S79

There are strict rules in place to regulate the communications between equity research analysts (RA) and investment banks (IB) 1. Can I-Bankers preview a research report? 2. Can RA and IB speak to each other at a social function? 3. Can a firm retaliate again a RA for negative client commentary? 4. Is there a quiet period for RA whose firm is not involved with IPO?

1. No 2. Yes 3. No 4. No

What is the minimum threshold at which a 13D filing is required? A. 5% B. 7% C. 9% D. 10%

A. 5%

What sales does Securities Act of 1933 regulate?

The first sale (remember because it is the first law)

In a tender offer, the issuer must file any written public announcements of the offer that are made A) Prior to the offer B) During a 10-day period commencing on the tender date C) During the offer D) At any time

D Answer Explanation The issuer must file all written communications made by the issuer or an affiliate, relating to a tender offer, and made at any time. This includes any public announcements of the tender made in writing by the issuer. Textbook Reference See textbook section 13.3

Under Regulation M, the price at which the security is to be or is being distributed is known as the A) Gross spread. B) Net purchase price. C) Distribution price. D) Offering price.

D Answer Explanation The price at which a security is being distributed to the market is known as the offer price as defined by Regulation M. Textbook Reference See textbook section 10.14

ABC Securities, the lead manager in an IPO, has a conflict of interest and must name a qualified independent underwriter (QIU) to participate in the offering. What experience requirement must the QIU meet? A) must have been in business at least 10 years B) there is no experience requirement for QIUs C) must have been the lead underwriter in one similar offering in the preceding year D) must have served as an underwriter in three similar offerings in the three preceding year

D Answer Explanation A QIU is defined as a member firm that does not have a conflict of interest in the offering, agrees to be an underwriter and has previously served as an underwriter in at least three public offerings of similar size during the preceding three-year period. Textbook Reference Please see textbook section 10.9

Nathaniel is a sophisticated investor who is putting money into an oil & gas drilling limited partnership (LP). In which document does he warrant that he has adequate knowledge and experience to evaluate the merits and risk of the proposed investment? A) partnership agreement B) general power of attorney C) due diligence agreement D) subscription agreement

D Answer Explanation A subscription agreement is a document signed by both the issuer of an LP and each limited partner, confirming each partner's investment. Each subscriber (limited partner) makes representations in the agreement, such as having adequate knowledge and experience to evaluate merits and risks. The subscription agreement also describes the background and experience of the general partner. Textbook Reference See textbook section 11.3.2.1

A corporation is offering 300,000 shares to the public at $15 per share. The manager's fee is $.15 per share, the underwriter's fee is $.20 per share, and the concession is $.65 per share. Participations are 100,000 shares for the manager and 200,000 shares for the underwriting syndicate. Retentions are 100% for the manager and 75% for the syndicate members. How much does the public pay per share? A) $14.00 B) $16.00 C) $13.75 D) $15.00

D Answer Explanation As per the questions details, the shares are being offered to the public for $15 per share. Textbook Reference See textbook section 9.5.1

Which of the following events are considered "public appearances" under FINRA rules, assuming a research analyst makes recommendations on equity securities at each? I. Print media article which does not offer a specific opinion on the security II. Speaking engagement III. Seminar IV. Conference call to 5 people A) I and IV B) I and III C) II and IV D) II and III

D Answer Explanation NYSE Rule 42 defines a public appearance as a seminar, forum, media interview, speaking engagement or print media article in which an analyst makes recommendations or offers opinions about equity securities. The definition also includes conference calls and interactive Internet forums presented to 15 or more people and non-password protected Webcasts. Textbook Reference See textbook section 10.12

A syndicate distributes shares in an IPO with an effective date of February 10. Corporate securities are delivered by the issuer to syndicate members on February 7. The syndicate exercises a greenshoe option on February 15. By what date must the syndicate manager complete final settlement of syndicate accounts? A) within 30 days after February 10 B) within 60 days after February 10 C) within 15 days after February 15 D) within 90 days after February 7

D Answer Explanation The 90-day clock begins on the syndicate settlement date, which is the date on which corporate securities of a public offering are delivered by the issuer to syndicate members. No later than the final settlement date, the syndicate manager must provide each underwriter an itemized statement of all costs and allocations. Textbook Reference Please see textbook section 10.15.1

In an IPO, the lead manager retains 20,000 shares for direct sales to institutions. Subsequently, there is a dispute between two underwriters over which is entitled to receive sales credits on retained shares placed directly with institutions. How is the dispute settled? A) according to the rules of priority and precedence B) at the sole discretion of the lead underwriter C) under FINRA's standard dispute resolution process D) By consulting the agreement among underwriters

D Answer Explanation The agreement among underwriters specifies the number of shares held in retention (if any) and also how sales credits are to be allocated for those shares placed with institutions. In a fixed pot arrangement, sales credits are pre-determined, regardless who initiates sales. In a jump ball arrangement, sales credits go to underwriters who initiate sales. Textbook Reference Please see textbook section 9.8

Widgets International has accounts receivable of $10 million and accounts payable of $25 million. Its operating income is $75 million and its cost of goods sold is $100 million. What is its credit turnover ratio? A) 5 B) 20 C) 10 D) 4

D Answer Explanation The credit turnover ratio, also known as the accounts payable turnover, is calculated as COGS/accounts payable. In this case, $100mm COGS divided by $25mm accounts payable. Textbook Reference See textbook section 5.3.3.1

In order for an underwriter to use the due diligence defense, what standard must be met? A. The underwriter must obtain a comfort letter from legal counsel B. Due diligence is not required provided that at least two underwriters previously executed due diligence on the issuer C. The underwriter must engage in thorough due diligence for at least 20 days D. The underwriter must satisfy the prudent more standard

D. The underwriter must satisfy the prudent man standard Conduct a "reasonable" amount of diligence Cannot outsources your due diligence, every underwriter must do their own due diligence if they would like that defense available

When using P/E to determine a share price estimate...

Use the Basic Shares Outstanding that is found on the beginning of the filing

There are strict rules in place to regulate the communications between equity research analysts (RA) and investment banks (IB) 1. Can RA and IB communicate? 2. Can IB suggest that RA cover a company based on client feedback? 3. To be defined as a research analyst, a written analysis must be sent to 4. Research reports must disclose any investment banking business with the subject company over the past

1. Only if chaperoned by legal/compliance personnel 2. Yes, but they cannot require RA to do so or influence the content 3. 15 or more recipients 4. 12 months

Issuer Disclosures - Public Companies - Issuers w/ 2,000 or more shareholders "Annual audited report"

10-K

Issuer Disclosures - Public Companies - Issuers w/ 2,000 or more shareholders "Quarterly unaudited report"

10-Q

Investor Disclosures - E.g. Hedge funds, mutual funds "Acquire more than 5% (active)"

13D

Investor Disclosures - E.g. Hedge funds, mutual funds "Taking public company private"

13E

Issuer Disclosures - Public Companies - Issuers w/ 2,000 or more shareholders "Current report"

8-K

All of the following would be defined as affiliates EXCEPT A) a shareholder who owns 7% of a company's voting stock B) member of senior management that has been granted stock options C) member of senior management that does not own company stock D) spouse of a director of the issuer

A Answer Explanation Affiliates, also called corporate insiders, are defined as officers, directors, or 10% shareholders of an issuer. The spouse of a corporate insider is also considered a corporate insider. Textbook Reference See textbook section 12.7

Marty is a registered rep with JKL Financial Inc. His sister Judy is an editor for a publishing house. May Judy purchase an IPO? A) Yes. Although Marty and Judy are immediate family members, Judy may purchase the IPO, but not through Marty's firm. B) Yes, as long as her purchase is insignificant in size and consistent with her investment history C) Judy must receive written consent from Marty D) No, as Marty and Judy are immediate family members

A Answer Explanation Although Marty and Judy are immediate family members, they do not materially support each other. Judy may purchase the IPO, but she cannot purchase the shares through Marty's firm, and Marty may not control the allocation of any shares to Judy, Textbook Reference See textbook section 10.1

In which document should a shareholder look to determine the compensation of a public company's executive officers and directors? A) proxy statement B) Form 10-Q C) public companies are not required to disclose this information D) Form 8-K

A Answer Explanation Information about director and executive officer compensation can be found in a company's proxy statement.

From which type of suitability determination can a sophisticated institutional customer be exempt? A) customer-specific B) no type C) reasonable-basis D) all types

A Answer Explanation Institutional customers (at least $50 million in assets) can be exempt from customer-specific suitability if the broker has a reasonable basis to believe they are capable of evaluating investment risks independently, and they also affirm that they are exercising independent judgment. No investor is exempt from reasonable-basis suitability. Textbook Reference See textbook section 9.13.3

Leon is a research analyst with ABC Securities. Beth is a research analyst with XYZ Securities. ABC is a member of the syndicate that is helping to take Magnum Inc. public, while XYZ is not participating in this underwriting. Magnum is not an Emerging Growth Company. Who is permitted to participate in a media interview about Magnum on the day after the IPO? A) only Leon B) only Beth C) both Leon and Beth D) neither Leon nor Beth

B Answer Explanation An analyst working for a firm not involved in an IPO can engage in a public appearance with investors and the media immediately after an IPO. An analyst with a firm that is a syndicate manager or member must wait 10 days before engaging in a public appearance. Textbook Reference See textbook section 10.12.2

The rules of Regulation S address stock that is sold A) in a private placement to non-accredited investors B) outside of the U.S. and is not registered C) to affiliates of the issuer in a secondary distribution D) on an intrastate basis only

B Answer Explanation Regulation S covers the sale of unregistered securities in off-shore transactions. If transactions take place within the Regulation S safe harbor, registration is not necessary when securities are sold outside of the U.S. and no directed selling efforts are made in the United States. Textbook Reference See textbook section 12.6

Mary Beth manages the fixed income sleeve of a hedge fund. What publication should she read to stay abreast of both competitive and negotiated new bond issues coming to market in the near future? A) The Weekly Bond Calendar B) The Bond Buyer C) 30-day bond inventory reports D) The Federal Reserve's Market Digest

B Answer Explanation The Bond Buyer tracks new bond issues coming to market. Both competitive and negotiated issues are included on its New Issue Calendar. Textbook Reference Please see textbook section 9.2

Just prior to its IPO, a social media company is hacked by criminals, who steal sensitive personal information on millions of subscribers while also compromising the company's internet security. Can the company continue with the IPO? A) No, it must postpone the IPO until the situation stabilizes. B) The company can request a postponement of up to 30 days from the SEC, without having to disclose the problem until it is remedied. C) Yes, but the event should be disclosed in an amended registration statement and prospectus. D) Yes, and the event can be disclosed in a free-writing prospectus.

