Regulations_Combined
Which of the following actions on the part of a corporation would require registration statement filing with the SEC under Rule 145?
Merger with another publicly held company & Spin off of a subsidiary as a publicly held company
Rule 144A allows qualified institutional buyers ("QIBs") to
buy and trade between themselves large blocks of privately placed issues. (This market is not available to individuals. Do not confuse Rule 144A with Rule 144, which covers the sale of "restricted" and "control" stock in the open market.)
In-house rules may be less stringent than FINRA rules
covered under the Securities Exchange Act of 1934
A discretionary account is one where
the broker has the power to decide what and how much to trade. The customer gives a written power of attorney to the broker allowing discretion to be exercised.
An Offering Memorandum is
the disclosure document for a private placement - which is a security sold in an exempt transaction.
Permitted purchasers of Rule 144A issues are:
qualified institutional buyers
The Securities Act of 1933 is primarily concerned with registration of:
are exempt securities under the Securities Act of 1933
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
-filing of the Form 144 with the SEC -a maximum of 4 sales per year are permitted -each sale is limited to the greater of 1% of the outstanding shares; or the weekly average of the prior 4 weeks' trading volume
Rule 144 allows the sale, every 90 days, of:
1% of the outstanding shares & the weekly average of the prior 4 weeks' trading volume (this can be sold 4 time a year)
In most states, uniform state law requires that individuals representing broker-dealers that sell managed accounts:
register as agents in the state register as investment adviser representatives in the state pass the Series 63 examination pass the Series 65 examination
State registration (Blue Sky) requirements apply to:
registration of corporate securities
SEC Regulation FD (fair disclosure) covers:
selective disclosure of material non-public information by issuers
The Firm Element component of the "Continuing Education" requirement must be completed:
Annually & is administered by the FINRA-member employer
To be defined as an "accredited investor" under Regulation D, a purchaser of a private placement offering must have a net worth (exclusive of residence) of:
$1,000,000
Activities allowed during "20-day cooling off" period
-Allowed to distribute "preliminary prospectus" aka red herring
Banker's Acceptance
-Can be sold without a prospectus
Securities Act of 1933
-Main purpose to provide public w/necessary means to judge merits of issue -Prospectus requirement for sale of NON-EXEMPT securities (this provides full & fair disclosure)
An investor who accumulates a 5% or greater position in the common stock of a registered issuer must file which of the following forms with the SEC?
13 D
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
3 years
Under Regulation D regarding private placements, how many accredited investors are allowed to invest in the offering?
35 (Regulation D permits a private placement to be sold to a maximum of 35 non-accredited investors and an unlimited number of accredited (wealthy and institutional) investors.)
After 3 cold calls, a prospect asks to be placed on the firm's "Do Not Call" list. His name will remain on the list for:
5 years from the date of request
Under Rule 144, no filing is required if the sale amount every 90 days does not exceed:
5,000 shares worth a maximum of $50,000
An unaffiliated investor wishes to sell a large amount of "144" shares. This person can do so, without being subject to the Rule 144 volume limitations, after holding the securities for:
6 months
Under Rule 147, intrastate offerings cannot be resold out of state for how long following completion of the initial offering?
6 months
Describe a "Chinese Wall" as used in the securities industry?
A separation of investment banking and trading functions within a broker-dealer to stop the potential flow of inside information
Who is NOT required to be fingerprinted at a broker-dealer?
ACats Clerk
Which of the following is subject to the registration requirements of the Securities Act of 1933?
American Depository Receipts
What securities are EXEMPT under the Securities Act of 1933
BISC Bank issues Insurance company issues Savings & loan issues Common carrier issues
Which of the following are permitted to be trustees under the Trust Indenture Act of 1939?
Bank & Trust Company
A customer is very satisfied with the service provided by his registered representative and gives the representative the name and telephone number of a good friend that needs investment advice. When the representative enters the telephone number of the friend, it comes up as blocked since this person is on the firm's "Do Not Call" list. Which statement is TRUE?
Because this individual is on the firm's "Do Not Call" list, no solicitation by the representative is permitted
Who is responsible for sending issuer reports to brokerage firm customers who have their shares held in street name?
Broker-dealer
Exempt from the Securities Act of 1933
Common carriers, small business investment companies, and benevolent associations are all exempt.
Under Regulation D, issuers must provide which of the following to investors to obtain a private placement exemption?
Copy of the Offering Circular or Private Placement Memorandum
The Trust Indenture Act of 1939 applies to offerings of:
Corporate Debt
The Trust Indenture Act of 1939 applies to:
Corporate bonds
What issuers must report to the SEC under the Securities Exchange Act of 1934?
Corporations & investment companies
Enforcement of regulations regarding trading of listed securities in the "Third Market" is performed by:
FINRA
Margin regulations
In-house rules may be more stringent than FINRA rules & In-house rules may be less stringent than FINRA rules
10k Report filed with SEC includes:
Income Statement; Balance Sheet; Statement of Changes to Retained Earnings; Sources and Uses of Cash Statement.
