Regulations - Securities Act of 1933 : Review Questions
Under Rule 147, intrastate offerings cannot be resold out of state for how long after the initial sale date? A. 6 months B. 12 months C. 18 months D. 24 months
A. 6 months
The President of PDQ Corporation buys PDQ shares in the open market. After holding them for 3 months fully paid, the President wishes to sell the shares. The shares can be sold: A. immediately B. after holding the securities for an additional 3 months C. after holding the securities for an additional 6 months D. after holding the securities for an additional 1 year
A. immediately
Excluding the percentage of the outstanding shares test, the maximum permitted sale under Rule 144 is the weekly average of the last: A. 2 weeks' trading volume B. 4 weeks' trading volume C. 8 weeks' trading volume D. 12 weeks' trading volume
B. 4 weeks' trading volume
Which of the following is subject to the registration requirements of the Securities Act of 1933? A. Eurodollar Debt B. American Depositary Receipts C. Municipal Debt D. Foreign Government Debt
B. American Depositary Receipts
Which statement is TRUE regarding intrastate offerings? A. Intrastate offerings are subject to the Securities Act of 1933 B. Many intrastate offerings are subject to provisions of the Uniform Securities Act C. Intrastate offerings are subject to the Securities Exchange Act of 1934 D. Intrastate offerings are subject to the Investment Company Act of 1940
B. Many intrastate offerings are subject to provisions of the Uniform Securities Act
Which of the following actions on the part of a corporation would require registration statement filing with the SEC under Rule 145? A. Stock dividend distribution B. Merger with another publicly held company C. 3 for 2 Stock split D. 1 for 4 Reverse Stock split
B. Merger with another publicly held company
An offering made under Regulation D, where a company that is already public raises additional capital solely from accredited investors, is called a PIPE transaction. PIPE stands for: A. Private investment in private equity B. Private investment in public equity C Public investment in private equity D. Public investment in public equity
B. Private investment in public equity
"Qualified Institutional Buyers" are permitted to buy and trade large blocks of unregistered securities among themselves under: A. Rule 144 B. Rule 144A C. Rule 147 D. Rule 415
B. Rule 144A
Which statement is TRUE regarding restricted shares? A. They are normally acquired through Rule 144 transactions B. They are normally acquired through Regulation D private placement transactions C. They can be sold freely after 3 months D. They can be sold publicly under a Rule 147 exemption
B. They are normally acquired through Regulation D private placement transactions
An unregistered hedge fund creates a website and uses it to promote itself to investors. Potential investors are invited to enter a password-protected area where they can get details about the fund's investment strategy and performance. Which statement is TRUE? A. This is prohibited under SEC rules B. This is permitted under SEC rules as long as the potential viewer completes and signs an accredited investor questionnaire before being given the password to enter C. This is permitted under SEC rules as long as the potential viewer completes and signs an arbitration agreement before being given the password to enter D. This is permitted without restriction
B. This is permitted under SEC rules as long as the potential viewer completes and signs an accredited investor questionnaire before being given the password to enter
Which of the following is defined as an "accredited investor" under Regulation D? A. Non-profit organization with assets in excess of $2,000,000 B. Trust with assets in excess of $5,000,000 whose purchase is directed by a sophisticated person C. The president of an insurance company D. An individual investor who buys $2,000,000 of the offering
B. Trust with assets in excess of $5,000,000 whose purchase is directed by a sophisticated person
A seller who has filed Form 144 can sell 1% of the outstanding shares or the weekly average of the last 4 week's trading volume. This amount may be sold: A. 1 time a year B. 2 times a year C 4 times a year D. 12 times a year
C 4 times a year
Which of the following actions on the part of a corporation would require a registration statement filing with the SEC under Rule 145? A. Stock dividend distribution B. Stock split C. Merger with another publicly held company D. Cash dividend distribution
C. Merger with another publicly held company
Which statement is TRUE about the use of a "red herring" preliminary prospectus? The preliminary prospectus may only be sent to customers: A. once registration is effective B. who have paid for the issue C. who have expressed an indication of interest or who are likely purchasers, during the cooling off period D. who have expressed an indication of interest or who are likely purchasers, prior to the cooling off period
C. who have expressed an indication of interest or who are likely purchasers, during the cooling off period
All of the following securities are exempt from the registration provisions of the Securities Act of 1933 EXCEPT: A. U.S. Government issues B. U.S. Government agency issues C. General Obligation Bonds D. Debentures
D. Debentures
What securities offering must be registered with the SEC? A. Rule 144 B. Rule 144A C. Rule 506 D. Rule 415
D. Rule 415 Shelf offerings under Rule 415 allow seasoned issuers to file a blanket registration statement that goes on the SEC's "shelf," good for 3 years. The issuer simply gives 2 day notice to the SEC and can sell. This is a simplified registration process.
