SIE Exam Unit 7 - Issues

A company that offers sales of another company's securities would best be described as A) a market maker. B) a transfer agent. C) an underwriter. D) an issuer.

An Underwriter

A new registered representative receives a memo discussing the distribution of a red herring. The registered representative knows that the memo is referencing A) a tombstone advertisement. B) a registration statement. C) a final prospectus. D) a preliminary prospectus.

A Preliminary Prospectus

Which of the following would most closely match the meaning of a red herring? A) A registration statement B) A preliminary prospectus C) A tombstone advertisement D) Prospectus

A Preliminary Prospectus

During the cooling-off period of a new registration filed with the Securities and Exchange Commission (SEC) A) tombstone advertisements may not be published. B) a red herring may be given to prospective investors. C) sales literature may be distributed with the preliminary prospectus. D) indications of interest received are binding on the broker-dealers.

A Red herring may be given to prospective investors

The sale of a security

Offering

The ________________ Act is the Securities Exchange Act of 1934 and covers the secondary markets

Exchange

Type of underwriting in which the underwriter buys the entire offer into inventory and then redistributes it to the public

Firm Commitment

Type of underwriting that is characterized by the broker-dealer buying the entire issue from the issuer and then reoffering it to the public

Firm Commitment

Type of underwriting where the underwriter buys the entire offer into inventory and then redistributes it to the public.

Firm Commitment

Which type of underwriting is characterized by the broker-dealer buying the entire issue from the issuer and then reoffering it to the public? A) Best efforts B) Mini max C) Firm commitment D) All-or-none

Firm commitment

Indications of interest taken during the cooling-off period are I. binding on the selling issuer and underwriters. II. nonbinding on the issuer and underwriters. III. binding on the investor. IV. nonbinding on the investor. A) I and III B) II and III C) II and IV D) I and IV

II & IV

Regarding primary and secondary offerings, which of the following are true? I. An offering can only be either a primary or secondary. II. An offering can be a combination of primary and secondary. III. An initial public offering (IPO) is a secondary offering. IV. An additional primary offerings (APO) is a primary offering. A) II and III B) I and IV C) I and III D) II and IV

II & IV

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

Indications of interest before the effective date

Private placements are primarily sold to A) general public investors. B) institutional investors. C) individuals who meet the definition of accredited investor. D) investment bankers.

Institutional Investors

Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933? A) Private (nonpublic) securities offerings B) Initial public offerings (IPOs) C) Additional public offerings (APOs) D) Shelf offerings

Private (nonpublic) securities offerings

While the intended purpose for which to use the sales proceeds would be expected to be found in a ________________, it would not be found in a ______________ ___________________ permitted to offer only bare bones facts about the new issue

Prospectus, Tombstone Advertisement

If a new issue will be specifically quoted on the OTCBB or the electronic OTC Pink, the prospectus delivery requirement period in the aftermarket (after the effective date) is ________________ days.

90

If a new issue will be specifically quoted on the OTCBB or the electronic OTC Pink, the prospectus delivery requirement period in the aftermarket is is _________ days.

90

Rule that applies to the final prospectus and aftermarket prospectus delivery obligations

Access Equals Delivery

Defined as a natural person who has a net worth of $1 million or more, not including net equity in a primary residence; or has had an annual income of $200,000 or more in each of the two most recent years (or $300,000 jointly with a spouse) and who has a reasonable expectation of reaching the same income level during the current year

Accredited Investor

Primary market transactions would include which of the following? A) Sale of $10 million of corporate stock by a broker-dealer acting as a market maker B) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter C) Sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker D) Sale of $10 million of municipal bonds by a broker-dealer acting as a market maker

Sale of $10 million of corporate bond a broker dealer acting as an underwriter

Primary market transactions would include which of the following? A) Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter B) Sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker C) Sale of $10 million of municipal bonds by a broker-dealer acting as a market maker D) Sale of $10 million of corporate stock by a broker-dealer acting as a market maker

Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter

The Exchange Act is the Securities Exchange Act of 1934 and covers the ________________ markets

Secondary

No ___________________ or _______________ is allowed during the cooling off period

Selling, Soliciting

An offering that is a combination of primary and secondary

Split Offering

If an officer of a bank with the authority to purchase and sell securities on behalf of the bank wants to purchase new issues, which of the following statements is true? A) The officer may not purchase a new issue unless the amount he wishes to purchase is considered small in relation to the total offering. B) The officer may purchase a new issue because anyone is allowed to purchase new issues. C) The officer may not purchase a new issue because he is considered a restricted person. D) The officer may purchase a new issue because no banking rules prohibit it.