C Answer Explanation A company can choose to proceed with a new issue after an unexpected negative material event. However, the material event should be disclosed in a revised registration statement and prospectus. It is not enough to disclose the event in a free-writing prospectus because a FWP can't conflict with information in the registration and prospectus. A delay of the offering is often advisable but is not required. Textbook Reference See textbook section 7.1.4

What is the threshold for defining a "large accelerated filer," for purposes of determining the filing deadline for a company's 10-K report? A) $100 million in assets B) $500 million U.S. market capitalization C) $700 million worldwide non-affiliate market capitalization D) $700 million U.S. market capitalization

C Answer Explanation It may help to remember that "large accelerated filers" are subject to the same size requirement as well-known seasoned issuers: $700 million of worldwide non-affiliate market capitalization (voting and non-voting stock). Textbook Reference See textbook section 8.1.4.1

During an applicable Regulation M restricted activity period, an issuer is restricted from all of the following activities EXCEPT A) bidding for a covered security B) purchasing a security subject to the provisions of Regulation M C) completing odd lot transactions in a covered security D) attempting to induce the purchase of covered security by a non-distribution participant

C Answer Explanation Odd lots transactions (typically less than 100 shares) during the applicable restricted period may be completed by offering participants in accordance with applicable written policies and procedures defined by Regulation M. This is allowed because they are not likely to influence the price of the security. Textbook Reference See textbook section 10.14

For issuers, what is a drawback to raising capital through an exempt private placement, compared to a public offering? A) more onerous prospectus delivery requirements B) less speed to market C) more expensive in terms of the cost of capital D) more regulatory red tape and legal cost

C Answer Explanation Private placements have several advantages over public offerings. For example, they can be brought to market faster with less regulatory red tape and legal cost, and they do not require registration statements or prospectuses. A major disadvantage is an increased cost of capital. With vast numbers of prospective investors in the public market, issuers can price their securities more competitively. Textbook Reference See textbook section 12.9

What form would a domestic public company normally use to register a merger, acquisition or consolidation? A) 8-K B) S-1 C) S-4 D) 10-D

C Answer Explanation S-4 is the standard form for registering business combination offerings for domestic companies including reclassifications, mergers, acquisitions, consolidations and transfers. The comparable form for a foreign company is F-4. Textbook Reference See textbook section 14.2

A registered rep verbally recommends that a customer participate in a structured portfolio of stocks. The rep's firm previously has participated in underwriting several stocks in this portfolio. Must the rep disclose this control relationship at the time of the recommendation? If so, how? A) No, because disclosure is only required at the time of transaction, not the time of recommendation. B) Yes, a written disclosure is required. C) Yes, a verbal disclosure is required. D) No, because disclosure is only required when customers purchase individual stocks, not structured portfolios.

C Answer Explanation The SEC requires broker-dealers to disclose to customers any control relationship they have with the issuer of securities offered or sold. This disclosure is triggered by a verbal recommendation to buy or sell securities. A verbal disclosure may be made at the point of offer or recommendation. A written disclosure is required at or before completion of the transaction. For this purpose, a structured portfolio of stocks is treated as a collection of individual securities. Textbook Reference Please see textbook section 10.11

Margaret is responsible for preparing all materials that will be presented or handed out at the road show for an IPO. What basic rule should she follow in choosing materials for this purpose? A) show all truthful facts that put the issuer in the best possible light B) don't use any financial projections C) don't go beyond facts in the red herring D) don't use audio-visual materials, such as PowerPoint slides

C Answer Explanation The basic rule is that any facts presented in a road show that go beyond those in the red herring become a free writing prospectus and must be filed. This should be avoided in road show planning. Financial projections (forward looking statements) can be used provided they are labeled as such and supporting data is included. PowerPoint files can be used if they are consistent with information in the red herring. Textbook Reference Please see textbook section 10.4

Which description most accurately describes a stalking horse bidder? A) In a broad auction M&A scenario, a sell-side advisor attempts to push for a successful second-round bidding process by enticing a stalking horse bidder to sign a low-ball offer. B) After receiving multiple bids in a 363 sale, the bankruptcy court awards the assets to the highest bidder, known as the stalking horse. C) In a 363 sale, the debtor will sell the assets to stalking horse buyer. The buyer will not have exclusivity because the seller is given the right to shop the sale to other buyers. D) In a 363 sale, the stalking horse buyer will make a low-ball offer and has a 90-day period to rescind their purchase agreement.

C Answer Explanation The stalking horse relates to a 363 Asset Sale in bankruptcy. The stalking horse is not the highest bidder, they are the initial bidder. There is no 90-day rescission period for the stalking horse to revoke. They must close on the transaction unless they are outbid. Textbook Reference See textbook section 15.1.2.3

Investor Disclosures - E.g. Hedge funds, mutual funds "Institutional investment manager (>$100 million)"

13F - Disclose long positions

Investor Disclosures - E.g. Hedge funds, mutual funds "Acquire more than 5% (passive)"

13G

An investor would like to know who the largest active shareholders of a company are, and what other stocks those investors own. Which filings could the investor review to obtain that information? A. 13D and then 13F B. 13F and then 13D C. 13D and then 13G D. 13G and then 13F

A 13D = Active Investor list 13F = Will allow you to see all of their long positions

In an underwriting, a competitive bid is generally used A) by primary dealers when purchasing government securities in Treasury auctions B) by underwriters to transfer the risk to the issuer C) for all corporate securities offerings D) only in secondary offerings

A Answer Explanation Competitive bids are used by primarily dealers when purchasing government securities in Treasury auctions. In a competitive bid the issuer awards the contract to the underwriter with the best price and contract terms. Competitive bids may be used in IPOs and other offerings, though they are typically structured on a negotiated basis. Underwriters retain the risk of distributing the securities if their competitive bids are filled. See Chapter 11 QID 1014 Textbook Reference See textbook section 9.1

In a fairness opinion, an investment banker estimates the value of assets to be acquired in a merger by projecting EBITDA or earnings over several future years and then adjusting for the company's weighted average cost of capital. This valuation method is known as A) Discounted cash flow analysis B) Comparable market multiples C) Capital assets pricing D) Price/earnings multiples

A Answer Explanation Discounted cash flow analysis begins with a projection of the earnings or cash flow (EBITDA) that a business or its assets will produce. These projections then are discounted by the company's weighted cost of capital (for both equity and debt capital). It also may include a terminal value of the assets (after the projected period) and discounts for small company or minority interests. Textbook Reference See textbook section 14.1

In a tender offer to acquire all the shares of a subsidiary, how can an acquiring company complete a short-form merger and squeeze out any minority shareholders who refuse to sell? A) acquire at least 90% of the outstanding stock B) request a contested proxy vote C) do a reverse merger D) use a shell company

A Answer Explanation Each state sets its own requirements for a short-form merger. In most states, acquiring at least 90% of the outstanding stock allows the acquiring company to force any remaining shareholders to sell. Textbook Reference See textbook section 6.5.2.2

Which one of the following events would not require a public company to file an 8-K to report it? A) The loss of a key customer B) A sale of unregistered stock C) The resignation of the company's Chief Financial Officer D) A change in the company's Certifying Accountant

A Answer Explanation Form 8-K is used to announce material events and changes that the investing public should know about. These include changes in senior-level executives, a notice of delisting, a change in the company's Certifying Accountant, and the sale of privately placed or unregistered securities. The loss of a key customer is not necessarily material or reportable. Textbook Reference See textbook section 8.1.3

In which types of Regulation A or A+ offerings are issuers required to make semiannual disclosures to the SEC indicating the amount of capital raised in the preceding six months? A) Regulation A and Regulation A+ Tiers 1 and 2 B) only Regulation A+, Tier 2 C) Regulation A and Regulation A+ Tier 1 D) Regulation A+, Tiers 1 and 2

A Answer Explanation In all three types of Reg A and A+ deals, issuers are required to file semiannual disclosures with the SEC indicating capital raised in the preceding six months. This is how the SEC makes sure issuers have not exceeded the capital-raising limits, which all three types of deals have. Textbook Reference Please see textbook section 12.2.2

The following data applies to ABC Corp. Assume that all of the liabilities of the company are interest bearing debt. Assume the tax rate for all years is 40%. Year End 2017 Information EBIT - $10,000 Assets - $110,000 Liability - $64,000 Equity - $46,000 Year End 2016 Information Assets - $90,000 Liability - $50,000 Equity - $40,000 What is ABC Corp's ROIC for 2017? A) 6.00% B) 23.26% C) 13.95% D) 10.00%

