Series 65: Unit 8 Exam

Which of the following statements made by an investment adviser would violate the antifraud provisions of the Uniform Securities Act? A. "Our fees are nonnegotiable" when Form ADV Part 2A clearly indicates otherwise. B. "We have over $40 billion in assets under management representing both institutional and retail clients." C. "We require any associated person determining general investment advice to be a CFA." D. "We believe that fundamental analysis is the best way to select stocks for our clients."

"Our fees are nonnegotiable" when Form ADV Part 2A clearly indicates otherwise"

Under the Uniform Securities Act, which of the following is not a security? A. Commercial paper with a maximum maturity of 270 days B. Limited partnership in a cattle-breeding program C. A condominium purchased as a primary residence D. Treasury stock

A condominium purchased as a primary residence A personal residence, whether a condominium or other single-family home, is real estate, not a security.

Although certain common stocks, known as federal covered securities, are exempt from state registration, the Administrator has the power to request from the issuer all of the following except A. a contact person located within the state for purposes of legal service. B. a consent to service of process. C. copies of the registration statement filed with the SEC. D. a copy of the issuer's articles of incorporation.

A contact person located within the state for purposes of legal service The consent to service of process eliminates the need for any local representation for legal purposes.

Which of the following can issue stock? A. A city B. A state C. The U.S. Treasury D. A corporation

A corporation

Under the provisions of the Uniform Securities Act, all of the following transactions are exempt except A. transactions by executors. B. transactions in preorganization certificates if no commission is paid, no subscriber makes any payment, and the number of subscribers does not exceed 10. C. a transaction pursuant to an offer directed by the issuer to no more than 10 individual investors in the state within a 12-month period, as long as no payment is made. D. liquidation of a security pledged as collateral for a loan.

A transaction pursuant to an offer directed by the issuer to no more than 10 individual investors in the state within a 12-month period, as long as no payment is made A transaction pursuant to an offer by an issuer to no more than 10 noninstitutional persons in the state would qualify as a private placement and would be exempt. However, unlike a preorganization certificate, the subscribers do pay for their purchases. All the other transactions are exempt.

Included in the Uniform Security Act's definition of an exempt transaction would be any transaction by any of the following except A. a marshal. B. a guardian. C. a trustee in bankruptcy. D. a trustee of an irrevocable trust.

A trustee of an irrevocable trust Although the term trustee is found in the list of persons engaged in exempt transactions, the USA limits it to trustees in bankruptcy.

An application to register securities may be filed under the Uniform Securities Act by any of these except A. a person on whose behalf the offering is made. B. an issuer. C. an agent of a broker-dealer. D. a broker-dealer acting on behalf of the issuer.

An agent of a broker-dealer Agents of broker-dealers are not eligible to file a registration statement for a securities offering. Registration statements may be filed by a broker-dealer, a person on whose behalf the offering is made (e.g., an offering made by a large shareholder), or—more commonly—the issuer.

Under the Uniform Securities Act, which of the following would NOT be considered an exempt transaction? A. The sale of ABCD common stock, listed on the OTC Bulletin Board, to an insurance company. B. The sale of an unregistered nonexempt security to an individual client at that client's request. C. An agent sells U.S. treasury bonds to an individual client. D. An executor liquidates the estate's portfolio.

An agent sells U.S. treasury bonds to an individual client Even though the bonds are an exempt security, the sale to an individual client is not an exempt transaction. Sales to institutions, or sales by fiduciaries, or unsolicited transactions are all exempt.

All of the following situations are exempt transactions complying with the requirements of the Uniform Securities Act except A. Broker-Dealer A has put together a syndicate of 15 insurance companies and pension funds to purchase the entire issue of XYZ Corporation's preferred stock. B. the executor of an estate liquidates 1,000 shares of IBM held by the estate. C. Mammoth Mutual Fund purchased 250,000 shares of common stock in a nonissuer transaction. D. Broker-Dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days.

Broker-Dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days Under the Uniform Securities Act, an unregistered private placement may be offered to no more than 10 prospective purchasers, with the exception of financial institutions and other broker-dealers. Transactions by executors, the sheriff, marshals, receivers, trustees in bankruptcy, guardians, or conservators are exempt. Sales to financial institutions, such as mutual funds and insurance companies, are also exempt

XYZ Brick Company wishes to raise capital by issuing some securities in its home state. The CEO of the company feels that registration with the administrator is unnecessary because the issue is exempt. Should XYZ be served with a court order, the burden of proving its issue is exempt is on the A. court. B. administrator. C. company. D. CEO

Company

Under the Securities Act of 1933, which of the following securities is required to register with the SEC? A. Tupelo Mississippi Bridge revenue bonds B. Debentures of First Newtown Bank Holding Corporation C. 5-year Treasury notes D. GNMA pass-through certificates

Debentures of First Newtown Bank Holding Corporation Bank holding company securities are not exempt from registration requirements under the Securities Act of 1933. Treasury securities, agency securities (such as GNMA pass-through certificates), and municipal securities (such as revenue bonds) are exempt from registration requirements under the act.

