Series 63 Chapter 2

What conditions must occur to make a "qualified issuer" for Notice Filing?

1. At least $4 million net worth 2. At least 400,000 shares held by the public 3. At least 4 market makers for at least 30 days during the preceding 3 months 4. Offering price at least $5 per share

Which of the following securities would NOT be subject to the registration requirements of the Uniform Securities Act? I A Canadian Government bond II An additional stock issuance by a NYSE-listed corporation III Common stock issued by a federally chartered credit union IV A bond issued by a regulated utility A) I, II, III and IV B) I and II C) I and III D) II and III

A) I, II, III and IV

When a security is to be federally registered and in multiple states at the same time, the method of registration commonly used is registration by: A) Filing B) Coordination C) Notification D) Qualification

B) Coordination

According to the Uniform Securities Act, if the Administrator issues a stop order denying the effectiveness of a registration statement, which of the following must always be one of the grounds cited? A) The proper filing fee was not paid B) The denial is in the public interest C) There was a false statement made in the registration documents D) The underwriters would receive excessive compensation

B) The denial is in the public interest While all choices may be used as grounds cited by the Administrator for denying the effectiveness of a registration statement, the denial must always be in the public interest.

According to the USA which of the following is considered a security? A) A Keogh plan B) A term life insurance policy C) A call option on a corn future D) An investor's residence

C) A call option on a corn future

What is the name of the period of time during which a new issue cannot be sold to the public? A) Post-registration period B) New issue period C) Cooling off period D) SEC registration review period

C) Cooling off period

Registration by notification is also referred to as: A) Coordination B) Qualification C) Notice filing D) Administration

C) Notice filing

All of the following are true about a security that is offered and sold in an exempt transaction under the Act, EXCEPT: A) The transaction and people involved are subject to anti-fraud provisions in the Act B) A prospectus is not always necessary C) The broker-dealer effecting the transaction is exempt from registration under the Act D) The security does not have to be registered

C) The broker-dealer effecting the transaction is exempt from registration under the Act

All of the following are true of stop orders pertaining to registration of a security, except: A) Administrator must notify issuer in writing B) Hearing must be scheduled within 15 days of the issuer's request C) Administrator must tell issuer reasons for the stop order D) Hearing request of issuer may be oral or in writing

D) Hearing request of issuer may be oral or in writing

Which of the following are defined as securities? A) Interest in a fixed annuity B) Commodity futures C) Endowment contracts D) Unit Investment Trusts

D) Unit Investment Trusts

A transaction effected by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator is considered to be in a: A) Fiduciary capacity B) Third party capacity C) Proxy capacity D) Agent capacity

A) Fiduciary capacity

Which one of the following is an exempt security? A) Treasury note B) REIT C) Treasury receipt D) Corporate stock

A) Treasury note U.S. Government securities, like treasury bills, treasury notes, and treasury bonds, are exempt securities. Treasury receipts are broker-dealer created products and therefore they are not exempt securities. REITS and corporate securities are also not exempt.

When registration is not required with the State, a security is considered to be: A) A non-exempt security B) An exempt security C) A blue sky security D) An issuer transaction

B) An exempt security Exempt securities do not need to be registered with the State and include securities issued by the U.S. government, government agencies, municipalities, non-profit entities, or banks.

Federal covered securities that are required to be registered with the SEC are covered under the rules and regulations of the: A) The Investment Company Act of 1940 B) The Investment Advisers Act of 1940 C) Securities Act of 1933 D) Securities Exchange Act of 1934

C) Securities Act of 1933

Which of the following would be considered securities? I Fixed annuities II Variable annuities III Term insurance IV Whole life insurance A) I, II, III, and IV B) I, III, and IV C) I and II D) II only

D) II only

When using registration by notification, all of the following would be included, except: A) Consent to service of process B) Copy of the offering circular and prospectus filed with the SEC C) Statement as to the company's eligibility D) The name and address of all investors

D) The name and address of all investors

According to the Uniform Securities Act, which of the following is not considered an exempt security? A) An over-the-counter option B) Commercial paper original maturity of 270 days or less, face value of $50,000 or more, and in the top 3 categories of a national rating C) U.S. Government T-bonds D) Securities listed on a national exchange

A) An over-the-counter option Promissory notes (commercial paper), securities listed on national exchange, and U.S. Government debt instruments are federal covered securities and exempt from USA registration requirements.

Under the Uniform Securities Act, which of the following would generally qualify for the private placement exemption? I. Securities listed on the New York Stock Exchange II. Municipal bonds​ III. Regulation D offerings IV. Transactions resulting from offers to 10 or fewer individuals during any 12-month period A) III and IV B) III C) IV D) I and II

A) III and IV

Which of the following is a lawful representation to a client regarding a registered security? A) It is registered with the Administrator B) A registered security has not been reviewed by the Administrator C) The Administrator releases a security for sale only if the registration statement is accurate D) Registered securities tend to outperform unregistered securities

A) It is registered with the Administrator Telling a customer that a security is registered with the Administrator is appropriate. Registration entails review and release for sale without the administrator taking a position as to the accuracy or adequacy of the prospectus or registration statement. Comments to the contrary are misleading and constitute fraud.

Under the USA, all of the following are considered exempt transactions except: A) Private placement resulting from offers to 35 or fewer non-institutional investors during any 12-month period where commissions are paid B) Offers or sales to a mutual fund C) A transaction between an issuer and underwriter D) Offers or sales to banks

A) Private placement resulting from offers to 35 or fewer non-institutional investors during any 12-month period where commissions are paid U.S. Banks are exempt issuers and any securities issued by banks are exempt securities. It follows that the issuance of bank securities is an exempt transaction. A mutual fund is an institutional investor and its transactions are exempt from state registration. Issuer to underwriter transactions are exempt transactions. Private placements are exempt transactions in a specific state only if offers are made to 10 or fewer non-institutional investors during any 12-month period where no commissions are earned.

