Unit 7 - Knowledge/Quiz/Exam Questions

what federal law regulates the initial sale of securities to the public A. the securities act of 1933 B. the securities exchange act of 1934 C. the investment company act of 1940 D. the truth in investing act

A. the securities act of 1933

In order to solicit the purchase of a mutual fund, a registered representative must provide the investor with I. the summary prospectus. II. the Rule 482 prospectus. III. the statutory prospectus. IV. the statement of additional information. A. I and II B. I or III C. II or III D. II and IV

B. I or III

The ABC Chemical Corporation wishes to advertise its upcoming offering of common stock in a tombstone advertisement that they, the issuer, will place. When placing the tombstone advertisement, which of the following would be least likely to appear? A) The expected price range of the offering B) The name of the issuer C) The names of the investment bankers underwriting the issue D) The total number of shares being offered

C) The names of the investment bankers underwriting the issue

Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a regional investment banker based in Seattle, to run the sale. This is an example of A) a CRUT. B) an IPO. C) a secondary offering. D) an APO.

C) a secondary offering.

The Mod Family Foundation is a $500,000,000 charitable foundation headed by Clarence Mod. The foundation is seeking to purchase a large block of WeariTech, Inc., a Nasdaq listed company, for the foundation's portfolio. Seacoast Securities is assisting with this secondary market transaction. In this example, the Mod Family Foundation is A. retail investor B. venture capitalist C. institutional investor D. issuer

C. institutional investor

Which of the following acts requires the registration of most new issues? A) The Securities Act of 1933 B) The Securities Market Improvement Act of 1975 C) The Securities Exchange Act of 1934 D) The Securities Investor Protection Act of 1970

A) The Securities Act of 1933

Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 except A) access equals delivery rule. B) Regulation A+. C) Regulation D. D) Rule 147.

A) access equals delivery rule.

Modulux, Inc., a NYSE listed manufacturer, is offering 5,000,000 shares to the public, which will raise capital to build a new plant. The new technology and design should allow Modulux to increase market share significantly in the modular home business. This offer is A) an APO. B) an IPO. C) a venture offering. D) a secondary offering.

A) an APO.

A registered representative provides financial support and housing at her home for her grandfather. Regarding the purchase of new issues, A) both persons are considered restricted. B) neither are considered restricted. C) the grandfather is restricted, but the registered representative is not. D) the registered representative is restricted, but her grandfather is not.

A) both persons are considered restricted.

Regarding the purchase of a new equity issue, an account where a restricted person has a beneficial interest would be allowed to purchase the new shares at the public offering price A) only if the interest does not exceed 10%. B) never. C) without restriction. D) only if the interest exceeds 15%.

A) only if the interest does not exceed 10%.

During the cooling-off period the disclosure document that may be delivered to interested parties is called the A) preliminary prospectus. B) cool off period prospectus. C) summary prospectus. D) final prospectus.

A) preliminary prospectus.

Regarding the sale of a new issue, a customer is considered a restricted person if the person is A) working as a salesperson who works for the issuing firm's underwriter. B) working as a salesperson for a supplier of the issuing corporation. C) a grandparent of an associated person of a member firm. D) working as a private investigator collecting information on the issuing firm's competitors.

A) working as a salesperson who works for the issuing firm's underwriter.

Issuance and trading of securities are regulated at more than one governmental level. These would include regulations at which of the following? I. county level II. city level III. federal level IV. state level A. III and IV B. I and II C. II and III D. I and IV

A. III and IV

a regulation A+ exemption covers A. an offering of $50 million or less in 12 months B. an offering of letter stock C. a private offering D. an offering of $50 million or more in 12 months

A. an offering of $50 million or less in 12 months

an underwriter that assists a corporation on the sale of a new issue without taking the security into inventory is underwriting on what type of underwriting A. best efforts B. firm commitment C. partial commitment D. full or none

A. best efforts

During the cooling-off period, underwriters may do all of the following EXCEPT A. gather binding indications of interest B. distribute red herrings to interested parties C. perform due diligence D. file required forms for state registration

A. gather binding indications of interest

an investor that purchases Big City 3 1/2% general obligation bonds of 2040 in the primary market should receive A. official statement B. preliminary prospectus C. final prospectus D. statutory circular