Under the Securities Act of 1933, new issues are not marginable until how many days have elapsed from the effective date? A. 30 days B. 45 days C. 60 days D. 90 days
A. 30 days
Under Rule 144, no filing is required if the sale amount every 90 days does not exceed: A. 5,000 shares worth a maximum of $50,000 B. 5,000 shares worth a maximum of $500,000 C. 10,000 shares worth a maximum of $100,000 D. 10,000 shares worth a maximum of $1,000,000
A. 5,000 shares worth a maximum of $50,000
Restricted stock is best described by which of the following? A. A security which was never registered and can only be sold in the public markets when it is either registered, or sold under an exemption provision B. A security of an issuer which has been bought in the open market by an officer or director of that company C. A security purchased by a non-accredited investor in a Regulation D private placement D. A security which is purchased by an issuer that is not exempt from the provisions of the Securities Acts
A. A security which was never registered and can only be sold in the public markets when it is either registered, or sold under an exemption provision
Which of the following securities is required to be registered with the SEC? A. American Depositary Receipts B. Eurodollar Debt. C. Foreign Government Debt D. Municipal Debt
A. American Depositary Receipts
Which statement is TRUE about new registered stock offerings? A. Any purchaser who received a preliminary prospectus must also receive the final prospectus B. The final prospectus must be delivered within 10 business days of the effective date C. Any purchaser will pay the Public Offering Price plus a small sales charge D. Any purchaser will pay the Public Offering Price plus a nominal commission or mark-up
A. Any purchaser who received a preliminary prospectus must also receive the final prospectus
Which of the following is NOT exempt under the Securities Act of 1933? A. Corporate Bonds B. Municipal Bonds C. U.S. Government Bonds D. Small Business Investment Companies
A. Corporate Bonds
Intrastate offerings are exempt from: A. Federal registration B. State registration C. FINRA regulation D. All regulation
A. Federal registration
Which of the following is an exempt issue? A. Fixed annuity contract B. Variable annuity contract C. Government bond mutual fund D. Municipal bond unit investment trust
A. Fixed annuity contract
All of the following are non-exempt issues under the Securities Act of 1933 EXCEPT: A. Fixed annuity contracts B. Variable annuity contracts C. Listed option contracts D. Listed common stock
A. Fixed annuity contracts
Which of the following securities is NOT exempt from the Securities Act of 1933? A. Industrial Company issues B. Benevolent Association issues C. Small Business Investment Company issues D. Common Carrier issues
A. Industrial Company issues
All of the following issues are exempt from registration under the Securities Act of 1933 EXCEPT: A. Investment companies B. Insurance companies C. Agency issues D. Municipal issues
A. Investment companies
Who is an accredited investor under Regulation D? A. Officer or director of the issuer B. Individual with a $200,000 Net Worth C. Trust with $2,000,000 of Assets D. Employee Benefits Fund with $1,000,000 of assets
A. Officer or director of the issuer
Which of the following are NOT exempt issues under the Securities Act of 1933? A. Real Estate Investment Trusts B. Savings and Loan Issues C. U.S. Government Bonds D. G.O. Bonds
A. Real Estate Investment Trusts
The director of a public corporation wishes to sell stock of that company in compliance with Rule 144. Which statement is FALSE? A. Registered control stock must be held for 6 months, fully paid, before it can be sold B. Unregistered restricted stock must be held for 6 months, fully paid, before it can be sold C. If the sale is for 5,000 shares or less, worth $50,000 or less, no SEC filing is required D. Any short swing profits (within 6 months) from trading the stock must be returned to the corporation
A. Registered control stock must be held for 6 months, fully paid, before it can be sold
Exempted issuers are defined under the: A. Securities Act of 1933 B. Securities Exchange Act of 1934 C. Trust Indenture Act of 1939 D. Investment Company Act of 1940
A. Securities Act of 1933
Which of the following activities is allowed during the 20-day cooling off period after a registration statement for a new issue is filed with the SEC? A. Sending a customer a "red herring" preliminary prospectus B. Confirming that an indication of interest from the customer will be filled C. Accepting a deposit from the customer D. Accepting a firm order from the customer
A. Sending a customer a "red herring" preliminary prospectus
The Chief Executive Officer of PDQ Company is married and has a husband who owns 5% of the common equity of PDQ. Which statement is TRUE regarding the husband and his PDQ stock holdings? A. The husband is considered to be an "affiliate" under Rule 144 B. The husband is not permitted to sell any shares since his wife is CEO and any sale would be considered insider trading. C. To sell PDQ securities, the CEO and her husband must obtain the permission of the PDQ Board of directors D. To sell PDQ securities, the husband is not required to file a Form 144
A. The husband is considered to be an "affiliate" under Rule 144
A customer that regularly purchases new common stock issues from her broker-dealer sends an e-mail to her registered representative asking that all prospectusesbe forwarded to her electronically at her e-mail address. Which statement is TRUE? A. The registered representative can follow the customer's instructions by forwarding the request to the member firm's operations department B. The registered representative must inform the customer that all prospectuses must be sent in hard-copy form to the customer's physical mailing address C. The registered representative must advise the customer that the firm will charge an extra fee for this service D. The registered representative must forward the e-mail to the branch manager for handling