A Answer Explanation ROIC = EBIAT/Invested Capital Invested Capital = (Average Debt + Average Equity) Ave. Debt = 57,000 Ave. Equity = 43,000 Invested Capital = $100,000 EBIAT = EBIT x (1-tax rate) = $10,000 x .6 = $6,000. ROIC = 6,000/100,000 = 6% Textbook Reference 2nd Ed: See textbook section 4.2.2.1; 1st Ed: See textbook section 3.4.1.6

Carolyn does freelance work for a private tech company that expects to IPO in two years. As a reward for service, she is given 200 shares of restricted stock. Until the IPO, the company will not file financial reports with the SEC. How long must she hold the restricted stock before it can be sold? A) until the IPO B) Six months C) one-year post IPO D) six months post IPO

A Answer Explanation Restricted stock must be held a certain period before it can be sold. The holding period is six months for securities issued by companies subject to reporting requirements of the SEC and at least one year for issuers that are not subject to reporting. However, there must be adequate current information about the issuer before a sale can be made. Securities of a private company that does not file financial reports are not eligible to be sold. Textbook Reference Please see textbook section 12.7

When a person acquires beneficial ownership of greater than 5% of a registrant's equity securities, they are required to file a(n) A) Schedule 13D B) Exchange Offer C) Form 8-K D) Form 14A

A Answer Explanation Schedule 13D must be filed within 10 days after the acquisition of 5% or more of a publicly-traded company's voting stock. Textbook Reference See textbook section 8.5

Section 4(a)(5) of the Securities Act of 1933 refers to: A) Private placements to accredited investors. B) Offers made outside the U.S. C) Limited offerings to the public of no more than $5 million. D) Transactions involving only Qualified institutional Buyers.

A Answer Explanation Sections 4(a)(2) and 4(a)(5) of the securities Act of 1933 permit private placements to accredited investors while avoiding the filing of a registration statement. Textbook Reference See textbook section 12.4

All of the following statements regarding notification requirements under Rules 101 and 102 of Regulation M are true EXCEPT A) offering documents must accompany the notice B) required notices must be in writing C) if no restricted period applies for an actively traded security, FINRA must be notified of the transaction by the day after pricing D) notice of an applicable restricted period and the basis for the determination is required no later than business day prior to the first complete trading session of the applicable restricted period

A Answer Explanation The FINRA notices required under Rules 101 and 102 must be in writing, but need not include offering documents. If no restricted period applies for an actively traded security, notice must generally be made no later than within one business day following the pricing of the distribution. If a restricted period applies, notice of the applicable restricted period and the basis for the determination is required no later than the business day prior to the first complete trading session of the restricted period. For example, if the restricted period is 5 days long, notification to FINRA is required 6 days prior to pricing. Textbook Reference See textbook section 10.14

An SEC Rule 165 exemption covers certain written communications made before a registration is filed for a business combination transaction. To qualify for the exemption, such written communications must meet which requirements? I. Be limited to a basic announcement of the offering II. Be included in a prospectus filed on the date of first use III.State that the announcement is not an offer IV. Avoid any mention of offering terms such as amount, time frame or use of proceeds A) I, II and III only B) I and IV only C) I, III and IV only D) I and II only

A Answer Explanation The exemption applies to written communications made in business combinations before the registration is filed, other than non-public communications between participants. Securities may be offered if such communications are prospectuses filed with the SEC and they are limited to a basic announcement, which may include basic terms of the offering and use of proceeds. The announcement must include a legend stating that it is not an offer, and be filed with the SEC prior to first use. Textbook Reference See textbook section 14.2

An issuer tender offer made under terms of Rule 13e-4 must remain open at least how many business days from commencement of the offer? A) 20 B) 30 C) 60 D) It depends on whether the offer is for cash or securities

A Answer Explanation The offer must remain open at least 20 business days after commencement, and at least 10 business days from any notice changing the percentage of securities being sought. Textbook Reference See textbook section 13.1

Mary Beth is one of two "independent persons" assigned to provide input on a fairness opinion that will be provided to public shareholders. To be considered independent, she should not I. be employed by the investment banking firm writing the fairness opinion. II. be part of the transaction deal team. III.be significantly influenced by those on the deal team. A) II and III only B) I, II and III C) I and II only D) I and III only

A Answer Explanation To promote a balanced review, it is "best practices" to assign at least two independent people to review the fairness opinion process and outcome. These people should not be part of the transaction deal team, and they should not work directly under or be significantly influence by people on the deal team. They do however, usually work for the same broker dealer. Textbook Reference See textbook section 14.1

When a member firm uses a fairness committee to review a fairness opinion that it has written, who is required to approve the opinion? A) non-deal team members of the committee B) all members of the committee C) the firm D) members of the committee who are on the deal team

A Answer Explanation Under FINRA Rule 2290, to make sure the process of reviewing and approving a fairness opinion is balanced, the opinion must be reviewed and approved by committee members who are not on the deal team of the transaction (non-deal team members). Textbook Reference See textbook section 14.1

Good Builders, Inc. buys a new dump truck for $50,000. The dump truck has a useful life of 10 years and a salvage value of $8,000. For accounting purposes, Good Builders, Inc. depreciates the dump truck on a straight line basis. For tax purposes, it uses a form of accelerated depreciation and books $21,000 of depreciation expense at the end of the fiscal year. Good Builders, Inc. has a marginal tax rate of 42% and an effective tax rate of 38%. Which of the following is true regarding the effect of these transactions as of the end of the fiscal year A) Good Builders, Inc. has a deferred tax liability of $7,056 B) Good Builders, Inc. has a deferred tax asset of $6,384 C) Good Builders, Inc. has a deferred tax liability of $6,384 D) Good Builders, Inc. has a deferred tax asset of $7,056

A Answer Explanation Under straight-line depreciation, the annual depreciation = (purchase price - salvage value)/useful life = ($50,000 - $8,000)/10 years = $4,200. Since the company declares a greater depreciation expense for tax purposes, this will lead to lower declared income and lower taxes paid than it actually reports. As a result, this creates a deferred tax liability - the company will need the pay the difference at some point in the future. The amount of the deferred tax liability = (tax depreciation - accounting depreciation) x marginal tax rate = ($21,000 - $4,200) x 42% = $7,056. The effective tax rate is a blended rate that is not generally used when adjusting financial statements. Textbook Reference See textbook section 2.4.2.2

Which of these investment combinations could be expected to perform the best during a period of steadily rising inflation and interest rates? A) short-term Treasury notes and stocks B) mortgage-backed and asset-backed bonds C) zero-coupon Treasury bonds and stocks D) long-term corporate and high-yield bonds

A Answer Explanation When interest rates and inflation are rising, the prices of long-term bonds are more vulnerable to declines than prices of short-term bonds. Stocks can be a good inflation hedge but long-term bonds generally are not. Mortgage-backed and asset-backed bonds generally have medium to long-term durations. As interest rates rise, high-yield (lower-quality) bonds become more vulnerable to default or downgrade risk. Textbook Reference See textbook section 5.6.3

During the cooling-off period, the CEO of a company going public accidentally discloses material information to a member of the media. This information is not contained in the prospectus or registration statement. The disclosure takes place at 4 p.m. on Friday. When must a free-writing prospectus be filed with the SEC, disclosing the same information? A) on Friday B) by the end of Saturday, the next calendar day C) on the next business day D) within 24 hours

A Answer Explanation When there is an inadvertent disclosure of material information during a cooling-off period, it is possible to correct the mistake after-the-fact by filing a free-writing prospectus with the SEC no later than the date of first use. This usually means on the same day the error was made. Time is of the essence in making the information public. Note that this is related to the timing of an FWP rather than under Regulation FD. Under Regulation FD disclosure would be required before the open of trading on the next business day. Textbook Reference See textbook section 7.6

Under SOX the principal executive and financial officers of a public company must certify that a registrant's Forms 10-K and 10-Q: A) Have been read and are accurate and complete. B) Include no forward looking statements. C) Are approved by the SEC. D) Have been prepared in a balanced manner by internal and external personnel.

A Make the top folks accountable for these things

A husband and wife, individually, are each shareholders of the same Subchapter S Corporation. Do they count as one shareholder or two shareholders for purposes of the 100 shareholder limit? A. One shareholder B. Two shareholders C. It depends if they hold the shares in a joint account D. It depends on their holding period

A. One shareholder It doesn't matter if they hold the shares in a joint account or in two individual accounts\ The holding period would be relevant to the capital gain tax rate that they pay when they eventually sell their shares

Which document does an investment bank typically sign with a client company in order to receive non-public financial information for the purposes of performing analytical work for the company? A) Engagement letter B) Confidentiality Agreement C) Definitive Agreement D) Letter of Intent

B Answer Explanation A confidentiality agreement (CA) is a legally binding contract between the target and each prospective buyer, or between an M&A advisor and a client, that governs the sharing of confidential company information. An engagement letter governs the terms of engagement between the company and an investment bank for a given M&A or capital markets transaction. The Definitive Agreement is a legally binding contract between a buyer and seller detailing the terms and conditions of a sale transaction. A Letter of Intent is an agreement signed at the onset of underwriting activities. Textbook Reference 2nd Ed: See textbook section 6.3.1.2; 1st Ed: See textbook section 6.2

The red-herring for Steelpoint Inc.'s IPO states that the company was founded by two brothers in 2010. After the registration but before the effective date, the company wishes to clarify this information by stating that one brother did not join the company until 2013. Can this correction be made in a free writing prospectus? A) yes, provided that the company's board of directors approves the free writing prospectus B) no, because it conflicts with information in the red-herring C) yes, in all cases D) yes, provided that it clearly states that the red-herring information is in error

B Answer Explanation A free writing prospectus is designed to supplement information in the registration and red-herring. It cannot be used to make corrections to material facts in those filings - i.e., when it is in conflict with them. The registration and red-herring will need to be amended with the correct facts, and then the free writing prospectus can be used to clarify. Textbook Reference Please see textbook section 7.6