Who may not register a security? A) An individual who is selling the security B) An individual who is buying the security C) The issuer D) The broker-dealer

B) An individual who is buying the security The buyer may not register the security. Any of the other parties may register. Securities are registered by those offering them not buying them.

Which of the following are federal covered securities? I. Shares of XYZ Mutual Fund II. ABC common stock, listed on the New York Stock Exchange III. Debentures of ABC Co., whose common stock is listed on the NYSE IV. WXYZ common stock, listed on the Capital Market sector of NASDAQ A) I, II, and III only B) I, II, III, and IV C) II only D) II and III only

B) I, II, III, and IV Federal covered securities include those issued by investment companies, securities listed on the New York Exchange, securities that are equivalent or senior to listed securities, and securities listed on any of the NASDAQ Markets (Capital Market, Global and Global Select).

All of the following transactions are exempt from state registration, EXCEPT: A) A transaction between two underwriters B) Private placements offered to 30 non-institutional buyers C) Fiduciary transactions D) Isolated non-issuer transactions

B) Private placements offered to 30 non-institutional buyers A private placement may be offered to no more than 10 non-institutional buyers within 12 months.

Whether an issuer has or had any adverse ruling by a state regulatory authority, a court, or SEC in conjunction with the offering must be included in the: A) SEC disclaimer B) Registration statement C) Form U4 D) Fraudulent activities statement

B) Registration statement

Which one of the following is considered a security? A) Bank certificates of deposit B) Transferable shares C) Gold coins D) Whole life insurance

B) Transferable shares A transferable share is one that is transferable from one investor to another. It is a security. Whole life insurance, bank CDs, and precious metals, like gold coins, are not included in the definition of a security.

XYZ Industries has filed a registration statement with State A to offer $6,000,000 of equity securities. According to the Uniform Securities Act, this registration remains in effect: A) Unless withdrawn by the issuer or revoked by the Administrator B) Until the end of the calendar year C) For one year after the effective date D) Until the end of the company's fiscal year

C) For one year after the effective date According to the Uniform Securities Act, once a registration statement for securities is effective, it remains so for one year after the effective date. The Administrator may require the issuer to keep the registration statement up-to-date, as well as file reports about the progress of the offering. If there are securities remaining unsold after the one-year period elapses, the issuer may apply to the Administrator for an extension, which may or may not be granted.

Which of the following are elements of an investment contract, and result in a financial instrument being considered a security? I. The expectation of profits from the efforts of a third party II. An investment of money III. A common enterprise IV. A liquid trading market A) III and IV B) I, II, III and IV C) I, II and III D) I and II

C) I, II and III

What may a State Administrator require for some federal covered securities? I. Statement of the value of the securities to be sold in the state II. Payment of fees III. Filing of copies of the federal registration IV. Filing of advertising and sales literature A) III and IV B) I, II, III, and IV C) I, II, and III D) I, III, and IV

C) I, II, and III For all but nationally traded securities, the state may require I, II, and III. However, states are prohibited from requiring IV by federal statute, and the prohibition is reflected in the USA.

When a broker-dealer receives an unsolicited order for the purchase of a security, which of the following is correct? A) It is a non-exempt transaction, regardless of whether the security itself is exempt B) It is an exempt transaction only if the security itself is exempt C) It is an exempt transaction, regardless of whether the security itself is exempt D) It is a non-exempt transaction only if the security itself is non-exempt

C) It is an exempt transaction, regardless of whether the security itself is exempt

Which of the following is not considered an exempt security? A) Common or Convertible preferred stock listed on a regional exchange B) Debentures of an NYSE-listed issuer registered C) Offerings of securities that are not federal covered securities D) Collateral trust certificate of an issuer whose stock trades on NASDAQ

C) Offerings of securities that are not federal covered securities Common or convertible preferred stock listed and traded on national or regional exchanges or NASDAQ are federal covered securities and are exempt from dual registration requirements at the state level under the USA. Bonds issued by those exchange-traded companies are also exempt from dual registration at the state level.

A pro football team in California is preparing to register a security that they intend to sell exclusively in California. The method of registration that they will likely utilize is: A) Notification B) Implementation C) Qualification D) Coordination

C) Qualification Qualification is the registration method most likely used when a security will only be registered and sold in one state.

Registration by filing is usually used for which of the following types of issuers? A) New high tech ventures B) Any secondary market transaction C) Well established companies D) Initial public offerings

C) Well established companies Registrations by filing are usually used by large, well-established corporations who have been in business for at least 36 months (3 years) before the offering.

Registrations are effective for: A) One year from the date that the registration statement is submitted B) Until the next registration statement is filed C) For a period of time determined by the Administrator, but not more than 18 months D) One year from the date the Administrator authorizes the security for sale

D) One year from the date the Administrator authorizes the security for sale

According to the Uniform Securities Act, which of the following is NOT true regarding the Administrator's powers related to an issuer attempting to register securities with the state? A) If the Administrator finds there is a problem with a registration statement, they have the power to issue a stop order B) The Administrator can deny registration because they found that excessive underwriting compensation will be paid C) A typo in a registration statement is not grounds for denial D) The Administrator needs only one reason to deny a registration

D) The Administrator needs only one reason to deny a registration When giving an order to deny, suspend or revoke registration, the Administrator must give at least two reasons, one of which must be that the order is in the public interest. In addition, the Administrator must have at least one other reason for the order. These grounds may include 1) the filing contains a statement that is false or misleading, 2) unreasonable amounts of underwriting compensation are being paid, 3) the issuer has failed to pay the proper filing fee, among others.