When making a sales presentation to a prospective client, an agent of a broker-dealer would not be exempt from the antifraud provisions of the Uniform Securities Act if the product being offered was a A. futures contract. B. forex contract. C. fixed annuity. D. federal covered security.

Federal covered security

The U.S. Supreme Court case resulting in the decision that an investment contract is a security is the A. Golub case. B. Steiner case. C. Howey case. D. Muller case.

Howey case

Which of the following securities are exempt from registration under the Uniform Securities Act? 1. Municipal securities 2. Government securities 3. Stock or bonds issued by an insurance company authorized to do business in this state

Municipal securities, government securities, & stock or bonds issued by an insurance company authorized to do business in this state All government and municipal securities are exempt from registration requirements under the Uniform Securities Act, as are insurance company securities if the company is authorized to do business in this state.

Which of the following is an exempt security under the Uniform Securities Act? A. Common stock traded on the London Stock Exchange B. Negotiable certificates of deposit with $100,000 denominations C. Commercial paper maturing in 12 months D. Shares of a U.S.-based insurance company not authorized to sell policies in that particular state

Negotiable certificates of deposit w/ $100k denominations

As referred to in the NSMIA, the term federal covered security would apply to which of the following? 1. Preferred stock in the XYZ Corporation whose common stock is listed on the NYSE 2. Common stock in ABCD, Inc., a stock traded on the OTC Link 3. Springfield, Illinois, municipal bonds sold to a resident of Springfield, Illinois 4. Springfield, Illinois, municipal bonds sold to a resident of Springfield, Missouri

Preferred stock in the XYZ Corporation whose common stock is listed on the NYSE and Springfield, Illinois, municipal bonds sold to a resident of Springfield, Missouri

All of the following are exempt securities under the Uniform Securities Act except A. securities issued by a Canadian province. B. securities issued by the Canadian government. C. securities issued by a federal savings and loan association. D. securities issued by a bank holding company.

Securities issued by a bank holding company Securities issued by a bank are exempt. However, this answer refers to a bank holding company that is considered to be an ordinary company subject to state registration if not otherwise exempt

Following the publication of a tombstone advertisement relating to an issue undergoing registration with SEC, an agent of a broker-dealer receives a call from a client who expresses the desire to purchase 100 shares at the best available price. The agent is permitted to A. send a preliminary prospectus. B. send in-house research. C. submit a pending order. D. send published articles about the issuer.

Send a preliminary prospectus

Which of the following statements regarding the Uniform Securities Act (USA) are true? 1. State securities Administrators may deny, by rule or order, an exemption to an exempt transaction under the USA, if the security involved is not covered by federal exemption. 2. State securities Administrators may not deny, by rule or order, an exemption to an exempt transaction under the USA if the security involved is not covered by federal exemption. 3. State securities Administrators may deny, by rule or order, an exemption to a federal covered security. 4. State securities Administrators may not deny, by rule or order, an exemption to a federal covered security.

State securities Administrators may deny, by rule or order, an exemption to an exempt transaction under the USA, if the security involved is not covered by federal exemption & State securities Administrators may not deny, by rule or order, an exemption to a federal covered security State securities Administrators may deny, by rule or order, an exemption to an exempt transaction under the USA unless the security involved is covered by a federal exemption. State securities Administrators may not, however, deny an exemption provided to a federal covered security. Federal covered securities are granted exemption from state registration by federal law, so the state Administrator has no authority to deny the exemption granted by the federal government.

Which of the following transactions are not exempt from registration? A. Transactions with pension or profit-sharing trusts B. Transactions with intrastate manufacturing companies C. Isolated nonissuer transactions D. Unsolicited nonissuer transactions

Transactions with intrastate manufacturing companies A transaction with a corporation that is not a financial institution is neither an exempt transaction nor exempt from the registration rules.