A. The registered representative can follow the customer's instructions by forwarding the request to the member firm's operations department
Which statement is TRUE about the spouse of an owner of 10% of the outstanding shares of a company? A. The spouse is considered to be an affiliated person subject to Rule 144 B. The spouse is considered to be an affiliated person and may sell up to 1% is the issued shares every 90 days C. The spouse can sell shares without filing Form 144 D. The spouse must file Form 144 within 24 hours of selling shares
A. The spouse is considered to be an affiliated person subject to Rule 144
Restricted shares subject to sale under Rule 144 are most commonly acquired through: A. private placements B. registered secondary distributions C. tender offers D. ESOPs (Employee Stock Ownership Plans)
A. private placements
Private placements offered under Regulation D are exempt from: A. registration with the SEC B. anti-fraud rules under the Securities Exchange Act of 1934 C. anti-fraud rules of each state under the Uniform Securities Act D. all of the above
A. registration with the SEC
Which of the following is an exempt securityunder the Securities Act of 1933? A. Unit Investment Trust B. Small Business Investment Company C. Open-End Investment Company D. Closed-End Investment Company
B. Small Business Investment Company
When the Securities and Exchange Commission sets the effective date for a new issue in registration, which statement is TRUE? A. The SEC has certified that the offering documents give full and fair disclosure B. The proper documents for registration have been filed with the SEC C. The SEC has approved the offering for sale to the public D. The SEC has established the final offering price
B. The proper documents for registration have been filed with the SEC
A registered representative has prepared a research report about a new stock issue that is currently in registration. The registered representative wishes to send the report to customers. Which statement is TRUE? A. The report can be mailed without restriction B. The report constitutes an "offer" under the 1933 Act and cannot be sent C. The report can only be mailed if approved or prepared by a Supervisory Analyst D. The report can only be sent if accompanied or preceded by a preliminary prospectus
B. The report constitutes an "offer" under the 1933 Act and cannot be sent
All of the following statements are true about Rule 147 EXCEPT: A. The rule exempts intrastate issues from federal registration B. The rule exempts intrastate issues from state registration C. Both the issuer and all purchasers must be state residents D. Resale is permitted to state residents only, for the 180 day period following the offering
B. The rule exempts intrastate issues from state registration
Credit can be extended on new issues: A. immediately after the offering is complete B. after 30 days have elapsed from the completion of the offering C. after 60 days have elapsed from the completion of the offering D. after 90 days have elapsed from the completion of the offering
B. after 30 days have elapsed from the completion of the offering
The President of PDQ Corporation donates restricted PDQ shares to the United Way after holding them for 3 months fully paid. United Way can sell the stock without restriction: A. immediately B. after holding the securities for 3 months C. after holding the securities for 6 months D. after holding the securities for 9 months
B. after holding the securities for 3 months
All of the following are required to sell "144" stock EXCEPT: A. seller's representation letter B. buyer's representation letter C. issuer's representation letter D. broker's representation letter
B. buyer's representation letter
If the SEC sends a deficiency letter to the issuer regarding an issue in registration, then: A it disapproves of registering the issue B. disclosure is not considered to be adequate C. the underwriters have failed to establish the Public Offering Price D. due diligence has not been performed by the underwriters
B. disclosure is not considered to be adequate
An indication of interest for a new stock offering is normally taken: A. before the 20 day cooling offperiod B. during the 20 day cooling off period C. after the 20 day cooling off period D. either before, during, or after the 20 day cooling off period
B. during the 20 day cooling off period
The maximum maturity on a banker's acceptance is: A. 30 days, because a longer maturity would cause the issue to be non-exempt B. 90 days, because a longer maturity would cause the issue to be non-exempt C. 270 days, because a longer maturity would cause the issue to be non-exempt D. 360 days, because a longer maturity would cause the issue to be non-exempt
C. 270 days, because a longer maturity would cause the issue to be non-exempt (same for commercial papers)
Under Rule 415, which permits seasoned corporate issuers to file a "shelf" registration statement for securities offerings, the filing covers a period of: A. 30 days B. 90 days C. 3 years D. 5 years
C. 3 years
Under Regulation D, which statement is TRUE? A. A Prospectus is used to provide disclosure B. An Official Statement is used to provide disclosure C. An Offering Circular is used to provide disclosure D. No disclosure is normally provided to investors since each is accredited
C. An Offering Circular is used to provide disclosure