Howard is an entrepreneur who wants to buy a money-losing fast food franchise. His goal is to gradually turn the losses into profits over time while taking the losses on his personal tax return right away. Which form of business organization should he avoid? A) S corp B) C corp C) limited partnership D) sole proprietorship

B Answer Explanation A major disadvantage of C corporations is that their losses cannot be personally deducted by stockholders, for income tax purposes. Only the entity itself can claim losses, on its corporate tax return. In both S corporations and limited partnerships, profits and losses flow through to individual owners, as they also do (within limits) in sole proprietorships. Textbook Reference See textbook section 1.1

XYZ Company goes public at a public offering price of $31. Several days later, the stock has increased to $43. If the underwriters decides to exercise the greenshoe clause, what price will investors pay for those shares? A) the broker has the option to charge 15% above the public offering price B) $31 per share, as that is the public offering price C) the broker has the option to charge 15% above the current market price D) they will pay $43 per share, since that is the current price of the shares

B Answer Explanation All greenshoe shares must be sold at the public offering price. Textbook Reference Please see textbook section 9.10

What is FALSE about the unsecured creditors committee's (UCC) function during a bankruptcy? A) It consists of the seven largest unsecured creditors. B) It is responsible to perfect liens for the secured creditors. C) The UCC can review motions filed with the court and participate in the creation of the debtor's reorganization plan. D) They are appointed by the US Trustee, a division of the Department of Justice.

B Answer Explanation All of the statements are true except for the statement dealing with perfecting liens. Liens are placed on property by the secured creditors. They register (perfect) their liens with the county clerk when the mortgage is first placed on property. Thus, liens are perfected when secured loans are first made, not when a company declares bankruptcy. Textbook Reference See textbook section 15.1.2.2

ABC Securities operates separate departments for equity research, debt research, the trading desk and investment banking. Which is not required to have an information barrier separating departments? A) The trading desk and debt research B) The trading desk and equity research C) Investment banking and debt research D) Investment banking and equity research

B Answer Explanation All research must have an information barrier separating it from investment banking. Equity research is not required to have an information barrier separating it from the trading desk, but debt research is. Textbook Reference Please see textbook section 10.12

The Sarbanes-Oxley Act mandated reforms to enhance corporate governance and financial disclosures, as well as to combat corporate and accounting fraud. Which of the following is not a requirement mandated by this legislation? A) It is mandated under the Sarbanes-Oxley Act that the majority of all public companies' board members must be independent. B) It is mandated under the Sarbanes-Oxley Act that a member of the audit committee must be a financial expert and that expert must be disclosed. C) It is mandated under the Sarbanes-Oxley Act that the public company cannot extend a personal loan to a company executive, unless the public company is in the business of lending money and the loan is at market terms. D) It is mandated under the Sarbanes-Oxley Act that the board of directors' audit committee must be entirely made up of independent directors.

B Answer Explanation All these explanations are true except it is not mandated that the audit committee have a financial expert. However, if there is a financial expert, that expert must be disclosed. It is important to note that although the Sarbanes Oxley Act does not mandate a financial expert be on the audit committee, NYSE and NASDAQ listing requirements require there be at least one financial expert on the committee. Textbook Reference See textbook section 8.2

Company DEF, which has $1,500,000,000 in revenue, $180,000,000 in EBITDA, and $150,000,000 in book value is preparing an initial public offering to raise $75,000,000. Company DEF will have $75,000,000 in debt after the IPO. To increase demand, the shares will be offered at a 15% discount. The average multiples for companies in the same sector are 1x EV/SALES, 6.5x EV/EBITDA, and 2.5x Price/Book. Based on the above data, what is the most likely valuation of Company DEF? A) $1,275,000,000 B) $994,500,000 C) $318,750,000 D) $1,170,000,000

B Answer Explanation Because this is a profitable company, the best comparable to use for this question is the EBITDA multiple. Company DEF's valuation using the EBITDA multiple is $180,000,000 x 6.5x = $1,170,000,000. However, to increase demand, the shares will be offered at a 15% discount. Therefore, the valuation after the discount is $1,170,000,000 x (1 - 15%) = $994,500,000. Textbook Reference 2nd Ed: See textbook section 4.4.2; 1st Ed: See textbook section 3.7~

Consider Exhibits 60-63. What is Jay's Jeans Inc's Days Inventory Held for 2010? A) 112 days B) 212 days C) 229 days D) 627 days

B Answer Explanation Days Inventory Held = 365 × Inventory/COGS = 365 × 30,245/51,963 = 212 Textbook Reference 2nd Ed: See textbook section 5.3.3.1; 1st Ed: See textbook section 5.3

A company's financial statements show the data provided in Exhibit 95. Furthermore, the company recently issued debt at 5.45% which is currently trading at 104. An investment banking analyst estimates a beta of 1.8, risk-free rate of 2.50% and expected market return of 9.00%. Also, the analyst expects cash flow to grow by 5.0% annually. What is the company's estimated enterprise value? A) $312,975,508 B) $543,554,007 C) $540,249,778 D) $2,470,700,032

B Answer Explanation Given the data provided here, the enterprise value is best calculated using the perpetuity calculation: Cash Flow / (WACC - Growth Rate). The most challenging part of this question is calculating WACC. Cost of Debt = Current Yield x (1 - tax rate) = 5.45%/104 x (1 - 38%) = 3.25%. Also, the company's debt / equity ratio (which uses market cap) = $60,000,000 debt / ($60,000,000 debt + $150,000,000 market cap) = 28.57%. Therefore, the % of debt is 28.57% and the percentage of equity = 1 - 28.57% = 71.43%. Cost of Equity = Risk-free rate + beta x (market return - risk free) = 2.50% + 1.8 x (9.00% - 2.50%) = 14.20%. Therefore, WACC = (14.20% cost of equity x 71.43% % of equity) + (3.25% cost of debt x 28.57% % of debt) = 11.07%. Now, enterprise value can be calculated as $33,000,000 cash flow / (11.07% WACC - 5.0% growth rate) = $543,554,007. Note that it is common practice for the perpetuity calculation to include (1+g) in the numerator, resulting in the formula as follows: enterprise value = (cash flow x (1+g)) / (WACC - g). However, the exam will not always include the (1+g). If you try the calculation using (1+g) and the result does not show up as an answer choice, eliminate the (1+g) and see if that result "fits." Textbook Reference 2nd Ed: See textbook section 5.5.1; 1st Ed: See textbook section 5.4

Who bears the risk if a best-efforts, all-or-none contingency underwriting fails to generate interest among the investing public and therefore is cancelled? A) only the underwriters B) both the underwriters and the issuer C) only the issuer D) the investing public

B Answer Explanation If the underwriting is cancelled due to lack of interest, both the underwriter and the issuer bear financial and operational risk. The underwriter loses the costs invested in undertaking issuer due diligence and organizing the syndicate. The issuer loses the cost invested in preparing the registration and prospectus. Both underwriters and the issuer also may lose the opportunity cost offered by the market window, as well as reputational costs associated with a failed offering. Textbook Reference See textbook section 9.3.1

In a shelf offering of bonds, where should an investor look to find the yield? A) The yield must be calculated using information in the red-herring. B) The yield is shown in the prospectus supplement. C) The yield is not shown. D) The yield is shown in the offering circular.

B Answer Explanation In a shelf offering of bonds, the yield is found in the prospectus supplement. Textbook Reference See textbook section 7.4

A public company hires an independent firm to solicit shareholder votes for a proxy contest. The company wants shareholders to vote "yes." In its proxy statement, the company must disclose I. Information about the entities making the solicitation II. Why the firm is soliciting "yes" votes III. Information about the cost of the solicitation IV. Balanced information explaining consequences of voting "no" A) I and IV B) I and III C) II and III D) II and IV

B Answer Explanation In the proxy statement, the company must include information about the entities making the solicitation, the cost of the solicitation, and how costs of the solicitation are being paid. Textbook Reference See textbook section 14.2

Which statement is false with regard to a DEFM14A proxies related to voting on an all-cash M&A deal when two public companies are involved? A) The proxy is prepared and submitted jointly to the SEC. B) Since two public companies are involved, pro-forma financial statements are required. C) A PREM14A proxy would also be required to be prepared and submitted to the SEC. D) A proxy statement could be avoided if the acquiring company makes a tender offer to acquire the target firm.