Intrastate Offerings (Rule 147)
Intrastate offerings are exempt from Federal registration & ARE SUBJECT to STATE registration
What is required to sell 144 stock
Issuer, broker, and seller representation letters (each separate)
The FINRA 5% Policy requires that consideration be given to which of the following when determining mark-ups and commissions?
Level of service provided by the firm -Type of security involved in the transaction -Dollar amount of the transaction
MISS (for miss perms-what does Miss stand for)
M-Manipulation-becomes fraud under the act I- Insiders-prohibited from profiting from inside info. S- SEC created to regulate the markets S- Short SALE RULES-SEC wrote REG SHO to set rules for selling securities short
When the Securities and Exchange Commission sets the effective date for a new issue in registration
The proper documents for registration have been filed with the SEC
The Securities Act of 1933 is primarily concerned with registration of:
NON-exempt securities
A customer is opening a new account at a brokerage firm and has been recommended penny stocks by the representative, since these are suitable based on the customer's investment objectives and risk tolerance. Which forms are needed to open the account?
New account form & Form 15G-2
PERMS (for MISS PERMS)
P- Proxy Rules- outside proxies shareholders became regulated to make takeover attempts fair to shareholders E- Exchanges- Must now register with the SC & regulate themselves under SEC guidance, as must their members R- Reports Corporate issues must file annual & quarterly financial reports which are public info M- Margin- control over credit on securities was given to the Federal Reserve S- Stabilization -thought manipulation is fraud, stabilization of new issue in the trading market is permitted under SEC rules.
Rule 144A issues trade on
PORTAL -Only QIBs can trade Rule 144A issues (qualified institutional buyers)
Trust Indenture Act of 1939
Passed to safeguard investors in corporate bonds by requiring appointment of trustee to oversee compliance w/requirements of "Trust indenture"
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:
Private investment in public equity
During a tender offer, which of the following activities are prohibited?
Purchase a call option in a cash account and tender 2 business days after trade date & Tender shares held in an arbitrage account where the position is "short against the box"
Rule 144 applies to:
Purchase of restricted stock, & sales of restricted stock
An "accredited investor questionnaire" is required when which type of offering is made to investors?
Regulation D
Which SEC rule gives an exemption to offerings of no more than $50 million within a 12 month time frame?
Regulation A -Circular must be provided for Reg A offerings
In a Securities Investor Protection Corporation (SIPC) liquidation,
SIPC covers each customer account for $500,000 total inclusive of $250,000 in cash
Which of the following is an exempt security under the Securities Act of 1933? A Unit Investment Trust B Small Business Investment Company C Open-End Investment Company D Closed-End Investment Company
Small Business Investment Company
Which of the following statements are TRUE regarding the Federal Telephone Consumer Protection Act of 1991?
The Act applies to for-profit organizations & The Act does not apply to not-for-profit organizations
SIPC coverage for customer accounts at banks that solely handle exempt securities?
The bank does not need to be registered as a broker-dealer under the Securities Exchange Act of 1934 & The bank does not need to be a member of the Securities Investor Protection Corporation
A customer who has his primary residence in Colorado, has a vacation home in Montana. An intrastate offering is being made in the state of Montana. Which statement is TRUE regarding the customer purchasing this securities offering?
The customer is prohibited from buying these securities (To purchase an intrastate offering, the purchaser must be a primary resident of that state. Having a vacation home in another state does not constitute a "primary residence.)
An investor who accumulates a 5% or greater position in the common stock of a registered issuer must file which of the following forms with the SEC?
The increase in the tender price increases the life of the offer by another 5 business days
Which of the following statements are TRUE regarding a registered individual who recently left the employment of a FINRA member firm?
The individual cannot maintain his license at another member firm without being employed by that firm & The license lapses if the individual remains unaffiliated for 2 years
The Chief Executive Officer of PDQ Company is married and has a husband who owns 5% of the common equity of PDQ. Which of the following statements are TRUE regarding the husband and his PDQ stock holdings?
The husband is considered to be an "affiliate" under Rule 144 & To sell PDQ securities, the husband must file a Form 144
Prohibited from what during cooling off period?
The issue cannot be SOLD, ADVERTISED, or RECOMMENDED. -Orders to buy the issue CANNOT be solicited.
Regulation Crowdfunding min & max
The minimum investment amount is $2,000 and the maximum investment amount is $100,000 per individual per offering. (maximum offering amount is $1million)
A customer instructs a registered representative to "Buy 500 shares of ADP whenever you think the price is right." Which of the following statements are true about this order?