A. official statement

Which of the following will not be found in a final prospectus? A) Effective date and offering price B) Agreement among underwriters C) Business plan and use of the proceeds D) Statement that the Securities and Exchange Commission (SEC) neither approves nor disapproves of the issue

B) Agreement among underwriters

The preliminary prospectus for the IPO of the Big Shoes Sneaker Company indicates that the number of shares sold may be increased as much as 15% if market demand is sufficient. This is called a A) Shelf offering B) Green Shoe option C) Secondary IPO offering D) Flex offering

B) Green Shoe option

Which of these may be found in the final prospectus that is not in the preliminary prospectus? I. Next year's sales II. Public offer price III. Release date IV. Planned use of the proceeds A) II and IV B) II and III C) I and II D) I and IV

B) II and III

An underwriting group is currently assisting an issuer with the preparation and filing of the registration statement for a new issue. Who is responsible for the accuracy of the information within the registration statement? A) Both the underwriters and the issuing corporation B) Issuing corporation C) Underwriting group D) Lead underwriter

B) Issuing corporation

All of the following are exempt issuers except A) the City of Alta Loma. B) Modulux, Inc., a home manufacturer. C) the Southwest Railroad Co. D) Alta Loma Community Foundation.

B) Modulux, Inc., a home manufacturer.

A corporation increases capitalization by selling shares of stock which can either come from a new issue or previously authorized but unissued shares. Total stock outstanding must A) always be greater than the number of shares issued. B) never exceed the number of shares authorized. C) always equal the number shares authorized. D) never equal the number of shares issued.

B) never exceed the number of shares authorized.

Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147? A) 80% of the issuer's assets are located in the state of California. B) 80% of the issuer's revenue must be generated from the state of California. C) 80% of the issuer's customers must be located in the state of California. D) 80% of the issuer's proceeds will be used in the state of California.

C) 80% of the issuer's customers must be located in the state of California.

The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its first public offering. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days? A) 40 B) Buyers in the secondary market are never entitled to the IPO prospectus C) 90 D) 25

C) 90

GEMCO Oil and Gas, a non-NMS stock, wishing to sell up to $100 million of convertible debt as market conditions permit, files a shelf registration statement with the SEC. Which of these statements are true? I. For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale. II. The registration statement is effective upon completion of the cooling-off period. III. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 2-year period without having to reregister the security. IV. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 4-year period without having to reregister the security. A) II and IV B) I and IV C) I and III D) II and III

C) I and III

The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these comply with those rules for initial (IPO) and additional (APO) public offerings? I. An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. II. An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. III. An APO of a stock listed on the NYSE requires delivery for a period of 25 days. IV. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. A) I and II B) II and III C) I and IV D) III and IV

C) I and IV

Which of the following best describes a prospectus? A) It is a document, required by securities law, which offers limited information about an issuer's securities to be offered to the public. B) It is a truth-in-lending document required whenever a loan is made to an issuer via the purchase of its debt securities. C) It is a full and fair disclosure of all material information and facts regarding the issuance of securities. D) It is a useful but not mandatory document showing detailed information intended to offer investors adequate reason to purchase shares.

C) It is a full and fair disclosure of all material information and facts regarding the issuance of securities.

Ensuring that the investing public is fully informed about a security and its issuing company when shares are first sold in the primary market is covered under which of the following federal acts? A) Securities Exchange Act of 1934 B) Investment Company Act of 1940 C) Securities Act of 1933 D) Uniform Securities Act

C) Securities Act of 1933

During the cooling off period, underwriters would be allowed to do all of the following except A) take indications of interest. B) publish a tombstone. C) advertise the issue. D) distribute a preliminary prospectus.

C) advertise the issue.

an offering in which one or more stockholders in the corporation are selling all or a portion of their own shares to the investing public for the first time is known as A) an initial public offering. B) a primary offering. C) a secondary offering. D) a subsequent offering.