B Answer Explanation Note: This question is asking which choice is FALSE Only if the deal includes stock as part of the consideration, would the proxy be required to contain pro-forma combined financial statements. Had one of the companies been private then a proxy statement would only be prepared and submitted by the public company, assuming a proxy is required. Textbook Reference 2nd Ed: See textbook section 6.5.2.1; 1st Ed: See textbook section 6.7.3.1

An energy company has annual earnings per share of $4.00, a stock price of $36 and a PEG ratio of 1.0. What else is true? A) Its sales are growing by 9% per year. B) Its earnings are growing by 9% per year. C) Its earnings are growing by 18% per year. D) Its sales are growing by 18% per year

B Answer Explanation PEG begins with the price/earnings (P/E) ratio and then divides that by the company's earnings growth rate. In this case, P/E is 36/4 = 9. If the PEG ratio is 1.0, then the earnings growth rate must be 9% (9 P/E ratio divided by 9% earnings growth = 1.0.) The lower the PEG ratio, the better the value. Textbook Reference See textbook section 4.2.1.2

To qualify for confidential treatment, a preliminary proxy filing must fulfill which of the following requirements? I. Shareholders must vote to make the proxy confidential II. Public communications must not have been made, other than a basic announcement III. Shareholders must vote in public IV. It must not be a "going private" or rollup transaction A) I and IV B) II and IV C) II and III D) I and III

B Answer Explanation Preliminary proxies can be kept from public disclosure until they become definitive, but only if they adhere to certain rules. They must be marked confidential and public communication must have been limited to a basic Rule 135 announcement. Confidentiality is not allowed in going private and rollup transactions. Textbook Reference See textbook section 8.1

Under Regulation Crowdfunding, which of the following investments would exceed the crowdfunding dollar limit per issuer? A) $1,675,000 in a six-month period, of which all is from crowdfunding B) $6,000,000 in a 12-month period, of which all is from crowdfunding C) $3,500,000 in a 12-month period, of which $2 million is from crowdfunding and $500,000 is via a Reg D private placement D) $7,000,000 over a 24-month period, with equal amounts raised in the first 12 months and the last 12 months

B Answer Explanation Rule change as of March 15, 2021. The dollar limit is $5,000,000 for any 12-month period. It applies only to crowdfunding, not other types of capital raising, such as Reg D private placements. An issuer can raise up to the limit via crowdfunding in each 12-month period, with no aggregate limit over time. The limit is per 12-month period, not per offering. Note that prior to March 15, 2021, the limit per offering was $1,070,000. It is now $5,000,000. Textbook Reference See textbook section 12.8

For purposes of a stabilization bid, the "principal market" is defined as A) The NYSE in all cases where the security is NYSE-listed B) The market with the largest aggregate volume for this class of securities over the last 12 months C) The Nasdaq in all cases where the security is Nasdaq-listed D) The market with the largest aggregate volume for all securities traded over the last six months

B Answer Explanation SEC Regulation M, Rule 100, defines the principal market as having the largest aggregated reported trading volume for the class of securities during the full 12 calendar months immediately preceding the filing of the registration. Textbook Reference See textbook section 10.14

Which return metric is likely to be the highest priority for shareholders? A) WACC B) ROE C) ROIC D) ROA

B Answer Explanation Shareholders tend to be most focused on ROE or Return of Equity, which is the return on their equity investment. It is generally calculated as Net Income / Average Shareholders Equity Textbook Reference 2nd Ed: See textbook section 4.2.2.3; 1st Ed: See textbook section 3.4

Which statements are true as they relate to piggyback registration rights? I. If an investor owns shares with Piggyback registration rights, the investor can register their shares as part of a public offering, but will be responsible for paying all of the expenses related to the registration of these shares. II. If an investor owns shares with Piggyback registration rights, those shares can be registered as part of a public offering. The issuer will be responsible for paying all of the expenses related to the registration of these shares. III. Shares that were bought in a private placement and have never been registered are candidates for piggyback registration rights. Since these shares will be part of the IPO they will be considered Primary Shares. IV. Shares that were bought in a private placement and have never been registered are candidates for piggyback registration rights. Since these shares will be part of the IPO they will be considered Secondary Shares. A) I and III B) II and IV C) I and IV D) II and III

B Answer Explanation Since these shares being registered with piggyback rights belong to previous owners, this would be a secondary offering. Because of this if the firm is also issuing new shares this would turn into a split offering. The issuing firm would be responsible to pay all expenses related to the registration of these shares. Textbook Reference See textbook section 12.5

The shareholders of ABC Corp. will meet on July 16 and vote on whether to approve a merger. When must ABC shareholders be given a prospectus describing terms and risk of the proposed transaction? A) within 30 days after the merger is announced B) prior to July 16 C) at least 10 business days prior to July 16 D) with sufficient advance notice to be able to read and understand the proposed transaction

B Answer Explanation The SEC requires prospectus delivery for securities transactions involving corporate mergers, acquisitions, reclassifications or asset transfers. Securities may not be sold or delivered in these transactions unless preceded by a prospectus, which means prior to the vote of securities holders. Textbook Reference Please see textbook section 10.1

What is the name of the SEC rule that requires a tender offer to be made available to every shareholder of the same class of securities on equal terms? A) level playing field B) all-holders C) all-or-none D) tender parity

B Answer Explanation The SEC requires that a tender offer must be made at the same price to all holders of the same class of securities. Generally, this is a price higher than the prevailing market price. Some shareholders (such as large holders) cannot be favored over others. The rule is known as all-holders or all-holders, best price. Textbook Reference See textbook section 13.3.2

After trading begins in an IPO, an investor who was allocated IPO shares returns them to a syndicate member because she can't afford to pay for them. The shares are trading at a premium to the public offering price. In this scenario, which is a permitted action for the underwriter to take? A) Allocate the shares pro rata among all underwriters B) Sell the shares and donate them to charity. C) Sell the shares immediate and remit the proceeds to the initiate investor. D) Disclose to other underwriters that it will retain the shares.

B Answer Explanation The agreement among underwriters (AAU) requires that any IPO shares trading at a premium and returned to a syndicate member after trading begins must be: 1) used to offset any syndicate short positions; 2) offered at the public offering price to unfilled customer orders; or 3) sold, with profits anonymously donated to charity. In short, there can be no financial incentive for an underwriter to receive these returned shares. They can't ever be placed into a syndicate member's investment account. Textbook Reference Please see textbook section 10.2

In a successful M&A process, at what point is the press release with the transaction announcement typically issued? A) Upon deal closing B) Shortly following the signing of the definitive agreement C) During the financing marketing period D) After HSR and regulatory approvals are received

B Answer Explanation The press release with transaction announcement is typically issued as soon as practicable following the signing of the definitive agreement. While the company typically issues a press release upon the receipt of HSR and regulatory approvals, this comes after the press release with transaction announcement. Similarly, while the company typically issues a press release upon deal closing, this usually comes weeks after the transaction announcement. It is important to note that any of these communications between signing and closing are considered a prospectus and are required to be filed with the SEC. Textbook Reference 2nd Ed: See textbook section 6.4.4; 1st Ed: See textbook section 6.6

Tangent Corp. wants to return money to its shareholders. It sells for $25 million a building that it owns and leases the building back at a competitive rent. The $25 million is then distributed to shareholders through a special dividend. How will the company's debt to equity ratio be impacted? A) The ratio will be positively impacted B) The ratio will be negatively impacted C) The ratio will decrease. D) The ratio will remain unchanged

B Answer Explanation This transaction has the impact of reducing retained earnings (via the dividend payment), which is a component of shareholder's equity. Thus, the ratio will increase - i.e., be negatively impacted. Textbook Reference See textbook section 4.2.3.1

Company ABC has sales growth of 10% per year. In year one it had $200MM of sales. ABC's gross profit margin is a constant 20%. Year over year ABC projects fixed operating expenses, excluding D&A, of $20MM while D&A is $4MM. Calculate year 3 EBIT. A) $16MM B) $24.4MM C) $28.4MM D) $48.4MM

B Answer Explanation To calculate year 3 EBIT we need to determine the year 3 projected income statement. Start by projecting the sales for the next three years. Year 1 sales is $200MM, year 2 is $220MM (200 * 1.10%), and year 3 is $242 ($220 * 1.10%). Next, calculate the projected gross profit using the fixed 20% profit margin. Year three gross profit is $242 x 20% = $48.4MM. Lastly, subtract the operating expenses and D&A (which are broken out in this question): $48.4MM - $20MM - $4MM = $24.4MM. Textbook Reference See textbook section 2.3.10

All of the following regulatory issues might lead to a prolonged period in between signing and closing for a given M&A deal EXCEPT A) material sales in multiple geographies B) complex antitrust issues C) HSR notification is filed immediately following signing of definitive agreement D) sensitive industry

B Answer Explanation Transactions with complex antitrust issues can take considerably longer to clear or may result in a deal not closing because one or more agencies challenge the deal or require undesirable conditions to be met (e.g., the divestiture of a line of business). Companies with significant foreign operations may require approval from comparable foreign regulatory authorities such as the Competition Bureau (Canada) and European Commission (European Union), which may significantly prolong the approval process. Depending on the industry (e.g., banking, insurance, and telecommunications), other regulatory approvals may be necessary that would extend the timeline. However, it is standard practice for the HSR filing to be made directly following the execution of a definitive agreement. If there are minimal or no antitrust concerns, the parties can consummate the transaction after a 30-day (15-day in the case of tender offers) waiting period has been observed (unless the regulator agrees to shorten this period). Therefore, this should not prolong the period between signing and closing. Textbook Reference 2nd Ed: See textbook section 6.5.1; 1st Ed: See textbook section 6.7

Orion Energy, a public company, wishes to take itself private in a 1-for-500 reverse stock split transaction. The goal is to buy out fractional shareholders (less than 1 share after reverse split) for cash, so the total number of shareholders will be less than 300. How must the company notify its small shareholders of this plan and its purpose? A) by filing a board resolution with the Secretary of State in the company's home state B) by filing Schedule 13E-3 with the SEC C) by including details in a Form 10-K or 10-Q filing D) there is no required shareholder notification

B Answer Explanation US securities law aims to protect small and minority shareholders in going private transactions. One important protection is the disclosure that must be provided in Schedule 13E-3. The filer must state whether he/she believes the proposed transaction is fair for minority shareholders. The schedule also gives minority shareholders adequate time to create a counter strategy. Textbook Reference Please see textbook section 13.2

ABC Corp., a domestic corporation, offers to acquire one class of its publicly registered debt securities for "cash only" in a transaction that requires a shareholder vote. Which filings must the company make? A) Proxy filing, S-4 registration and prospectus B) Proxy filing only C) S-4 registration of an offer only D) None

B Answer Explanation Under SEC Rule 145, a business combination offer for all-cash (that does not involve a change of securities) does not require registration or a prospectus. If the cash payment is contingent on shareholder vote, a proxy must be filed. Textbook Reference See textbook section 14.2

Which of the following is most likely a gun jumping violation? A. Two months prior to its filing a registration statement, an issuer released an update to its data protection policies. B. Two weeks prior to filing a registration statement, the company releases results from the previous quarter. C. Two weeks prior to its effective date, the company files an amended S1. D. Two days prior to its effective date, the company files a Free Writing Prospectus.