Under the registration provisions of the Uniform Securities Act, it is unlawful for an agent in the state to sell XYZ securities unless A. XYZ is a federal covered security. B. the agent is a nonregistered, nonexempt person. C. both the agent and XYZ are nonexempt and nonregistered. D. XYZ is a nonregistered, nonexempt security.

XYZ is a federal covered security If XYZ is a federal covered security, it is not required to register with the state. Nonexempt securities and nonexempt persons must be registered to be sold (securities) or to do business (persons).

A transactional exemption would be available under the Uniform Securities Act when an agent for a broker-dealer A. sells a retail client $10,000 of U.S. Treasury bonds. B. receives an unsolicited order from a client to purchase heating oil contracts. C. sells a large block of an unregistered nonexempt security to an insurance company that is not authorized to do business in this state. D. sells a large block of an unregistered nonexempt security to an individual who meets the definition of an accredited investor.

Sells a large block of an unregistered nonexempt security to an insurance company that is not authorized to do business in this state The sale of a security to an institution, such as an insurance company, is considered an exempt transaction. The fact that the company is not authorized to do business in the state only means that its securities would not be exempt, but that does not change the fact that this is a sale to an institution and is, therefore, exempt. The term accredited investor is meaningless here; only institutions qualify for exempt treatment, not rich people. The T-bonds are an exempt security, but the sale to a retail client is not an exempt transaction. Heating oil contracts are a commodity, not a security.

Parsimonious Planning Associates (PPA), an investment adviser with over $250 million in assets under management, is accused of violating the antifraud provisions of the Uniform Securities Act. Which of the following statements is true? A. The Administrator of the state where PPA's principal office is located is the only person authorized to investigate the charge. B. The Administrator of the state where the alleged fraud occurred may investigate the charge. C. Because PPA is a federal covered adviser, only the SEC has the jurisdiction to investigate the charge. D. No investigation may take place until the charges are proven true.

The Administrator of the state where the alleged fraud occurred may investigate the charge Once an investment adviser's AUM reaches $110 million, registration with the SEC is required. That makes PPA a federal covered adviser. Although covered advisers are exempt from the jurisdiction of the state for most things, one area in which they are not is when the antifraud provisions of the USA are breached. In that case, jurisdiction will usually rest with the Administrator of the state where the alleged fraudulent activity took place. In some states, the Administrator will refer the charges to the Administrator of the state where the investment adviser's principal office is located, but that is not mandatory. Because the violation is of the USA, the SEC has no jurisdiction. Without an investigation, how can the charges be proven true (or false)?

A client wants to purchase commercial paper. The licensed agent may indicate to the client that the security need not be registered if which of these are true? 1. The minimum denomination is $50,000. 2. The maximum maturity is 270 days. 3. It is rated in one of the three highest rating categories by a recognized rating agency. 4. It is in book-entry form.

The minimum denomination is $50,000; the maximum maturity is 270 days; & it is rated in one of the three highest rating categories by a recognized rating agency Commercial paper may qualify as an exempt security if the minimum denomination is $50,000, has a maturity of not more than 270 days, and is rated in one of the three highest rating categories by a nationally recognized rating agency. It may or may not be in book-entry form (electronic records with no paper certificate); that has nothing to do with an exemption from registration. How do we know this is referring to the exemption under the Uniform Securities Act instead of the Securities Act of 1933, which has no rating requirement? The first reason, and most important, is that this is the NASAA exam; by default, unless stated otherwise, all questions refer to the USA and NASAA model rules. The second is the use of the term agent. That is a registration designation found only in state law.

Under the Uniform Securities Act, one method of securities registration is qualification. When that method is used, which of the following statements is correct? 1. The registration is valid for one year from the effective date. 2. The registration is valid for one year from the effective date unless the underwriter or issuer still has some unsold shares. 3. The registration is valid until the next December 31st. 4. The registration statement may be amended to increase the number of shares in the offering as long as the public offering price and the underwriter's compensation are not changed.

The registration is valid for one year from the effective date unless the underwriter or issuer still has some unsold shares & The registration statement may be amended to increase the number of shares in the offering as long as the public offering price and the underwriter's compensation are not changed Under the USA, when a security is registered, the registration is valid for one year after the effective date. However, the act provides that if the issuer or underwriter still has unsold shares from the offering, the effective date may be extended, so this is a more accurate choice. The act also allows the registration statement to be amended to allow for an increase in the number of shares to be offered as long as the public offering price and the underwriter's compensation are not changed.

