Regulations: Securities Exchange Act '34 Review Questions

The Securities Exchange Act of 1934 regulates trading of all of the following EXCEPT: A: Commodities Futures B: Options C: Corporate Bonds D: Corporate Stock

A: Commodities Futures -commodities aren't securities

The "penny stock rule" applies to customer purchases of securities that are not exchange listed which are priced below: A: $10 per share B: $5 per share C: $2 per share D: $1 per share

B: $5 per share

Margins on government and municipal securities are set by (the): A: MSRB B: FINRA C: FRB D: SEC

B: FINRA

An investor who accumulates a 5% or greater position in the common stock of a registered issuer must file which of the following forms with the SEC? A: 8K B: 10K C: 13D D: 144

C: 13D

A corporate issuer is obligated to file an 8K report of significant events within how many business days of the event? A: 1 day B: 2 days C: 4 days D: 10 days

C: 4 days

Stabilizing bids may NOT be entered: A: below the public offering price B: at the public offering price C: above the public offering price D: by the syndicate manager

C: above the public offering price

The Self Regulatory Organizations (SROs) are: A: private companies B: government sponsored enterprises C: membership organizations D: publicly traded companies

C: membership organizations

Broker-dealers are required to report their computed Net Capital to customers: A: monthly B: quarterly C: semi-annually D: annually

C: semi-annually

All of the following are included in the 10K report filed by corporate issuers with the SEC EXCEPT: A: income statement B: balance sheet C: retained earnings statement D: net capital computation

D: net capital computation

The civil penalty for being found guilty of insider trading is: A: double damages B: treble damages C: quadruple damages D: quintuple damages

B: treble damages

Who is NOT required to be fingerprinted at a broker-dealer? A: Registered representative B: Cage clerk C: ACATs clerk D: Registered principal

C: ACATs clerk

Stabilization of new issues is: A: a provision of the Securities Act of 1933 B: a provision of the Uniform Securities Act C: permitted at, or above, the Public Offering Price D: permitted at, or below, the Public Offering Price

D: permitted at, or below, the Public Offering Price

Under Federal law, stock can be tendered from all of the following accounts EXCEPT a: A: cash account B: long margin account C: restricted margin account D: short margin (borrowed) account

D: short margin (borrowed) account

Municipal market participants are subject to which of the following rules? A: Anti-fraud Rule 10b-5 under the Securities Exchange Act of 1934 B: Prospectus delivery rules under the Securities Act of 1933 C: Issuer reporting requirements under the Securities Exchange Act of 1934 D: Indenture requirements of the Trust Indenture Act of 1939

A: Anti-fraud Rule 10b-5 under the Securities Exchange Act of 1934

All of the following must be sent to customers of broker-dealers semi-annually EXCEPT: A: Broker-dealer securities inventory amounts B: Broker-dealer balance sheet C: Broker-dealer subordinated loan amounts D: Broker-dealer net capital computation

A: Broker-dealer securities inventory amounts

The separation of investment banking/research and trading functions within a broker-dealer to stop the potential flow of inside information is known as the: A: Chinese Wall B: Berlin Wall C: Wall Street Wall D: Circuit Breaker

A: Chinese Wall

Who determines if an OTC stock is marginable? A: FRB B: FINRA C: SEC D: OTCBB

A: FRB

Which statement is TRUE regarding margin regulations? A: In-house rules may be more stringent than FINRA rules B: Exchange rules may be less stringent than Federal Reserve rules C: In-house rules may be less stringent than FINRA rules D: In-house rules must be approved by the SEC prior to any change

A: In-house rules may be more stringent than FINRA rules

All of the following publicly held issuers must report to the SEC under the Securities Exchange Act of 1934 EXCEPT: A: Municipalities B: Unit investment trusts C: Mutual funds D: Corporations

A: Municipalities

The Securities Exchange Act of 1934 regulates all of the following markets EXCEPT: A: Primary B: Secondary C: Third D: Fourth

A: Primary

All of the following requires filing with the SEC EXCEPT: A: Purchase of a 3% position in one company's stock B: An officer selling 1% of that company's stock C: Broker-Dealer Net Capital computation D: Corporate proxy materials

A: Purchase of a 3% position in one company's stock -should be 5%

The provisions of the Securities Exchange Act of 1934 cover all of the following activities EXCEPT: A: Trading rules for exempt securities B: Trading rules for non-exempt securities C: Anti-fraud provisions for exempt securities D: Anti-fraud provisions for non-exempt securities

A: Trading rules for exempt securities

An issuer is required to make an 8K filing with the SEC for all of the following events EXCEPT: A: declaration of a cash dividend B: election of new members of the Board of Directors C: declaration of bankruptcy D: proposal of a merger with another corporation

A: declaration of a cash dividend

Under the "penny stock rule," an established customer who is exempt from the rule is defined as a person who has: A: effected a securities transaction or made a deposit of funds or securities with that broker-dealer more than 1 year previously B: effected a securities transaction or made a deposit of funds or securities with that broker-dealer more than 3 years previously C: made at least 1 previous purchase of "penny stocks" from the same broker-dealer D: made at least 2 previous purchases of "penny stocks" from the same broker-dealer