The order is the same as a not held order & The order can be accepted without a prior written discretionary power of attorney from the customer
The Vice-President of ACME Corporation, an NYSE listed firm, places an order to buy 10,000 shares of ACME common at the market. 3 months later, ACME stock's price has increased by 20% and the officer places an order to sell. Which statements are TRUE?
The sale of the stock is subject to Rule 144 & The officer must forfeit the profit on the sale
Restricted shares
They are normally acquired through Regulation D private placement transactions & They can be sold publicly under a Rule 144 exemption
A customer buys 100 shares of ABC stock at $20 per share. Two months later, the stock is quoted at $10.00 - $10.50. The registered representative that sold the stock to the customer offers to repurchase the shares at $18. Which statement is TRUE?
This is prohibited because the FINRA Conduct Rules do not allow customer accounts to be guaranteed against loss
A golf pro at the country club where a registered representative is a member wants to refer prospective clients to the representative in exchange for a small fee. Is this prohibited or permitted?
This is prohibited.
Regarding purchase limitations under Regulation A
Tier 1 offerings are not subject to purchase limitations & Tier 2 (Regulation A+) offerings are subject to purchase limitations
Exempt from State registration requirements
U.S. Government issues Municipal issues Securities listed on a national stock exchange ("blue chips")
To claim a private placement exemption:
a Form D must be filed with the SEC
Securities Investor Protection Corporation protects brokerage:
accounts against broker-dealer failure
Credit can be extended on new issues:
after 30 days have elapsed from the completion of the offering
SEC Rule 10b-18 allows an issuer to buy its shares in the open market:
at the highest independent bid or the last reported sale price, whichever is higher
The Federal Telephone Consumer Protection Act of 1991 prohibits unsolicited calls from being made:
before 8:00 AM in the time zone of the recipient & after 9:00 PM in the time zone of the recipient
Rule 103 of Regulation M requires that a market maker in a stock that is also a syndicate member in an "add-on" offering of that issue, during the 20-day cooling off period:
can either resign as a market maker or can act as a passive market maker
The Sarbanes-Oxley Act of 2002 requires:
chief corporate officers to certify the company's financial disclosures & research analysts to be separated from investment banking functions at broker-dealers
8K reports must be filed if the issuer:
declares bankruptcy; declares a merger; declares a divestiture; changes the composition of the Board of Directors. (Note: filing must be made 4 days after the event)
The Official Statement is the
disclosure document for municipal bonds (which are an exempt issue).
Prospectus
disclosure document for new issues that ARE NOT exempt from registration under the securities act of 1933.
If the SEC sends a deficiency letter to the issuer regarding an issue in registration,:
disclosure is not considered to be adequate
A "penny stock" is a designation that applies to a:
equity security
A new issue offering to a maximum of 35 non-accredited investors that has not been registered with the SEC is:
exempt under regulation D
Which of the following is an exempt issue?
fixed annuity contract--exempt from registering because this is an insurance product and the company bears the reinvestment risk
For any claims that a customer may have against a failed broker-dealer that are in excess of Securities Investor Protection Corporation coverage limits, the customer becomes a:
general creditor
SEC Rule 10b-5-1:
gives officers of publicly held companies a safe harbor from being charged with an insider trading violation if they establish a pre-arranged trading plan for that issuer's securities
Under the "penny stock rule," an established customer that is exempt from the rule is defined as a person who has:
had an account with that firm for atleast 1 year & has made at least 3 previous purchases of "penny stocks" from the same broker-dealer
A broker-dealer may hold fully paid customer securities:
if the securities are segregated and held in safekeeping
MISS PERMS
is a memory device for the provisions Sec. Exchange Act of 1834.
A "legal person" is a
legally-created entity, such as a corporation, limited partnership or trust, that has the same legal abilities as a human being (a natural person), such as the ability to sue, own property, and enter into contracts.
The FINRA 5% Policy applies to
mark-ups, mark downs, and commissions charged for OTC securities
Which of the following maintain "Do Not Call" lists?
member firm & FTC (federal trade commission)
Commercial Paper is a:
money market instrument exempt from the Securities Act of 1933
The Regulatory Element component of the "Continuing Education" requirement must be completed:
on the registrant's 2nd anniversary of registration & every 3 years after the initial review
A registered representative takes a customer out to a dinner and a show, spending $180. This activity is:
permitted if it complies with the firm's policies and procedures
The primary purpose of the Trust Indenture Act of 1939 is to:
protect the interests of holders of "non-exempt" bonds by appointment of a trustee
When a customer buys a new stock issue from a syndicate member, the customer pays:
the public offering price as stated in the prospectus without any commission
Under SEC rules, filing of the Form 144, required when selling restricted stock, is:
the responsibility of the seller & filed at, or prior to, the time that the sell order is placed
If an individual is found guilty of insider trading, he or she must pay back the profit achieved or loss avoided, and in addition must pay a penalty equal to 3 times that amount. This is called
treble damages