B Remember the three phase timeline: 1. Pre-registration (when gun jumping would occur) 2. Cooling-off 3. Post-effective

Broker-dealer A took a company public in 1998. In 2011, the issuer hires BD A to underwrite a follow-on offering. At the time of the follow-on, 35% of the issuer's shares are owned by 5 large institutional investors. What is Broker-dealer A's biggest risk when underwriting the new issue? A. A short squeeze by an institutional shareholder B. A block trade by an institutional shareholder C. A 13G filing by an institutional shareholder D. The company includes forward looking statements in its most recent 10-Q filing

B Wouldn't want one of the institutional investors selling their shares to investors, because you are trying to go after those same buyers

A Schedule 13D must be filed when an investor's beneficial ownership interest is: A. equal to or greater than 5.0% B. equal to or greater than 5.1% C. equal to or greater than 10.0% D. equal to or greater than 10.1%

B. equal to or greater than 5.1%

An M&A data room permits the printing and sharing of deal-related documents as long as they include the name of the user, the date, and also A) an unbroken seal. B) a user ID and password. C) a watermark. D) an encryption key.

C Answer Explanation A data room is a physical or virtual room in which authorized deal participants may print, share and view deal-related documents, confidentially and securely. To maintain the integrity of the room, document printing requires a watermark, date and user name. Textbook Reference See textbook section 6.4.1.3

ABC Corp., a public company, distributes a press release to announce that it has acquired the LED light division of a competitor for $60 million in an all-cash deal. How does the SEC treat this press release? A) It is exempt from filing because the deal is for all-cash. B) It is a public announcement and must be filed as advertising. C) It is a prospectus and must be filed no later than the date of first-use. D) It is exempt from filing because the deal is for less than $100 million.

C Answer Explanation A press release to announce a transaction is defined as a prospectus and must be filed with the SEC no later than the date of first use. Textbook Reference See textbook section 6.5.2.1

What is the advantage of a Section 338(h)(10) election? A) It allows the company that is selling assets to receive a "stepped-up basis." B) It allows the company that is buying assets to receive a "stepped-up basis." C) It allows the company that is buying stock to receive a "stepped-up basis." D) It allows the company that is selling stock to receive a "stepped-up basis."

C Answer Explanation A section 338(h)(10) election treats the purchase and sale of stock to be treated for tax purposes as if assets were purchased by the buyer and assets were sold by the seller. The main caveat is that the buyer receives a stepped-up basis and a tax shied as if it bought assets for tax purposes despite the fact that the buyer actually purchased stock certificates. It is the buyer (not the seller) who receives this stepped-up basis and incremental tax shield. Textbook Reference 2nd Ed: See textbook section 6.2.3; 1st Ed: See textbook section 6.6.3

After the filing of its 10-Q for its recently finished fiscal 3rd quarter, a public company announces an acquisition to be financed entirely with a new bond issue. In making the acquisition, the acquirer will also be repaying all of the target's existing debt. In calculating the pro forma Enterprise Value / LTM EBITDA trading multiple for the company, what adjustments does the banker need to make? A) Add target's debt amount to the acquirer's debt as of Q3 and the target's tax-effected LTM EBITDA to the acquirer's LTM EBITDA B) Add target's debt amount to the acquirer's debt as of Q3 and the target's LTM EBITDA (including synergies) to the acquirer's LTM EBITDA C) Add new bond dollar value to the acquirer's debt as of Q3 and the target's LTM EBITDA (including synergies) to the acquirer's LTM EBITDA D) Net the dollar value of the new bond against the target's debt amount and add the target's LTM EBITDA to the acquirer's LTM EBITDA

C Answer Explanation Both the numerator and denominator need to be adjusted to calculate the pro forma Enterprise Value / LTM EBITDA trading multiple for the acquirer. For the numerator, the acquirer's Enterprise Value is increased by the dollar amount of the new bond, while the denominator is increased by the target's LTM EBITDA (including synergies). Textbook Reference 2nd Ed: See textbook section 4.3; 1st Ed: See textbook section 3.4

Under Sections 11 and 12 of the Securities Act of 1933, who may sue for untrue or omitted information in a registration statement A) Any person who relied on the information B) Any person who sustains a loss exceeding $1,000 C) Any person acquiring the security D) Any person who is a resident of the state of jurisdiction

C Answer Explanation Civil relief for untrue or omitted statements is fairly broad and extends to any person who acquires the securities. Textbook Reference See textbook section 7.11

So as not to be held liable under Section 11 of the 1933 Act relating to misstatements found in a registration statement, which statement accurately depicts the responsibility of the investment banker? A) The syndicate as a whole can offer a due diligence defense that establishes after a reasonable investigation, any untrue statements in the registration statement were believed to be true at the time the registration statement went effective. The syndicate must present an attorney's comfort letter establishing the performance of the necessary level of due required under the circumstances. B) Each member of the syndicate must conduct its own due diligence and present an attorney's comfort letter establishing the performance of the necessary level of due diligence. C) Each member of the syndicate must conduct its own due diligence and show they performed a reasonable investigation, that of which a prudent man would conduct in the management of his own property. D) The syndicate as a whole can offer a due diligence defense that establishes after a reasonable investigation, any untrue statements in the registration statement were believed to be true at the time the registration statement went effective.

C Answer Explanation Each party must conduct its own due diligence of the registration statement; reliance on anyone else's investigation is not permissible. Adequate due diligence, however, does not require an attorney's comfort letter. A reasonable investigation merely requires that which a prudent man in the management of his own property would conduct. The defense is available to all parties except the issuer and non-consenting accountants. If an accountant is non-consenting, he cannot use the due diligence defense because he cannot be held responsible in the first place. Textbook Reference See textbook section 7.1.2.1.2

Regarding a securities registration, which of the following is an incorrect description of what would be included? A) For a shelf registration, additional details of the offering, such as the price, total deal size, and gross spread, may be filed in subsequent amendments. B) The S-1 registration form would include disclosures on corporate insiders, as well as any legal proceedings. It would also include a capitalization table, detailing the issuer's current debt and equity capital. C) If any material change occurs in the financial statements included in the S-1 registration, or if the statements become outdated or "stale"the statements must be refiled with the SEC. Statements are considered outdated after 270 days for Seasoned issuers and WKSI's, and 135 days for all other issuers. D) The S-1 registration form would include a list of the underwriters, as well as the Audited Financial Statements. A registration statement is not required to include forward-looking financial projections, though it may.

C Answer Explanation Financials are considered outdated after 130 days for WKSIs and seasoned issuers and after 135 days for all other issuers. Textbook Reference See textbook section 7.1.1 & 7.1.5

Use the information in Exhibit 36 to answer the following question. An investment banking analyst prepares precedent transactions as displayed in Exhibit 36. The analyst makes an error while transcribing the information. For which transaction did the analyst make this transcription error? A) Executive Builders/Startup Builders B) Executive Drivers/Startup Drivers C) Executive Flyers/Startup Flyers D) Executive Finders/Startup Finders

C Answer Explanation For a given company, EV/EBITDA will always be a lower multiple than EV/EBIT. Since EBITDA is, by definition, greater than EBIT (because it excludes expenses associated with depreciation and amortization), a company's enterprise valuation is always a lower multiple of EBITDA than EBIT. For the "Flyers" deal, EV/EBITDA is higher than EV/EBIT, so this is the error. Textbook Reference 2nd Ed: See textbook section 4.4.2; 1st Ed: See textbook section 4.6

The effective date for Grapevine Technologies IPO was one week ago. The company wishes to promote its new products, which are not described in the registration statement, red-herring or prospectus. Can it now use a free writing prospectus for this purpose? A) Only if it is a WKSI B) Only if it is a WKSI or seasoned issuer C) Yes, free writing prospectuses may be used by all eligible issuers in the post-effective period D) No, free writing prospectuses may never be used in the post-effective period

C Answer Explanation Free writing prospectuses may be used by WKSIs, seasoned issuers, unseasoned issuers and non-reporting issues in both the cooling-off period (after the registration but before the effective date) and in the post-effective period. They are the best way to supplement the registration and prospectus with breaking news. Textbook Reference Please see textbook section 7.6

ABC Co., a public company, is in the cooling off period for two offerings, one for its common stock and another for convertible bonds. This is a secondary offering of common stock. The bonds can be converted into the issuer's common stock. For which offering is it allowed to issue an amended term sheet filed as a free-writing prospectus? A) only equity offerings B) only bond offerings C) both equity and bond offerings D) neither, because the equity is a secondary offering and the bonds are convertible.

