC may issue a deficiency letter requesting additional information before allowing registration to become "effective" C: The preliminary prospectus with the final price is distributed D: The offering participants perform due diligence on the offering
C: The preliminary prospectus with the final price is distributed
Under SEC rules, filing of the Form 144, required when selling restricted stock, is: A: the responsibility of the buyer B: the responsibility of the broker-dealer C: filed at, or prior to, the time that the sell order is placed D: filed within 10 business days of the placement of the sell order
C: filed at, or prior to, the time that the sell order is placed -responsibility of seller
Banker's Acceptances are: A: money market instruments subject to the Securities Act of 1933 B: capital market instruments subject to the Securities Act of 1933 C: money market instruments exempt from the Securities Act of 1933 D: capital market instruments exempt from the Securities Act of 1933
C: money market instruments exempt from the Securities Act of 1933 -used to finance imports and exports -can be sold w/out prospectus
Under Regulation D, all of the following are accredited investors EXCEPT a(n): A: investment company B: trust with assets in excess of $5,000,000 whose purchase is directed by a sophisticated person C: partnership with assets in excess of $5,000,000 formed for the specific purpose of acquiring the securities offered D: savings and loan institution
C: partnership with assets in excess of $5,000,000 formed for the specific purpose of acquiring the securities offered -formed for the purpose of acquiring securities
An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares, the officer must meet all of the following requirements EXCEPT: A: filing of the Form 144with the SEC B: a maximum of 4 sales per year are permitted C: the stock must be held for 6 months, fully paid D: each sale is limited to the greater of 1% of the outstanding shares; or the weekly average of the prior 4 weeks' trading volume
C: the stock must be held for 6 months, fully paid -6 month period required for restricted stock, not controlled stock
Which statement is TRUE about the use of a "red herring" preliminary prospectus? The preliminary prospectus may only be sent to customers: A: once registration is effective B: who have paid for the issue C: who have expressed an indication of interest or who are likely purchasers, during the cooling off period D: who have expressed an indication of interest or who are likely purchasers, prior to the cooling off period
C: who have expressed an indication of interest or who are likely purchasers, during the cooling off period
To sell restricted stock in compliance with the provisions of Rule 144, all of the following are required EXCEPT: A: Filing of a Form 144 B: Issuer's representation that the corporation is current with all required SEC filings C: Seller's representation that the securities have been held fully paid for 6 months D: Broker's representation that it solicited the transaction
D: Broker's representation that it solicited the transaction -Broker must prove it did NOT solicit the transaction
Which of the following activities is prohibited during the "cooling off" period? A: Distribution of a "Red Herring" B: Answering questions from customers about the offering C: Attending a road show D: Confirming an indication of interest
D: Confirming an indication of interest
Which of the following securities is NOT exempt from the Securities Act of 1933? A: Benevolent Association issues B: Small Business Investment Company issues C: Common Carrier issues D: Industrial Company issues
D: Industrial Company issues
All of the following are exempt issues under Federal Securities Acts EXCEPT: A: Government Bonds B: Small Business Investment Companies C: State Chartered Bank Issues D: Municipal Bond Funds
D: Municipal Bond Funds -FUNDS
What is found in the final prospectus for a registered offering that is not in the preliminary prospectus? A: Names of the underwriters B: Use of the proceeds of the offering C: Audited financial statements D: Public offering price
D: Public offering price
Which of the following activities may a Registered Representative do prior to the filing of a registration statement for a new issue securities offering? A: Solicit potential buyers and collect indications of interest B: Solicit customer to place order to buy the issue C: Send a preliminary prospectus to interested customers D: Read background material on the industry
D: Read background material on the industry
What securities offering must be registered with the SEC? A: Rule 144A B: Regulation S C: Regulation D D: Regulation A
D: Regulation A
Which statement is FALSE about a private placement? A: Securities from these offerings are typically restricted from immediate resale. B: The offering may be made to a maximum of 35 non-accredited investors C: The offering may be made to an unlimited number of accredited investors D: The offerings is made under Rule 147
D: The offerings is made under Rule 147
A registered representative has prepared a research report about a new issue that is "in registration." Which statement is TRUE? A: The research report may be sent to any customer expressing an "indication of interest" B: The research report may be sent to any customer if it is accompanied by a preliminary prospectus C: The research report may only be sent to customers who have bought new issues within the preceding 12 months D: The research report may not be sent
D: The research report may not be sent