C) a secondary offering

your customer has purchased shares of the Littleton Lumber Company (a nonlisted stock) in the secondary market. Littleton Lumbar recently completed an APO. Your customer will receive a prospectus for the APO if the purchase is within how many days of the APO date? A. 5 days B. 25 days C. 40 days D. 90 days

C. 40 days

which of the following may purchase an IPO at the POP? A. Jim, a registered representative for Seacoast Securities B. Jim's brother Robert, a contractor C. Jim's niece Amber, a chef D. Jim's father Roy, a retired engineer

C. Jim's niece Amber, a chef

Under the intrastate offering rule (Rule 147), when may a resident purchaser of securities resell them to a nonresident? A. three months after the first sale made in that state B. six months after the last sale made in that state C. at least six months after the date of purchase D. none of these

C. at least six months after the date of purchase

Seabird Airlines is selling shares to the public for the first time. The company intends to use the proceeds from the sale of its stock to purchase several new passenger aircrafts. this offering is an example of A. secondary offering B. rights offering C. initial public offering D. subsequent primary offering

C. initial public offering

an investment banking firm that enters into a contract with a municipality to provide advice and direction on raising capital for the municipality is A. syndicate member B. muni dealer C. municipal advisor D. bond dealer

C. municipal advisor

primary market transactions would include which of the following A. sale of $10 million of US Treasury bonds by a BD acting as a market maker B. sale of $10 million of corporate stock by a BD acting as a market maker C. sale of $10 million of corporate bond by a BD acting as an underwriter D. Sale of $10 million of municipal bonds by a broker-dealer acting as a market maker

C. sale of $10 million of corporate bond by a BD acting as an underwriter

Under the de minimis exemption, an initial public offering of common stock may be sold to an account where restricted persons have a beneficial interest as long as their interest in the account does not exceed A) 20%. B) 25%. C) 5%. D) 10%.

D) 10%.

which of the following would be allowed during the cooling off period A) Allocating shares to investors B) Distributing a prospectus C) Taking orders D) Distributing a red herring

D) Distributing a red herring

The ATOP Company is planning to offer shares of both common and preferred stock to the investing public in order to raise operating capital intended to be used for expansion. Which of the following laws enacted by Congress would be the most relevant when issuing these equity securities to the public? A) The Trust Indenture Act of 1939 B) The Securities Investors Protection Act of 1970 C) The Investment Company Act of 1940 D) The Securities Act of 1933

D) The Securities Act of 1933

A company's board of directors has agreed that the company should be prepared to have shares of common stock ready to be issued that are intended to be distributed in the form of a one-time employee bonus. Not knowing exactly when the one-time bonus plan will be implemented and the shares will be needed, the type of registration or offering that would best suit the scenario is A) an ESOP registration. B) a shadow registration. C) a bonus share plan. D) a shelf registration.

D) a shelf registration.

An offering is defined as the sale of a security. Regarding offerings, all of the following are true except A) offerings can be identified by who is selling the securities issuer or investor. B) offerings of bonds can be made to the investing public. C) offerings of stocks can be made to the investing public. D) corporate securities can only be offered in public securities offerings.

D) corporate securities can only be offered in public securities offerings.

A preliminary prospectus is used to solicit A) sales before the effective date. B) sales after the effective date. C) indications of interest before the registration filing date. D) indications of interest before the effective date.

D) indications of interest before the effective date.

Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is A) the pre-filing period. B) the mandated waiting period. C) the posteffective period. D) the cooling-off period.

D) the cooling-off period.

which of the following are considered to be nonexempt offerings according to the securities act of 1933? I. government securities II. private placements III. public offering of $60 million by a brokerage firm IV. sales of corporate bonds of $52 million A. I and II B. I and III C. II and IV D. III and IV

D. III and IV

a corporation seeking to raise funds in order to expand its manufacturing capacity will do so in A. currency market B. secondary market C. funding market D. capital market

D. capital market

Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a FINRA member broker-dealer based in Seattle, to run the sale. Seacoast Securities is acting as A. dealer B. issuer C. owner D. investment banker

D. investment banker

a corporation that seeks to sell its own stock to raise money for building a new factory is an example of A. selling group member B. underwriter C. market maker D. issuer

D. issuer

the Hew Lumber company's common stock is currently trading at $32 in the market. Hew is preparing to sell additional shares to raise money for a new mill. this is an example of A. secondary offering B. hybrid offering C. IPO D. subsequent primary offering

D. subsequent primary offering (APO)

how many primary offerings can a corporation issue? A. 1 primary offering B. 2 primary offerings C. 3 primary offerings D. unlimited

D. unlimited