A: effected a securities transaction or made a deposit of funds or securities with that broker-dealer more than 1 year previously

Which of the following usually acts as the stabilizing market maker? A: Issuer B: Managing underwriter C: Any member of the syndicate D: Any member of the selling group

B: Managing underwriter

The Securities and Exchange Commission was created by the: A: Securities Act of 1933 B: Securities Exchange Act of 1934 C: Trust Indenture Act of 1939 D: Investment Company Act of 1940

B: Securities Exchange Act of 1934

Which statement is FALSE about stabilizing bids? A: A stabilizing bid is placed by the syndicate manager B: Stabilization is permitted during the 20-day cooling off period C: Only 1 stabilizing bid is permitted at any time D: A stabilizing bid can be placed at or below the Public Offering Price

B: Stabilization is permitted during the 20-day cooling off period

An officer of a listed company calls his registered representative and tells him to buy a large block of that stock. Prior to placing the order to buy, the registered representative calls ten of his customers and tells them to buy that company's stock. Which statement is TRUE? A: This action is permitted under SEC rules B: This action is a violation of the insider trading rules C: This action is an ethical business practice D: This action is beneficial to the customer, and thus is allowed

B: This action is a violation of the insider trading rules

If a publicly traded corporation declares bankruptcy: A: a 10K report must be filed within 4 business days B: an 8K report must be filed within 4 business days C: a 10K report must be filed immediately D: an 8K report must be filed immediately

B: an 8K report must be filed within 4 business days

All of the following are covered under the Securities Exchange Act of 1934 EXCEPT: A: registration of broker-dealers B: registration of new issues C: stabilization of new issues D: registration of exchanges

B: registration of new issues

Which of the following meets the definition of insider trading? A: A registered representative knows of an institutional order that is about to be placed to buy 5,000,000 shares of XYZ stock at the market and immediately places an order to buy 1,000 shares of XYZ at the market for his wife's account B: A registered representative with discretion places orders to buy 1,000 shares of XYZ at the market in a client account; later that day places an order to sell 800 shares of XYZ at the market in that account; and finally, towards the end of the day, places an order to buy 600 shares of XYZ at the market in that account C: A registered representative has been told by his client, the Vice-President of DEF Corporation, that this quarter is looking bad and the representative immediately places an order to sell 1,000 shares of DEF at the market for his wife's account D: A registered representative enters a 1,000,000 share order to buy DEF at the market without a valid account number and when the execution report comes back, the representative allocates the order to her customer accounts based on each customer account profile

C: A registered representative has been told by his client, the Vice-President of DEF Corporation, that this quarter is looking bad and the representative immediately places an order to sell 1,000 shares of DEF at the market for his wife's account

All of the following statements are true about a tender offer for common shares EXCEPT: A: The offer must remain open for at least 20 business days B: Each "sweetening" of the offer must extend the offer for an additional 10 business days C: During the life of the offer, the issuer can buy the stock in the market in addition to buying shares via the offer D: During the life of the offer, any subscribing investors' shares that are tendered are held in escrow pending the outcome of the offer

C: During the life of the offer, the issuer can buy the stock in the market in addition to buying shares via the offer

Which statement is TRUE about a tender offer for common shares? A: The offer must remain open for at least 10 business days B: The offer must remain open for at least 30 business days C: Each "sweetening" of the offer must extend the offer for an additional 10 business days D: Each "sweetening" of the offer must extend the offer for an additional 20 business days

C: Each "sweetening" of the offer must extend the offer for an additional 10 business days

Which statement is FALSE regarding a broker-dealer holding margin and fully paid securities? A: Margin securities can be commingled with the securities of other customers and rehypothecated B: Margin securities are hypothecated by the customer to the broker dealer C: Fully paid securities can be commingled with the securities of other customers and rehypothecated D: Margin securities are often lent to short sellers

C: Fully paid securities can be commingled with the securities of other customers and rehypothecated

If a foreign broker-dealer that does not have U.S. based operations wishes to solicit customers in the United States, the broker-dealer: A: may only deal with retail accounts B: is not required to establish an SEC-registered U.S. subsidiary C: can effect its business through another registered U.S. broker-dealer D: can effect its business directly as long as the foreign broker dealer only solicits accredited individuals.