The officer may not purchase a new issue because he is considered a restricted person

Regarding primary offerings, which of the following is true? A) A corporation can have only one primary offering—the initial public offering (IPO). B) There is no limit to the number of primary offerings a corporation can issue. C) A corporation can have two primary offerings—the initial public offering (IPO) and an additional public offering (APO). D) After its initial public offering (IPO), a corporation can have only one more primary offering—its subsequent primary offering (SPO).

There is no limit to the number of primary offerings a corporation can issue

During the minimum 20-day cooling-off period, ________________ ________________ may be published, and a preliminary prospectus, also known as a ______________ ______________, may be distributed to prospective investors.

Tombstone Advertisements, Red Herring

In a Best Efforts Underwriting, the _________________ is not committed to purchasing the shares and is therefore not at risk

Underwriter

Broker-dealers who help issuers bring their securities to market in the primary market

Underwriters

What does USA stand for?

Uniform Securities Act

Type of underwriting where the underwriters (syndicate) buy securities from the issuer acting simply as an agent, not as principal

Best Efforts Underwriting

Which of the following calls for the underwriters to buy securities from the issuer acting as an agent, not as principal? A) Best efforts underwriting B) Follow-on offering C) Firm commitment underwriting D) Initial public offering

Best Efforts Underwriting

Which of the following calls for the underwriters to buy securities from the issuer acting as an agent, not as principal? A) Follow-on offering B) Initial public offering C) Best efforts underwriting D) Firm commitment underwriting

Best Efforts Underwriting

Period where underwriters may not distribute sales or advertising literature regarding the securities to be offered. However, they may distribute a preliminary prospectus intended to gather indications of interest and place tombstone ad

Cooling Off Period

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

Corporate securities can only be offered in public securities offerings

The Uniform Securities Act (USA) provides a legal framework for the registration of A) foreign securities traded abroad. B) variable annuities at both state and federal levels. C) securities at the state level. D) mutual funds at the federal level.

Securities at the State Level

Which of the following would not be expected to be found in a tombstone advertisement for a new issue? A) The number of shares to be offered B) The name of the issuer or those of the underwriters C) The intended purpose for which to use the sales proceeds D) The type of security to be offered (equity or debt)

The intended purpose for which to use the sales proceeds

During the cooling-off period, underwriters may not A) distribute sales literature or advertising material. B) distribute a preliminary prospectus. C) take indications of interest. D) place a tombstone advertisement.

Distribute sales literature or advertising material

IPOs, SPOs, and APOs are all ______________ offerings—those where the offering proceeds go to the issuer.

Primary

Where securities are sold to the investing public by the issuer wishing to raise capital

Primary Market

IPOs, SPOs, and APOs are all examples of what type of offering?

Primary Offering

Offering in which the proceeds raised go to the issuing corporation, municipality, or government

Primary Offering

Under the Securities Act of 1933, which of the following is a nonexempt security? A) U.S. government bonds B) Commercial paper C) Municipal bonds D) Shares issued by a U.S. government bond fund

Shares issued by a U.S. government bond fund

Offering where an Issuer who is already a publically traded company can register new securities without selling any of the shares until later or waiting to sell a portion of the shares

Shelf Offering

Type of offering, an issuer who is already a publically traded company can register new securities without selling any of the shares until later or waiting to sell a portion of the share

Shelf Offering

The requirement for a supplemental prospectus to be filed before each sale is applicable to A) initial public offering sales. B) additional issues. C) shelf registration sales. D) sales of shares in the secondary market.

Shelf Registration Sales

The requirement for supplemental prospectus to be filed before each sale is applicable to A) initial public offering sales. B) sales of shares in the secondary market. C) shelf registration sales. D) additional issues

Shelf Registration Sales

All of the following names describe the Securities Act of 1933 except A) The Prospectus Act. B) The Exchange Act. C) The Truth in Securities Act. D) The Full and Fair Disclosure Act.

The Exchange Act

Shelf offerings are covered under which if the following? A) The Bank Secrecy Act B) The Trust Indenture Act of 1939 C) The Securities Act of 1933 D) The Investment Company Act of 1940

The Securities Act of 1933

A corporation sells shares to the investing public in order to raise capital. This is known as A) a secondary market transaction. B) an exchange market execution. C) an issuer transaction. D) a primary, or investor-to-investor, transaction.