C Answer Explanation Free-writing prospectuses are used to issue new information to the public during the cooling-off period, after the registration statement has been filed but before the effective date, for both equity and debt offerings. They usually are the best way to update deal terms or issuer information during this time. The main requirement is that they must be filed with the SEC no later than the date of first use. Textbook Reference See textbook section 7.6

Under which set of circumstances would a registered representative working for a broker-dealer be permitted to invest in an IPO? I. The CEO of XYZ Corp. directed that 200 shares be allocated to each of 50 of her sorority sisters. Coincidentally, three of the sorority sisters happen to be registered representatives who would like to invest. II. A registered representative's spouse is employed by XYZ Corp, the issuer of an IPO. III. Each of thirty college friends have invested equal amounts into an investment club. Two of these friends work for broker dealers and are registered representatives who would like to invest. IV. A registered representative's firm is not the lead bank or a member of the syndicate that is underwriting the IPO. It would be permissible for the registered representative to invest in the IPO, even if his firm is part of the selling group. A) None of the scenarios B) I and II C) I, II and III D) II only

C Answer Explanation Generally registered representatives are precluded from investing in IPO's, even when their own firm is not involved. The fact that they work in the securities industry disqualifies them from investing. However, there is an exception for issuer directed allocations where there was no intention to circumvent the general rule. There is also an exception when a family member works for the issuer of the IPO. Here it wouldn't matter whether the rep's firm was involved. Also, an investment fund cannot be owned greater than 10% in value by those employed in the security industry. In this case since each of the thirty investors put in equal amounts, the combined reps' ownership is less than 10%. Textbook Reference Please see textbook section 10.10.2

ABC Securities, a member firm, has a conflict of interest while participating in a public offering. The firm may not sell securities with respect to the conflict to a discretionary account unless the account holder A) is an institution or has sufficient investment sophistication. B) has waived the right to notification and approval. C) gives specific written approval. D) has given standing instructions of approval.

C Answer Explanation In this case, the member may not sell conflict-related securities to a discretionary account without specific written approval. A blanket approval or standing statement is not sufficient. For example, if a broker dealer is selling its own stock to a client, a conflict would apply and discretionary accounts must receive written approval. Textbook Reference See textbook section 10.9

ABC Co, Inc., an SEC filer in good standing, has a non-affiliate market capitalization of $600 million. ABC subsequently issues $200 million of non-convertible notes, its first debt issuance in the last three years. If ABC subsequently decides to do a follow-on equity offering, which of the following is TRUE? A) ABC is prohibited from using a free-writing prospectus. B) ABC would be required to file a Form S-1 before distributing a free-writing prospectus. C) ABC would be required to file a Form S-3 before distributing a free-writing prospectus. D) ABC could issue a free-writing prospectus discussing the new equity offering prior to filing the registration statement.

C Answer Explanation In this scenario, ABC would qualify as a seasoned issuer because it has a non-affiliate market cap of at least $75 million and has been an SEC filer for at least one year. As a result, it is eligible to file an S-3 to register, and could use an FWP after the S-3 has been filed. ABC does not qualify as a WKSI because it has neither a $700 million non-affiliate market cap nor total debt issuance of $1 billion in the last three years. Textbook Reference See textbook section 7.2

Just prior to going public, a streaming media company releases financial projections for future subscriber growth. Is this a violation? A) Yes, it is a gun-jumping violation. B) No, because the company is not yet public. C) It depends on whether the projections are part of normal business activities and are accurate. D) Yes, it is a cooling-off period violation.

C Answer Explanation It usually is not a violation for an issuer to engage in normal business activities prior to an IPO. Examples include publishing regular financial updates, factual reports and communications involving marketing activities. However, releasing information that specifically references the upcoming offering is not allowed during the quiet period. Releasing sensitive or overly optimistic financial projections also could be problematic. Textbook Reference See textbook section 7.1.3

The purpose of a lock-up period following an IPO is to A) comply with the SEC regulation regarding lock-ups. B) prohibit corporate insiders from selling shares in the open market. C) help maintain a stable share price in the secondary market. D) prevent insiders from acquiring larger positions in their company's stock

C Answer Explanation Lock-up periods prohibit company executives from selling their shares in the secondary market for a certain period of time following the effective data. The length is subject to negotiation with the issuer and is disclosed in the prospectus. The purpose of a lock-up period is the help ensure a stable share price by reducing selling pressure and to avoid negative perception that can be create when corporate insider liquidate immediately following a new issue. Textbook Reference See textbook section 9.11

When a syndicate allocates shares to potential investors in an IPO, which of the following would not be a prohibited arrangement? A) Requiring the investor who will receive these IPO shares to purchase additional shares in the secondary market. B) When an underwriter allocates new shares to either officers, directors or senior management of a current, future, or prospective client. C) Allowing the CEO of the issuing company to specifically allocate shares to any individual in writing. D) In exchange for receiving a generous allocation in an IPO, the investor agrees to pay excessive compensation to the underwriter for other services.

C Answer Explanation Requiring investors to purchase additional shares in the secondary market is a prohibited Tie-In Arrangement. Paying excessive compensation to the underwriter for other services is a prohibited Quid-Pro-Quo. IPOs sold to clients in return for their investment banking business is prohibited Spinning. Textbook Reference See textbook section 9.6

A quote for a U.S. Treasury bond of 101-18+ is the same as A) 101 and 18/32 B) 101 and 19/32 C) 101 and 37/64 D) 101 and 18/64

C Answer Explanation T-notes and T-bonds are quoted as a percentage of par and a fraction of 32. A quote of 101-18 is the same as 101 and 18/32. However, if the quote ends in a +, 1/64 should be added to the price. In this case, that means 101-18+ = 101 and 37/64 Textbook Reference See textbook section 5.7.3

The Suitability Rule covers what types of actions that may be taken by a participant in a securities offering? A) Filing orders previously taken B) Underwriting C) Recommendations D) Book-building

C Answer Explanation The Suitability Rule covers recommendations to a customer for the purchase, sale or exchange of any security. Textbook Reference See textbook section 9.12

ABC Company has an equity turnover ratio of 4.0. XYZ Company has an equity turnover ratio of 2.0. ABC has average shareholders' equity of $4 million and XYZ has shareholders' equity of $1 million. Which of these statements is true? A) XYZ has EBIT of $2 million. B) ABC has operating income of $16 million. C) ABC has sales of $16 million. D) XYZ has EBITDA of $2 million.

C Answer Explanation The formula for equity turnover ratio is sales divided by average shareholder equity. ABC is generating $4 of annual sales for every $1 of stockholder equity. Textbook Reference See textbook section 5.3.3.1

The limitations on liens negative covenant performs which of the following? A) Limits the amount of debt that may be outstanding at any time B) Prohibits a merger or consolidation C) Prevents the pledge of assets as collateral D) Restricts the making of loans, acquisitions, and other investments

C Answer Explanation The limitations on liens provision prevents the borrower from pledging additional assets as collateral. As such, it limits the amount of secured debt in the capital structure, thereby sustaining implied recovery levels for existing secured debt holders. Textbook Reference See textbook section 15.3

At what point are buyers typically granted access to the data room? A) Prior to submission of first round bids B) Upon signing the CA C) At the start of the second round of the process D) Towards the end of the second round

C Answer Explanation The second round of the auction centers on facilitating the prospective buyers' ability to conduct detailed due diligence and analysis so they can submit strong, final (and ideally) binding bids by the set due date. The second round typically starts with the management presentation, often held in conjunction with site visits. Buyers are typically afforded access to a populated data room either just before or after the management presentation, which enables them to conduct deep analysis of detailed information about all aspects of the target (e.g., business, financial, accounting, tax, legal, insurance, environmental, information technology, and property). Serious bidders dedicate significant resources to ensure their due diligence is as thorough as possible. They often enlist a full team of accountants, attorneys, consultants, and other functional specialists to conduct a comprehensive investigation of company data. Textbook Reference 2nd Ed: See textbook section 6.4.1.3; 1st Ed: See textbook section 6.5

Two active investors each own 4% of ABC Corporation. The two investors reach an agreement to vote their shares in the same manner. What is the consequence of this agreement? A) The two investors are considered to be acting in concert with one another. Accordingly, together they own 8%. The relationship of the two investors will not lead them to file any forms with the SEC. B) Every investor stands on their own merits. Since each investor only owns 4%, there is no special requirement for them to file any forms. C) The two investors are considered to be acting in concert with one another. Accordingly, together they own 8%, which would necessitate their filing a Form 13-D. D) The two investors are considered to be acting in concert with one another. Accordingly, together they own 8%, which would necessitate their filing a Form 13-G, because neither of them owns greater than 5% directly.

C Answer Explanation The two investors are considered to be acting in concert with one another. Accordingly, together they own 8%, which would necessitate their filing a Form 13-D. Textbook Reference See textbook section 8.5.1

Which of the following documents does a public target file immediately after signing a Definitive Agreement? I. Press release II. Annual Report III. Merger proxy IV. Reps and warranties A) I and IV B) II and III C) I and III D) II and IV

C Answer Explanation Upon signing a Definitive Agreement, a public target issues a press release (that is filed as part of an 8-K) and files a merger proxy. A company files its annual report only after the completion of its fiscal year. An M&A transaction would not affect this timing. In a an M&A transaction, the buyer and seller make representations ("reps") to each other about their ability to engage in the transaction, and the seller makes reps about the target's business. In a stock-for-stock transaction, the buyer also makes reps about its own business. Examples include: • financial statements must fairly present the current financial position • no material adverse changes (MACs) • all material contracts have been disclosed • availability of funds (usually requested from a financial sponsor) • Reps and warranties serve several purposes: • assist the buyer in due diligence • help assure the buyer it is getting what it thinks it is paying for • baseline for closing condition (see "bring-down" condition below) • baseline for indemnification Textbook Reference 2nd Ed: See textbook section 6.4.4; 1st Ed: See textbook section 6.6

For a given M&A sale process, at what point is the final population of the data room typically complete? A) By the start of the second round B) Once the CIM is distributed C) It is populated on a continuous basis through most of the second round D) Prior to process launch

C Answer Explanation While the goal is to have a basic data foundation in place by the start of the second round, the data room is continuously updated and refreshed with new information throughout the auction in accordance with follow-up buyer data requests and the presenting of new and more detailed data. Textbook Reference 2nd Ed: See textbook section 6.4; 1st Ed: See textbook section 6.4

A privately held company with 2 million shares files an S-1 to register an IPO. In the IPO, the company plans to register 2 million shares, of which 1 million are primary and 1 million are secondary. How many shares will be outstanding after the IPO? A. 1 million shares B. 2 million shares C. 3 million shares D. 4 million shares

C Pre-IPO there's still 2 million shares outstanding Post-IPO: Primary shares = New shares Secondary shares = Doesn't change the share count, just changed the ownership of those shares Then the last million shares remained private and weren't registered. WKSI = The public float requirement (and remember the time requirement as well)

XYZ Securities, a broker-dealer, is an underwriter, but not the lead manager, in the IPO of Star Semiconductors. The CEO of XYZ owns 14% of Star's common stock. What are the consequences as it relates to the new issue? A) Any conflict depends on how long the CEO has owned the Star stock. B) There is no conflict of interest. C) A conflict exists, and a qualified independent underwriter must participate. D) A conflict exists but there is no need for a qualified independent underwriter.

