SIE Unit 1 Lesson 1.1

The prospectus delivery requirement, access equals delivery, is satisfied when A) the preliminary prospectus has been filed with FINRA and is therefore available on FINRA's website for investors to see. B) the final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see. C) a red herring is initially sent by mail to investors during the cooling-off period. D) the final prospectus has been filed with Financial Industry Regulatory Authority (FINRA) and is available on FINRA's website for investors to see. Question ID: 1464980

B) the final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see. Beyond physical delivery of a paper prospectus, access equals delivery is the industry standard for meeting the final prospectus delivery requirements. It is deemed to be satisfied when the final prospectus has been filed with the SEC and is therefore available on the SEC's website for investors to log in and see. This standard does not apply to delivery of a preliminary prospectus before the effective date. LO 1.b

The aftermarket prospectus requirement for the IPO of nonlisted securities is A) 40 days. B) 25 days. C) 90 days. D) not specified in the Securities Act of 1933. Question ID: 1464990

C) 90 days. For the first 90 days following the IPO, a prospectus must be provided to purchasers in the secondary market. LO 1.b

An issuer files a registration statement with the SEC for the sale of new securities on May 1. While reviewing the registration statement, the SEC determines that it has not been filed properly and issues a deficiency letter on May 5. The issuer submits a corrected registration statement on May 8. Which of the following is true regarding the 20-day cooling-off period? A) It is halted on the day the deficiency letter is issued and resumes where it left off on the day the corrected registration is received. B) It is halted and does not resume until 20 days following the corrected registration is received. C) It is halted on the day the deficiency letter is issued and must begin anew from that same date once the corrected registration is received. D) It continues and is not impacted by the issuance of the deficiency letter by the SE. Question ID: 1464911

A) It is halted on the day the deficiency letter is issued and resumes where it left off on the day the corrected registration is received. When a deficiency letter is issued by the SEC to an issuer, the 20-day cooling-off period is halted. It resumes where it left off when the corrected registration statement is filed. In other words, the days that the cooling-off period are suspended do not count toward the 20 days. LO 1.b

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 names of the company's officers. B) the names of the underwriting members. C) the number of shares to be sold. D) the type of security to be sold (stock or bond). Question ID: 1464933

A) the names of the company's officers. Information on a tombstone, those advertisements allowed to be placed prior to the effective date, is limited to; name of issuer, type of security, number of shares to be sold, public offering price or expected range, and names of the underwriters or group. LO 1.b

The XYZ Company is looking to offer shares of its common stock to the public. Which of the following laws enacted by Congress would have the most relevance to the issuance of these securities? A) The Securities Investors Protection Act of 1970 B) The Trust Indenture Act of 1939 C) The Securities Act of 1933 D) The Investment Company Act of 1940 Question ID: 1464873

C) The Securities Act of 1933 The Securities Act of 1933, also known as the Paper Act or Prospectus Act, is the bedrock of all modern securities law. It requires issuers looking to make a public offering of securities to provide full and fair disclosure of all material facts about the company and the securities being offered. The company does this by registering its securities with the U.S. Securities and Exchange Commission (SEC), often with the aid of accountancy firms, securities attorneys, and underwriters. Part of the registration process for newly offered securities is the publishing of a prospectus which all prospective investors must receive at or prior to purchase. LO 1.a

What is the maximum number of nonaccredited investors allowed in a Regulation D exempt transaction under Rule 506(b)? A) None B) 25 C) 50 D) 35 Question ID: 1483010

D) 35 The SEC does not require registration of an offering under Regulation D as long as there are no more than 35 nonaccredited investors. There is no limit to the number of accredited investors that may invest in the private placement. LO 1.c

All of the following are exempt issuers under the Securities Act of 1933 except A) Helpful Charities, Inc. B) the State of Montana. C) the U.S. Treasury. D) ABC Broker-Dealer, which issues Treasury receipts. Question ID: 1483002

D) ABC Broker-Dealer, which issues Treasury receipts. A broker-dealer is not an exempt issuer. The federal government, states, and charities are examples of exempt issuers. LO 1.c

To qualify as an exempt transaction under Tier 1 of Regulation A, an issuer may offer a maximum of which of the following? A) Up to $5 million in securities in a 12-month period B) Up to $75 million in securities in a 12-month period C) Up to $6 million in securities in a 12-month period D) Up to $20 million in securities in a 12-month period Question ID: 1483006

D) Up to $20 million in securities in a 12-month period Securities offerings up to $20 million in a 12-month period will be allowed in Tier 1. Of the $20 million, no more than $6 million can be sold on behalf of existing selling shareholders (similar to a combination offering). The offering would be subject to a coordinated review by individual states and the SEC. LO 1.c

All the following are exempt from the Securities Act of 1933 except A) debt securities issued by religious organization. B) U.S. Treasury securities. C) fixed annuity contracts. D) limited partnership. Question ID: 1464995

D) limited partnership. Limited partnership interests are not exempt securities. The exempt securities include U.S. government securities, municipal bonds, commercial paper and banker's acceptances that have maturities of less than 270 days, insurance policies and fixed annuity contracts (but not variable annuities), charitable, religious, educational, and nonprofit association issues and more. LO 1.c

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) never. C) only if the interest exceeds 15%. D) only if the interest does not exceed 10%. Question ID: 1464887

D) only if the interest does not exceed 10%. Restricted persons will be able to have an interest in an account (one that is not wholly their own) that purchases new equity issues as long as no more than 10% of the account's beneficial owners are restricted persons. LO 1.a

In a split offering, A) shares are sold by existing shareholders only. B) all shares are issued to the public from existing shareholders. C) shares are issued to existing shareholders only. D) shares are issued from the corporation and sold by existing shareholders. Question ID: 1464845

D) shares are issued from the corporation and sold by existing shareholders. In a split offering, shares are sold to the public. These shares come from both the corporation (issuer) and existing shareholders. These offers are also called combination offers. LO 1.a