An Issuer Transaction

Intended purpose for which to use the sales proceeds would be expected to be found where?

Prospectus

Advertisement that is permitted to offer only bare bones facts about the new issue

Tombstone Advertisement

All the following are exempt from the Securities Act of 1933 except A) limited partnership. B) fixed annuity contracts. C) debt securities issued by religious organization. D) U.S. Treasury securities.

Limited Partnership

Type of prospectus that is used between the registration and effective dates, it is used to solicit or gauge indications of interest.

Preliminary Prospectus

Broker-dealers who sell out of their own account in the secondary market

Market Makers

Certain investors are deemed accredited when they have a net worth of A) $1 million. B) $500,000, not including net equity in the primary residence. C) $1 million, not including net equity in the primary residence. D) $200,000.

$1 million, not including net equity in the primary residence

The aftermarket prospectus requirement for exchange-listed securities is A) 90 days. B) 25 days. C) 40 days. D) 0 days.

0 Days

For new issues that qualify for listing on an exchange or Nasdaq, the prospectus delivery requirement period in the aftermarket (after the effective date) is __________ days.

25

Acts under contract with a municipality, providing advice on the structure and sale of the municipality's securities

Municipal Advisor

An official statement is a disclosure document that would be used in connection with an offering of which of the following securities? A) U.S. Treasury notes B) Common of preferred stock offered privately C) Limited partnership interests D) Municipal bonds

Municipal Bonds

Serves as a disclosure document and contains any material information an investor might need about a municipal bond issue

Official Statement

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 exceeds 15%. B) never. C) only if the interest does not exceed 10%. D) without restriction.

Only if the interest does not exceed 10%

Type of offering where the offering proceeds go to the issuer

Primary Offering

Offerings where the Issuer receives the sale proceeds

Primary Offerings

Both IPOs and APOs are ______________ offerings, where the _______________ receives the sale proceeds

Primary, Issuer

Covers the primary market and requires full and fair disclosure on new issues by providing a prospectus to the investor

Securities Act of 1933

For securities offered via a shelf registration, a __________________ ___________________ must be filed with the Securities and Exchange Commission (SEC) before each sale.

Supplemental Prospectus

Which of the following would be allowed during the cooling off period? A) Allocating shares to investors B) Taking indications of interest C) Taking orders D) Distributing a prospectus

Taking indications of interest

Which of the following would be allowed during the cooling off period? A) Taking orders B) Taking indications of interest C) Allocating shares to investors D) Distributing a prospectus

Taking indications of interest

The access equals delivery rule applies to A) all prospectuses delivered before the registration date. B) the final prospectus delivery requirements during the cooling-off period. C) the final prospectus and aftermarket delivery obligations. D) the preliminary prospectus delivery requirements during the cooling-off period.

The final prospectus and aftermarket delivery obligations

Which of the following would not be expected to be found in a tombstone advertisement for a new issue? A) The number of shares to be offered B) The type of security to be offered (equity or debt) C) The intended purpose for which to use the sales proceeds D) The name of the issuer or those of the underwriters

The intended purpose for which to use the sales proceeds

An underwriter is placing a tombstone advertisement for a company's new issue. A prospective investor might expect to see all of the following information on the advertisement except A) the number of shares to be sold. B) the type of security to be sold (stock or bond). C) the names of the underwriting members. D) the names of the company's officers.

The names of the company's officers

An issuer that is already a publically traded company wants to register new securities without selling any of the shares until later when it anticipates it will be retooling all of its existing manufacturing plants. Which of the following applies? A) This can be accomplished by utilizing a new initial public offering, which is necessary for registration of all new shares. B) This cannot be done because newly registered securities must be made available for sale immediately. C) This can be accomplished by utilizing an additional issue offering, which is specifically for publically traded companies wanting to register new shares to be issued later. D) This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later.

This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later

Provides a legal framework for the state registration of securities and may be adopted by individual states and adapted to their needs

Uniform Securities Act

Six days into the cooling-off period, an issuer receives a deficiency letter from the Securities and Exchange Commission (SEC) requesting clarification and corrections. Once the issuer submits these, and assuming that they satisfy the deficiency, the cooling-off period will resume. With no other deficiencies arising, the issue should become effective in A) 15 days. B) 8 days. C) 20 days. D) 14 days.