All of the following must be specified in the state registration statement of the security except A. a stop order from any other state that affects the offering of the security within that state. B. the total amount of the security that will be offered in each state. C. the total amount of the security that will be offered in this state. D. all other states where the security is currently registered or will be registered.

The total amount of the security that will be offered in each state The total amount of the security to be offered in other states need not be specified, although identifying those states is required. The amount of the security to be offered in the state of registration is required, as it generally provides the basis on which the registration fee is calculated. A stop order from another state that affects the offering of the security within the state must be included. The registration statement will always describe the intended use of the proceeds.

Which of the following statements regarding the private placement exemption under the USA are TRUE? 1. There may be no more than ten offers to noninstitutional purchasers during any consecutive 12-month period. 2. The seller reasonably believes that the retail buyer is purchasing for investment only. 3. No investors may resell stock acquired in a private placement without a prescribed holding period. 4. Commissions may be paid on sales to noninstitutional purchasers.

There may be no more than ten offers to noninstitutional purchasers during any consecutive 12-month period and the seller reasonably believes that the retail buyer is purchasing for investment only There is a limit of 10 offers during any 12 months to noninstitutional (retail) purchasers. Because the purchase is "for investment purposes only", the seller must have reason to believe that retail buyers intend to hold the security rather than turn it over quickly. However, that holding period is only for retail buyers; there is no holding period for institutional purchasers and it is only on institutional transactions that commissions may be paid.

Under the Uniform Securities Act, which of the following statements are true regarding private placements? 1. They may be offered to no more than 10 persons in a state in a 12-month period. 2. They may be offered to an unlimited number of institutional investors. 3. Institutional buyers need not be purchasing for investment.

They may be offered to an unlimited number of institutional investors and institutional buyers need not be purchasing for investment With the exception mentioned shortly, private placements are transactions resulting from offers to no more than 10 noninstitutional persons (retail clients) in 12 months for investment purposes only. The offeror must be convinced that retail clients are purchasing for investment purposes. This means no immediate resale intentions are allowed on the buyer's part. No commissions may be paid, directly or indirectly, for these transactions. The exception is that sales to institutional purchasers are exempt from the limitations regarding number of offers, immediate resale restrictions, and commissions. They may, therefore, be offered to more than 10 persons. (Remember that the term person is defined very broadly in the act.)

The Uniform Securities Act provides an exemption from registration for certain securities and for certain transactions. However, the Administrator is not empowered to deny an exemption from state registration to which of these? 1. U.S. government securities 2. Private placement transactions 3. A transaction with an insurance company 4. Municipal bonds issued by another state

U.S. government securities & municipal bonds issued by another state Other than in a transaction involving a federal covered security, the Uniform Securities Act gives the power to the Administrator to deny an exemption to any exempt transaction, such as private placements or transactions with professional investors (e.g., insurance companies or bank trust departments). However, when it comes to a security's exemption, the Administrator may only deny exempt security status to an issue of a nonprofit organization or an investment contract issued in connection with an employee benefit plan, never a U.S. government security or one issued by another state.

Which of the following are exempt transactions under the Uniform Securities Act? 1. XYZ Company signs an agreement to sell 1 million shares of its stock to ABC broker-dealer, who will then act as an underwriter in marketing the shares to the public. 2. There is a nonissuer sale of securities listed on the Nasdaq Stock Market to several individual clients of the agent. 3. Johan sells 100 shares of an unregistered security he owns to his next-door neighbor for $1,000. 4. A customer calls a registered agent and asks to buy 1,000 shares of SPHG, a company the representative is not familiar with, and the representative fills the order.

XYZ Company signs an agreement to sell 1 million shares of its stock to ABC broker-dealer, who will then act as an underwriter in marketing the shares to the public; Johan sells 100 shares of an unregistered security he owns to his next-door neighbor for $1,000; & a customer calls a registered agent and asks to buy 1,000 shares of SPHG, a company the representative is not familiar with, and the representative fills the order Transactions between an issuer and an underwriter, isolated nonissuer transactions (Johan), and unsolicited nonissuer transactions (SPGH) are exempt under the Uniform Securities Act. Transactions in federal covered securities (listed on national exchanges or the Nasdaq Stock Market) are transactions in an exempt security, but because the sales are being made to individual clients, the transactions might not be exempt.

As enumerated in the Uniform Securities Act, exempt securities would include those issued by all of these except A. a corporation based in Toronto, Ontario, whose common stock trades on the Toronto Stock Exchange. B. a sovereign foreign government with which the United States maintains diplomatic relations. C. any credit union organized and supervised under the laws of this state. D. a promissory note that evidences an obligation to pay cash within nine months after the date of issuance, is issued in denominations of at least $50,000, and receives a rating in one of the three highest rating categories from a nationally recognized statistical rating organization.