Under Regulation D, issuers must provide which of the following to investors to obtain a private placement exemption? A. Copy of the Prospectus B. Copy of the Official Notice of Sale C. Copy of the Offering Circular or Private Placement Memorandum D. Copy of the Official Statement
C. Copy of the Offering Circular or Private Placement Memorandum
Which statement is TRUE regarding intrastate offerings? A. Intrastate offerings are subject to federal registration only B. Intrastate offerings are exempt from state registration only C. Intrastate offerings are subject to "Blue Sky" laws D. Intrastate offerings are subject to both state and federal registration
C. Intrastate offerings are subject to "Blue Sky" laws
Permitted purchasers of Rule 144A issues are: A. Accredited Investors B. Financial Institutions C. Qualified Institutional Buyers D. Major Institutional Investors
C. Qualified Institutional Buyers
Which statement describes trading of Rule 144A issues? A. Rule 144A issues are NMS securities that are listed and trade on the NYSE, AMEX and NASDAQ B. Rule 144A issues are not listed and trade in the OTCBB or Pink Sheets C. Rule 144A issues trade in the PORTAL market from QIB to QIB D. Rule 144A issues cannot be traded in the public markets
C. Rule 144A issues trade in the PORTAL market from QIB to QIB
Who is subject to Rule 144? A Buyer of restricted stock B. Buyer of unrestricted stock C. Seller of restricted stock D. Seller of unrestricted stock
C. Seller of restricted stock
What type of securities offering is NOTexempted from registration with the SEC? A. Regulation S B. Rule 147 C. Shelf offering D. Regulation D
C. Shelf offering
An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares: A. a 6 month holding period must be completed B. a 90 day holding period is required since the shares are already registered C. a Form 144 must be filed with the SEC D. there is no requirement to file a Form 144 with the SEC
C. a Form 144 must be filed with the SEC
Under SEC rules, the purchaser of a Regulation D private placement must complete and sign a(n): A. subscription agreement B. hypothecation agreement C. accredited investor questionnaire D. arbitration agreement
C. accredited investor questionnaire
Under SEC rules, filing of the Form 144, required when selling restricted stock, is: A. the responsibility of the buyer B. the responsibility of the broker-dealer C. filed at, or prior to, the time that the sell order is placed D. filed within 10 business days of the placement of the sell order
C. filed at, or prior to, the time that the sell order is placed
Under Regulation D, all of the following are accredited investors EXCEPT a(n): A. investment company B. trust with assets in excess of $5,000,000 whose purchase is directed by a sophisticated person C. partnership with assets in excess of $5,000,000 formed for the specific purpose of acquiring the securities offered D. savings and loan institution
C. partnership with assets in excess of $5,000,000 formed for the specific purpose of acquiring the securities offered
An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares, the officer must meet all of the following requirements EXCEPT: A. filing of the Form 144 with the SEC B. a maximum of 4 sales per year are permitted C. the stock must be held for 6 months, fully paid D. each sale is limited to the greater of 1% of the outstanding shares; or the weekly average of the prior 4 weeks' trading volume
C. the stock must be held for 6 months, fully paid
When a proposed new issue securities offering is "in registration," what statement could NOT be made to an interested institutional investor? A. "The lead underwriters on the issue are PDQ and RFP investment banks" B. "The roadshow on the issue is scheduled to be in your city on November 5th" C. "The issue is expected to be priced on or around November 20th" D. "Our research report shows that the expected POP is undervalued"
D. "Our research report shows that the expected POP is undervalued"
Which of the following is defined as "accredited investors" under Regulation D? A. Non-profit organization with assets in excess of $2,000,000 B. Trust with assets in excess of $3,000,000 whose purchase is directed by a sophisticated person C. Trust with assets in excess of $10,000,000 formed for the specific purpose of acquiring the securities offered D. A bank or savings and loan institution
D. A bank or savings and loan institution
Under Regulation D regarding private placements, how many accredited investorsare allowed to invest in the offering? A. 10 B. 35 C. 50 D. An unlimited number
D. An unlimited number
Which of the following is NOT subject to the registration requirements of the Securities Act of 1933? A. American Depositary Receipts B. American Depositary Shares C. American Style Options D. Foreign Currency Contracts
D. Foreign Currency Contracts
A registered representative who handles the accounts of wealthy clients is told the following by one of her customers: "I made a "seed" money investment of $8,000,000 in a venture capital financing of a start-up tech company and received unregistered stock. Now I want to sell $4,000,000 of that company's shares." In order to handle the sale, the registered representative makes several disclosures to the client. Which of the following "due diligence" disclosures is INCORRECT? A. The company must have registered shares with the SEC and must be current in its SEC filings B. The customer must have held the stock fully paid, for at least 6 months C. The customer must intend to make a bona fide public offering of the shares D. If more than one filing is required due to the large size of the holding, the customer must wait 30 days to sell the next tranche.
