Series 7 Unit 7 Practice test

If an officer of a public company buys 400 shares of the company's registered stock in the open market, he A) may sell immediately subject to Rule 144 volume limitations B) may sell under Rule 144 only after a 6-month holding period C) may not sell until he leaves the company D) may sell immediately without restriction

A) may sell immediately subject to Rule 144 volume limitations

A customer is interested in an IPO of a stock in registration. He requests that you highlight the important information on the preliminary prospectus and send an analysis of the company's past performance. You may A) not comply with the request because the preliminary prospectus may not be altered B) comply with the request because the customer solicited the information and analysis C) comply with the request because it involves an IPO in which little information is known about the issuer D) not comply with the request because the stock is not yet listed for trading on any exchange

A) not comply with the request because the preliminary prospectus may not be altered

Officers of XYZ Corp., a listed company, are permitted to A) write calls against unrestricted XYZ stock held long B) benefit from short swing profits C) short XYZ stock D) benefit from material, non-public information

A) write calls against unrestricted XYZ stock held long

Which of the following will NOT be found in a final prospectus? A) Statement that the SEC neither approves nor disapproves of the issue B) Agreement among underwriters C) Date and offering price D) Business plan

B) Agreement among underwriters

An investor files the necessary forms to sell stock under Rule 144. The filing is effective for a maximum of how many days? A) 60 B) 90 C) 30 D) 120

90

If the SEC has cleared an issue, which of the following statements is TRUE? A) The SEC has guaranteed the issue. B) The issuer has filed a standard registration statement. C) The SEC has guaranteed the accuracy of the information in the prospectus. D) The SEC has endorsed the issue.

B) The issuer has filed a standard registration statement.

The underwriting agreement is the contract that establishes the relationship between A) the underwriting group and selling group members B) the issuer and the underwriters C) the issuer and the investing public D) the managing underwriter and the underwriting group members

B) the issuer and the underwriters

Which statements are TRUE regarding the purchase of new equity issues by restricted persons? I. An investment club is permitted to buy a new equity issue at the POP. II. An investment club is not permitted to buy a new equity issue at the POP. III. An investment club that has a registered representative as a member is permitted to buy a new equity issue at the POP. IV. An investment club that has a registered representative as a member is not permitted to buy a new equity issue at the POP.

I. An investment club is permitted to buy a new equity issue at the POP. IV. An investment club that has a registered representative as a member is not permitted to buy a new equity issue at the POP.

Which of the following describe indications of interest secured during the 20-day cooling-off period? I. Binding on the customer II. Nonbinding on the customer III. Binding on the broker/dealer IV. Nonbinding on the broker/dealer

II. Nonbinding on the customer IV. Nonbinding on the broker/dealer

The smallest component of a corporate underwriting spread is usually the A) takedown B) underwriter's fee C) selling concession D) manager's fee

D) Manager's fee

Corporate debt securities (such as commercial paper) are exempt from registration under the Securities Act of 1933 if their maturities do not exceed how many days? A) 365 B) 90 C) 30 D) 270

D) 270

A shelf registration statement is good for two years, but once effective with the SEC, it allows shares to be sold over a maximum period of A) 90 days B) 30 days C) 1 year D) 3 years

D) 3 years

The Securities Exchange Act of 1934 covers all of the following EXCEPT A) trading of corporate securities B) trading on exchanges C) issuance of financial reports by corporations D) issuance of corporate securities

issuance of corporate securities

To which securities market does the Securities Act of 1933 apply? A) Primary B) Third C) Secondary D) Fourth

A) Primary

Which of the following securities is NOT exempt from the Securities Act of 1933? A) Real estate investment trusts B) Municipal issues C) U.S. government agency issues D) U.S. government issues

A) Real estate investment trusts

ABC is engaged in a stock rights offering with the help of Alpha Securities as managing underwriter. If Alpha Securities agrees to purchase the unused rights for any stock that ABC cannot sell to current stockholders, and use them to purchase stock for resale to the public, what type of underwriting arrangement is this? A) Standby B) Special C) Best efforts D) All-or-none

A) Standby

All of the following are restricted persons EXCEPT A) employees of members B) portfolio managers C) finders and fiduciaries acting on behalf of the managing underwriter D) any persons owning 5% or more of a member firm

D) any persons owning 5% or more of a member firm

Which of the following statements regarding a firm commitment underwriting are TRUE? I. An underwriting syndicate is a group of broker/dealers who have banded together to distribute new issue securities to the public and whose members have made financial commitments to the issuer. II. A selling group consists of 2 or more broker/dealers who have agreed to participate in the distribution of new issue securities to the public and have made financial commitments to the underwriting syndicate in advance. III. An underwriting syndicate is a group of broker/dealers who have banded together to buy new issue securities to be held by the syndicate members for investment purposes. IV. A selling group consists of 2 or more broker/dealers who have agreed to participate in the distribution of new issue securities as selling agents only, without principal risk.

I. An underwriting syndicate is a group of broker/dealers who have banded together to distribute new issue securities to the public and whose members have made financial commitments to the issuer. IV. A selling group consists of 2 or more broker/dealers who have agreed to participate in the distribution of new issue securities as selling agents only, without principal risk.

Under Regulation D, accredited investors in a private placement must meet minimum standards that may include which of the following? I. Annual income in excess of $200,000 for at least the last two years II. Annual income in excess of $100,000 for at least the last two years. III. Net worth in excess of $1 million not including net equity in a primary residence. IV. Net worth in excess of $200,000.

I. Annual income in excess of $200,000 for at least the last two years III. Net worth in excess of $1 million not including net equity in a primary residence.

Which of the following are SROs? I. FINRA II. SIPC III. SEC IV. Chicago Stock Exchange

I. FINRA IV. Chicago Stock Exchange

Which of the following are characteristics of the Securities Act of 1933? I. Requires registration of exchanges II. Called the Truth in Securities Act III. Requires full and fair disclosure of material facts IV. Enabled the Federal Reserve Board to determine margin requirements

II. Called the Truth in Securities Act III. Requires full and fair disclosure of material facts

In a corporate underwriting, the syndicate letter is signed by which of the following? I. Issuer II. Managing underwriter III. Syndicate members IV. Selling group members

II. Managing underwriter III. Syndicate members

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 $50 million

III. Public offering of $60 million by a brokerage firm IV. Sales of corporate bonds of $50 million

The demand is far less than anticipated for a new issue of common stock. In this situation, the underwriter may stabilize the issue by placing bids in the open market A) at the public offering price only B) at or anywhere above the public offering price C) at or slightly below the public offering price D) slightly above the public offering price

at or slightly below the public offering price

A Tier 1 securities offering under Regulation A+ allows small to medium sized companies to A) raise up to a maximum of $10 million in a 12-month period B) raise up to a maximum of $20 million in a 12-month period C) raise up to a maximum of $15 million in a 12-month period D) raise up to a maximum of $5 million in a 12-month period

raise up to a maximum of $20 million in a 12-month period