A corporation based in Toronto, Ontario, whose common stock trades on the Toronto Stock Exchange Although securities issued by the Canadian government or any political subdivision are exempt, those issued by Canadian corporations would only be exempt if trading on U.S. exchanges as federal covered securities.

The Uniform Securities Act considers certain transactions to be exempt from the requirements to register and to file advertising material. Included in that group are all of the following except A. any offer or sale to a pension or profit-sharing trust, as long as the plan has assets of no less than $750,000. B. any transaction executed by a bona fide pledgee without any purpose of evading the act. C. any transaction by an executor, administrator, sheriff, marshal, or guardian. D. an isolated nonissuer transaction effected through a broker-dealer.

Any offer or sale to a pension or profit-sharing trust, as long as the plan has assets of no less than $750,000 In general, the USA does not consider a transaction with an employee benefit plan to be exempt unless the plan has assets of at least $1 million.

When the Uniform Securities Act (USA) refers to unsolicited orders, which of the following is true? A. If the order ticket is appropriately marked, the Administrator may not challenge a broker-dealer's assertion that the order was unsolicited. B. Under certain conditions, an Administrator may prohibit a broker-dealer registered in the state from accepting any unsolicited orders. C. A client may not purchase, at her own initiative, securities trading in the secondary market if the agent is otherwise prohibited from soliciting the order. D. Unsolicited orders are defined as exempt transactions under the USA.

Unsolicited orders are defined as exempt transactions under the USA Customers have the right to buy or sell whatever they may desire. The issue becomes who initiates the trade. An unsolicited transaction may be executed by an agent if it is the client who asks for the trade. The trade ticket should be marked as unsolicited. The state securities Administrator has the right to seek verification from the client that the trade was, in fact, unsolicited. The security involved in the trade can be one that is nonexempt and unregistered in the state.

When a security is being registered under coordination, all of the following are required except A. none of these are exceptions. B. filing with the administrator a statement of the maximum and minimum proposed offering price and maximum underwriting discounts or commissions concurrently with the filing of the registration statement with the SEC. C. prompt filing with the administrator of any amendments filed with the SEC. D. a description of the proposed use of the proceeds of the underwriting.

Filing with the administrator a statement of the maximum and minimum proposed offering price and maximum underwriting discounts or commissions concurrently with the filing of the registration statement with the SEC The statement of the maximum and minimum proposed offering prices and the maximum underwriting compensation must be filed at least two full business days before the effective date, not with the initial filing.

Which of the following financial instruments are considered securities under the Uniform Securities Act? 1. Collateral trust certificates 2. Investment contracts, including interests in oil and gas drilling partnerships 3. Options listed on the Chicago Board Options Exchange 4. Foreign currency options contracts traded on the Philadelphia Stock Exchange

Collateral trust certificates, investment contracts, including interests in oil and gas drilling partnerships, options listed on the Chicago Board Options Exchange, & foreign currency options contracts traded on the Philadelphia Stock Exchange Collateral trust certificates, investment contracts, options, and option contracts, regardless of the underlying asset, are identified as securities in the Uniform Securities Act and are subject to its provisions. Currencies are not securities, but options on currencies are. The key to questions like this is to remember those things that are not securities.

Which of the following securities are NOT exempt from state registration? A. An investment contract issued by the pension fund of ABC Corporation, a large manufacturing corporation whose shares are traded on the New York Stock Exchange. B. Securities issued by Jones Corporation, whose shares are publicly traded in Kansas and entirely owned by Kansas residents. C. Securities issues by the Episcopal diocese of Cleveland, Ohio. D. Securities issued by the Japanese government.

Securities issued by Jones Corporation, whose shares are publicly traded in Kansas and entirely owned by Kansas residents The Episcopal diocese of Cleveland, Ohio, and the Japanese government are exempt issuers; therefore, their securities are exempt. ABC Corporation is listed on the NYSE and is exempt from state registration. Publicly traded intrastate offerings are required to register with the state Administrator where the issue is offered.