14 Days

After the issuer files a registration statement with the Securities and Exchange Commission (SEC), the time known as the cooling-off period begins. This allows a registration to become effective as early as A) 40 business days after the date the SEC has received it. B) 20 calendar days after the date the SEC has received it. C) 40 calendar days after the date the SEC has received it. D) 20 business days after the date the SEC has received it.

20 calendar days after the date the SEC has received it

For new issues that qualify for listing on an exchange or Nasdaq, the prospectus delivery requirement period in the aftermarket is _________ days

25

For a new issue that qualifies for Nasdaq listing, a prospectus must be provided to all purchasers within how many days after the effective date? A) 60 days B) 90 days C) 40 days D) 25 days

25 Days

For a new issue that qualifies for listing on an exchange, a prospectus must be provided to all purchasers for how many days after the effective date? A) 90 days B) 25 days C) 60 days D) 40 days

25 Days

For nonlisted and non-Nasdaq securities the prospectus delivery requirement period in the aftermarket (after the effective date) is _______ days.

40

For nonlisted and non-Nasdaq securities, the prospectus delivery requirement period in the aftermarket is _______ days

40

A company is looking to raise additional capital to fund an expansion plan. The company's senior management chooses to issue additional bonds to the general public. The best expression to explain this type of offering would be A) an initial public offering (IPO). B) a secondary offering. C) a private securities offering. D) a primary offering.

A Primary Offering

A municipal advisor does which of the following activities? A) Advises institutions on selling municipal bonds B) Advises institutions on buying municipal bonds C) Advises municipalities on selling securities D) Advises municipalities on buying securities

Advises municipalities on buying securities

Which type of underwriting is characterized by the broker-dealer buying the entire issue from the issuer and then reoffering it to the public? A) Best efforts B) Firm commitment C) Mini max D) All-or-none

Firm Commitment

Regarding the purchase of new equity issues by restricted persons, which statements are true? I. An investment club is permitted to buy a new equity issue at the offering price. II. An investment club is not permitted to buy a new equity issue at the offering price. III. An investment club that has eight members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price. IV. An investment club that has 12 members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price. A) I and III B) II and IV C) I and IV D) II and III

I & IV

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) without restriction. B) only if the interest exceeds 15%. C) only if the interest does not exceed 10%. D) never.

Only if the interest does not exceed 10%

The Access Equal Delivery rule does not apply to what type of prospectus?

Preliminary

IPOs, APOs, and shelf offerings are all examples of what type of offerings?

Publif Offerings

A preliminary prospectus is also known as a ________ _______________

Red Herring

Preliminary prospectus that may be distributed to prospective investors during the minimum 20 day cooling off period

Red Herring

Term that does not include key information about the issue such as price and the number of shares offered and is derived from the disclaimer printed in red on the cover page

Red Herring

A preliminary prospectus cannot be distributed before the _________________ date

Registration

If it finds that the registration statement needs revision, expansion, or to have corrections made, the Securities and Exchange Commission (SEC) may suspend the review of the new issue and issue a deficiency letter. Once the issuer submits a corrected registration statement, the 20-day cooling-off period A) begins anew. B) resumes where it had left off. C) is increased by 10 business days to accommodate review of the new information. D) considered over allowing the registration to be effective.

Resumes where it had left off

No _______________ or _________________ is allowed during the cooling off period. Taking indications of ___________________ is permitted.

Selling, Soliciting, Interest

Regarding primary offerings, which of the following is true? A) A corporation can have two primary offerings—the initial public offering (IPO) and an additional public offering (APO). B) A corporation can have only one primary offering—the initial public offering (IPO). C) After its initial public offering (IPO), a corporation can have only one more primary offering—its subsequent primary offering (SPO). D) There is no limit to the number of primary offerings a corporation can issue.

There is no limit to the number of primary offerings a corporation can issue

Regarding primary offerings, which of the following is true? A) After its initial public offering (IPO), a corporation can have only one more primary offering—its subsequent primary offering (SPO). B) There is no limit to the number of primary offerings a corporation can issue. C) A corporation can have only one primary offering—the initial public offering (IPO). D) A corporation can have two primary offerings—the initial public offering (IPO) and an additional public offering (APO).

There is no limit to the number of primary offerings a corporation can issue

Broker-dealers who help issuers bring their securities to market in the primary market.

Underwriters