C: can effect its business through another registered U.S. broker-dealer

The main purpose of the Securities Exchange Act of 1934 is to: A: regulate the sale of new issue securities B: create the Securities and Exchange Commissions C: establish anti-fraud rules for securities market participants D: establish anti-money laundering rules for securities market participants

C: establish anti-fraud rules for securities market participants

If a person is convicted of insider trading: A: the amount of any profit achieved or loss avoided must be paid B: two times the amount of any profit achieved or loss avoided must be paid C: payments are made to the Department of Treasury D: payments are made to the Securities and Exchange Commission

C: payments are made to the Department of Treasury

Pre-arranged trades by insiders are: A: prohibited B: permitted under Rule 10b-5 C: permitted under Rule 10b-5-1 D: permitted under Regulation FD

C: permitted under Rule 10b-5-1

Corporate officers who wish to trade their own company's stock must comply with all of the following rules EXCEPT: A: filing change of holding reports with the SEC B: prohibitions on short sales of that company's stock C: purchase restrictions through the exercise of stock options D: trading is restricted to decisions based on publicly available information

C: purchase restrictions through the exercise of stock options

The definition of a "short swing" profit under the Securities Exchange Act of 1934 is a completed round turn trade effected at a profit within: A: the same day by any investor B: six months by any investor C: six months by an insider D: within one year by an insider

C: six months by an insider

Under Regulation M, which statement is FALSE regarding stabilizing bids entered by market makers? A: Only the syndicate manager places a stabilizing bid B: There is no time limitation on the period that a stabilizing bid can be maintained C: A stabilizing bid cannot be placed unless a "Notice of Stabilization" is included in the prospectus D: A stabilizing bid can be placed at any price that is reasonably related to the market

D: A stabilizing bid can be placed at any price that is reasonably related to the market

All of the following are considered to be "insiders" of ABC Corporation EXCEPT: A: ABC Corporation's President B: The spouse of ABC Corporation's President C: The in-house counsel of ABC Corporation D: An investor holding non-convertible senior ABC securities

D: An investor holding non-convertible senior ABC securities

The anti-fraud provisions of the Securities Exchange Act of 1934 do NOT apply to: A: Individuals trading exempt securities B: Individuals trading non-exempt securities C: Broker-dealer firms trading exempt securities D: Broker-dealer firms trading commodities

D: Broker-dealer firms trading commodities

Under the provisions of the Securities Exchange Act of 1934, which of the following are NOT required to be registered? A: The exchanges that trade securities B: Member firms C: Sales employees of member firms D: Clerical employees of member firms

D: Clerical employees of member firms

All of the following are provided to shareholders in the annual reports of registered corporations EXCEPT: A: Income Statement B: Balance Sheet C: Statement of Changes in Stockholders' Equity D: Details regarding new product launches

D: Details regarding new product launches

Which statement is FALSE about listed securities? A: Under Regulation T, all listed securities are marginable B: Listed securities are subject to "Regulation SHO" C: Listed issuers must register any new issue offerings with the SEC D: Listed issuers must report their results to the FRB

D: Listed issuers must report their results to the FRB

Which statement is FALSE regarding the "penny stock rule"? A: Before confirmation of a trade in a "penny stock" can be made with a new customer, a suitability determination must be completed, signed and returned B: Suitability statements are required for new customers who wish to purchase OTC equity securities valued at under $5 that are not included on NASDAQ C: Suitability statements are not required for customer purchases of low-priced NASDAQ listed and exchange listed securities D: Suitability statements are not required for customers who have either had cash or securities in custody of that firm for at least 6 months; or for customers who have bought 2 or more "penny stock" issues previously from that firm

D: Suitability statements are not required for customers who have either had cash or securities in custody of that firm for at least 6 months; or for customers who have bought 2 or more "penny stock" issues previously from that firm -needs to be 1 year, at least 3 or more issues

An officer of a company has been invited by a large mutual fund company to give a talk to the fund company's analysts about its business plans and prospects. At the talk, the officer inadvertently discloses material information that could affect the stock's price. Which statement is FALSE? A: The officer is considered to be a "tipper" B: The analysts are considered to be "tippees" C: The company must make an immediate public disclosure of the information to avoid insider trading liability D: The company must file a 10K with the SEC disclosing the information to avoid insider trading liability

D: The company must file a 10K with the SEC disclosing the information to avoid insider trading liability

The Vice-President of ACME Corporation, an NYSE listed firm, places an order to buy 10,000 shares of ACME common at the market. 3 months later, ACME stock's price has increased by 20% and the officer places an order to sell. Which statement is TRUE? A: The sale of the stock is not subject to Rule 144 B: The stock cannot be sold unless it has been held, fully paid, for 6 months C: The sale is prohibited until a "waiver of liability" has been obtained from the issuer D: The officer must forfeit the profit on the sale

D: The officer must forfeit the profit on the sale -shares aren't registered, they aren't "restricted"

The Securities and Exchange Commission is empowered to administer all of the following Acts EXCEPT: A: Securities Act of 1933 B: Trust Indenture Act of 1939 C: Investment Company Act of 1940 D: Uniform Securities Act

D: Uniform Securities Act

A corporate executive holds a meeting with a select group of high-producing registered representatives and gives information about the company's expected revenue and income for the upcoming quarter that is extremely positive. The representatives are permitted to: A: buy the stock for their personal accounts only B: recommend that their customers buy the stock C: recommend that their family members buy the stock D: do nothing with the information and should report the situation to the firm's compliance department

D: do nothing with the information and should report the situation to the firm's compliance department

A foreign broker-dealer that is not SEC registered is permitted to deal with clients in the United States: A: under no circumstances B: only if the clients are accredited investors C: only if the clients are sophisticated D: only if the clients are major institutional investors

D: only if the clients are major institutional investors