D Answer Explanation A conflict exists and must be disclosed when the issuer is owned at least 10% by an associated person (employee) of a broker-dealer that participates as an underwriter. However, it is only when the syndicate manager has this conflict that a qualified independent underwriter must participate. Textbook Reference Please see textbook section 10.9

All of the following investors could own shares of a Subchapter S Corporation EXCEPT A) The CEO of the company B) An individual investor with no other affiliation with the company C) A non-profit corporation, recognized under §501(c)3 of the Internal Revenue Code D) A company filing taxes as a Subchapter C Corporation

D Answer Explanation According to the Internal Revenue Code (IRC), individuals, estates and non-profits can invest in a Subchapter S Corporation. Other corporations cannot be investors in an S-Corp. Textbook Reference See textbook section 1.1

Patsy is a director of ABC Corp., a public company, and she holds 10,000 shares of its stock. The current stock price is $40. If she plans to sell 2,000 shares during the next three months, is she required to file a proposed notice of sale with the SEC? A) No, because neither the dollar value nor number of shares exceeds the limit. B) Yes, because both the dollar value and number of shares exceeds the limit. C) Yes, because the number of shares she proposes to sell exceeds the limit. D) Yes, because the dollar value of the proposed sale exceeds the limit.

D Answer Explanation Affiliates must file Form 144 with the SEC if a proposed sale of control stock exceeds either 5,000 shares or an aggregate dollar amount of $50,000 in any three-month period. Selling her 2,000 shares at the current stock price would create an aggregate sale of $80,000, which is over the limit. Textbook Reference Please see textbook section 12.7.2

A pension fund with $40 million in assets has indicated a desire to opt out of customer suitability information requirements under FINRA Rule 2111. To allow this opt out, the underwriter must have a reasonable basis for believing that the fund I. Is exercising independent judgment in evaluating the recommendation II. Is capable of evaluating investment risks independently III. Has a documented Investment Policy Statement guiding its process and decisions A) I and III only B) II and III only C) I, II, III D) I and II only

D Answer Explanation FINRA Rule 2111 imposes requirements on members who allow institutions to opt out of suitability information requirements through an affirmative indication. The institution must exercise independent judgment and be capable of evaluating risks independently. Textbook Reference See textbook section 9.13

Under Section 7 of the Securities Act of 1933, which of the following types of information must be included in a registration statement? I. Identity, address and jurisdiction of the issuer II. Capitalization of the issuer III.The specific price of the offering IV. Recent certified financial statements of the issuer A) I and II only B) I, II, III and IV C) I and IV only D) I, II, and IV only

D Answer Explanation Important material information about the issuer must be included in the registration statement. The specific price of the offering is not required, and generally it is not determined until after the registration statement has been filed. See Chapter 9 QID 5136 Textbook Reference See textbook section 7.11

For which of the following types of securities can a public offering be made at a fixed price, based solely on the judgment of the syndicate manager and without any supply-demand feedback? A) mutual fund B) US Treasuries C) municipal bonds D) corporate bonds

D Answer Explanation In a fixed-price offering, all shares must be sold at the public offering price. They cannot be sold at a discount to any investor. Fixed-price offering are not permitted for exempt securities (e.g., US Treasuries), municipal securities or mutual fund offerings. Textbook Reference Please see textbook section 10.7

The primary objective of Regulation M is to A) regulate securities offered by broker dealers domiciled in the European Union B) govern the timing of buying and selling of the registrant's securities by company directors C) restrict insider trading in registered securities of the registrant D) prevent manipulation of the share price before the effective date of a new offering

D Answer Explanation Regulation M's primary purpose is to prevent manipulative actions by underwriters in regards to the issuer's share price. Textbook Reference See textbook section 10.14

Charles is the CFO of a public company. He wants to know if he is allowed by Sarbanes-Oxley to borrow money from his company 401(k). The answer is A) only if the loan is taken for a financial hardship B) no, because the law prohibits this type of personal loan C) yes, provided the loan is made at a competitive interest rate D) yes, because it's a loan from the plan, not the company

D Answer Explanation Sarbanes-Oxley's prohibition on personal loans to executive officers and directors does not extend to the company 401(k). This is a loan made by a qualified plan, a separate entity from the company itself. Officers and directors can borrow from a 401(k) on the same basis as other participants. Textbook Reference See textbook section 8.2.3

ABC Corp. makes a tender offer to purchase 100% of VBN Corp. for $90 per share on October 5, 2018. What is a true statement with regard to this tender offer? I. VBN's board must respond to the tender offer by filing a Schedule 14D-9 by October 15, 2018. II. When VBN's board responds on the 14D-9, they must make a binding recommendation to their shareholders to either accept or reject the tender offer. III. When VBN's board responds on the 14D-9, they are permitted to express no opinion and remain neutral to the tender offer. IV. When VBN's board responds on the 14D-9 they can suggest to their shareholders that they purchase shares of the company on the open market in order to thwart ABC's attempts at acquiring the company. A) I and II B) I, III and IV only C) I and III only D) III only

D Answer Explanation Tender offers must remain open for 20 business days (not calendar days) and the board of VBN must respond within 10 business days -Because the tender was made on October 5th, 10 business days would be later than October 15th. The board of VBN doesn't have to respond with a yes or no answer. They could also express no opinion and remain neutral, or they could even state that the company is unable to take a position with respect to the tender offer. VBN's board cannot encourage shareholders to buy shares in the market to thwart ABC's attempts. Textbook Reference See textbook section 13.3.3.5

In which M&A document is the break-up fee detailed? A) Final Bid Procedures Letter B) Confidentiality Agreement C) Initial Bid Procedures Letter D) Definitive Agreement

D Answer Explanation The "termination provisions" of the Definitive Agreement detail the circumstances under which one party may terminate the agreement rather than complete the deal. In some circumstances, one party may owe a termination fee ("breakup fee") to the other party. Examples include: • if the seller terminates the deal to take a better offer, the seller pays a breakup fee to the buyer • if the seller terminates because the buyer can not come up with financing, the buyer may owe a breakup fee to the seller. Textbook Reference 2nd Ed: See textbook section 6.4.4; 1st Ed: See textbook section 6.6

Tyler Ltd. is an actively traded security according to Regulation M. Tyler has A) A public float of $125 million and an ADTV of $1,200,000 B) An ADTV of $900,000 and a public float of $100 million. C) An ADTV of $750,000 and a public float of $175 million. D) A public float of $175 million and an ADTV of $1 million.

D Answer Explanation The term 'actively-traded securities' is defined in Rule 101 of Regulation M. These are securities that have an ADTV of at least $1 million and are issued by an issuer whose common equity securities have a public float of at least $150 million. Under Regulation M, actively traded securities are not subject to a restricted period. Textbook Reference See textbook section 10.14

In which public document, available to investors, can the underwriting agreement be found? A) prospectus B) Form 8-K C) registration D) none

D Answer Explanation The underwriting agreement is available to all members of the underwriting group. But it is not generally made available to the public and is not required to be included in public documents. Textbook Reference See textbook section 10.2.1

The syndicate desk would do each of the following activities except: A. Collect IOI's, circle shares B. Run road show C. Stabilize after effectiveness D. Prepare offering documents

D Maybe the capital markets bankers, but not the syndicate desk

When a registrant enters into a material definitive agreement, Form 8-K is required to contain which of the following information items? I. Articles of incorporation for the target II. A description of the terms and conditions of the agreement III. The identity of the parties to the agreement IV. Fairness opinion letter A) I and IV B) II and IV C) I and III D) II and III

D Answer Explanation Form 8-K is required to contain the date on which the agreement was entered into or amended, the identity of the parties to the agreement and a brief description of any material relationship between the registrant or its affiliates, as well as a brief description of the terms and conditions of the agreement that are material to the registrant. These requirements are fulfilled by the attachment of an appropriate press release as well as the actual definitive agreements as exhibits to the 8-K. Textbook Reference See textbook section 8.1

Insider Disclosures - Officers & Directors (BOD), and - > 10% shareholders "Become an insider"

Form 3

Insider Disclosures - Officers & Directors (BOD), and - > 10% shareholders "Insider changes ownership (open market)"

Form 4

Insider Disclosures - Officers & Directors (BOD), and - > 10% shareholders "Insider changes ownership (non-open market)"

Form 5

Quarterly dividends...

Must be converted into the annual amount

An investment banking rep is doing due diligence on an IPO for a company located on the Florida panhandle. The rep reads the following disclosure in the S-1: "Our coastal location carries significant hurricane risk. We carry hurricane insurance that would ensure that business operations are uninterrupted from a hurricane." What is the rep's best course of action after reading this passage?

The rep should notify legal counsel that this passage is misleading. They would need business interruption insurance instead.

Three investors each own 3% of a company. They reach an agreement to vote their shares the same way. Are they required to file a 13D?

Yes, investors acting "in concert" to control more than 5% of the equity of a company are required to file a 13D