D. If more than one filing is required due to the large size of the holding, the customer must wait 30 days to sell the next tranche.
All of the following securities are exemptfrom registration under the Securities Act of 1933 EXCEPT: A. Insurance company issues B. Bank issues C. Savings and loan issues D. Junk bonds
D. Junk bonds
All of the following are exempt issues under Federal Securities Acts EXCEPT: A. Government Bonds B. Small Business Investment Companies C. State Chartered Bank Issues. D. Municipal Bond Funds
D. Municipal Bond Funds
Which of the following activities is allowed prior to the filing of the registration statement? A. Sending a customer a "red herring" preliminary prospectus B. Accepting an indication of interest from the customer after sending the red herring C. Accepting a deposit to buy the security from the customer D. None of the above
D. None of the above
What securities offering must be registered with the SEC? A. Rule 144A B. Regulation S C. Regulation D D. Regulation A
D. Regulation A Regulation A is an "EZ" registration rule that applies to issues up to $50 million. It makes it simpler for smaller companies to raise capital. Instead of filing a full registration statement with the SEC, the company files an "abbreviated" simplified registration. Instead of going through a 20 day "quiet period," the company goes through a 20 day "review period," where the issue can be marketed to "test the waters" (this is not allowed for regular registered issues). Once registration is effective, the issue is sold with an Offering Circular rather than a Prospectus. Regulation A issues, because they are registered and the company must report to the SEC, can be listed on exchanges and traded there.
If the SEC sends a deficiency letter to the issuer regarding an issue in registration, which statement is FALSE? A. Disclosure in the registration documents is not complete B. The issuer must file an amendment with the SEC to cure the deficiency C. The 20-day cooling off period starts again once the amendment is filed D. The SEC has cancelled the deal since the disclosure documents were deemed deficient
D. The SEC has cancelled the deal since the disclosure documents were deemed deficient
To offer a private placement, which statement is TRUE? A. A registration statement must be filed with FINRA prior to sale B. A registration statement must be filed with the SEC prior to sale C. A registration statement must be approved by the principal of the firm prior to sale D. The offering is exempt, so no registration is required
D. The offering is exempt, so no registration is required
A registered representative has prepared a research report about a new issue that is "in registration." Which statement is TRUE? A. The research report may be sent to any customer expressing an "indication of interest" B. The research report may be sent to any customer if it is accompanied by a preliminary prospectus C. The research report may only be sent to customers who have bought new issues within the preceding 12 months D. The research report may not be sent
D. The research report may not be sent
An investor owns 20% of the outstanding shares of ABC Corporation, a publicly traded company. The investor's spouse owns 5% of that company's stock. If the spouse wishes to sell her holding, all of the following statements are true EXCEPT: A. The spouse is considered to be an affiliated person subject to Rule 144 B. A Form 144 must be filed if the shares are to be sold C. Solely from the standpoint of percentage of shares outstanding, a maximum of 1% of the company's shares can be sold at this time D. Up to 6 sales per year are allowed
D. Up to 6 sales per year are allowed
Electronic delivery of a prospectus is NOTpermitted for: A. common stock issues B. preferred stock issues C. corporate debt issues D. investment company issues
D. investment company issues
All of the following statements are true if the SEC sends a deficiency letter to the issuer regarding an issue in registration EXCEPT: A. disclosure in the registration documents is not complete B. the issuer must file an amendment with the SEC to cure the deficiency C. the 20-day cooling off period starts again once the amendment is filed D. the effective date of the issue is unaffected by the deficiency notice
D. the effective date of the issue is unaffected by the deficiency notice