Which of the following would not be considered a fraudulent or prohibited business practice? A. Omitting a material fact because the agent felt the client would not understand the information involved B. Larger-than-ordinary commissions without prior disclosure to the client C. Attempting to solicit a trade in unregistered exempt securities with an individual client D. Submitting a trade order for a potential client who has promised that the new account will be opened tomorrow

Attempting to solicit a trade in unregistered exempt securities with an individual client Even though the security is unregistered, because it is exempt, no registration is required. Material information must be disclosed, even if the client doesn't understand its meaning. No trades can take place until an account is opened, and although there are circumstances that permit larger-than-ordinary commissions, that fact must be disclosed to the client.

Section 402(a) of the Uniform Securities Act contains a lengthy list of securities that are exempt from the registration and advertising filing requirements of the act. Included in that list would be all of the following except A. church bonds. B. common stock listed on the NYSE. C. bonds issued by the city of Berlin, Germany. D. municipal bonds.

Bonds issued by the city of Berlin, Germany Securities exempt from state registration include those issued by a U.S. or Canadian governmental unit, such as municipal bonds, and securities issued by nonprofit and charitable organizations, such as church bonds. However, bonds issued by a nonsovereign foreign government (cities, etc.) are not considered exempt securities unless guaranteed by the sovereign (Germany, in this case) government. Even before the NSMIA created the exemption for federal covered securities, those listed on the NYSE received what was called the blue-chip exemption.

Which of the following securities are federal covered and exempt from state registration? 1. Bonds of an issuer whose common stock is listed on the NYSE 2. Bonds of an issuer whose common stock is listed on the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]) 3. Stock traded on Nasdaq 4. Registered investment company securities

Bonds of an issuer whose common stock is listed on the NYSE, bonds of an issuer whose common stock is listed on the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]), stock traded on Nasdaq, & registered investment company securities All securities of an issuer whose common stock is listed on any national exchange or any tier of the Nasdaq Stock Market are exempt from state registration, including any securities of the same issuer senior to such securities. All registered investment company securities are also exempt from state registration.

The Securities Act of 1933 regulates A. broker-dealers and associate members. B. self-regulatory organizations (SROs). C. investment advisory firms. D. offerings of new securities.

Offerings of new securities The Securities Act of 1933 is designed to prevent fraud and protect the public from misrepresentation in the marketing of new issues. Remember, the Securities Act of 1933 deals with new issues, whereas the Securities Exchange Act of 1934 deals with the secondary market, persons (i.e., broker-dealers, associate members), and exchanges.

Under the Uniform Securities Act, bonds issued by which of the following are nonexempt securities? A. ABC, Inc., of Canada, a distributor of beverages in the United States and other countries B. Canadian national government C. Canadian province of Ontario D. Canadian city of Montreal

ABC, Inc., of Canada, a distributor of beverages in the United States and other countries Government bonds issued by nations with which the U.S. maintains diplomatic relations, such as Canada, are exempt securities under the USA. In addition, securities issued by Canadian political subdivisions are also exempt from registration. For example, the province of Ontario and the city of Montreal are Canadian political subdivisions and therefore exempt. No exemption from the USA is available for corporate securities issued in countries with which the U.S. has diplomatic relations.

Common stock of KAPCO, Inc., trades on the NYSE. Which of the following securities would not be exempt from registration under the Uniform Securities Act? A. Limited partnership interests in a shopping center with KAPCO, Inc., as the general partner B. KAPCO noncumulative preferred stock C. KAPCO, Inc., subordinated debentures, traded on the OTC Pink Market D. Stock rights to acquire KAPCO common stock

Limited partnership interests in a shopping center with KAPCO, Inc., as the general partner When an issuer's stock is listed on the NYSE, any security it issues that is equal to or senior to that stock is a federal covered security and exempt from registration with any state. Remember that any debenture is senior to the issuer's stock. When that issuer acts as a general partner in a real estate offering, it is not its security that is being sold, so the exemption does not apply.

To which of the following situations does the transaction exemption apply? A. Offering an unregistered security to a maximum of 12 individual customers in a 10-month period B. City of Chicago bond offering C. The sale of an estate's holding of IBM shares by an executor D. Canadian government bond offering

The sale of an estate's holding of IBM shares by an executor An exempt transaction relieves the security from any state advertising or registration requirements. Transactions by executors and estate administrators are examples of exempt transactions. Municipal and government bonds are exempt securities, and whether or not they are exempt transactions depends on to whom or how they are sold (that information is not given in this question). The sale of the unregistered stock is not an exempt transaction (private placement) because the USA only permits offers to a maximum of 10 noninstitutional investors over a 12-month period.

XYZ Corporation is registering a new issue of common stock. A final prospectus must be delivered within the statutory time limits to A. any person solicited by a registered agent. B. any person who is employed by the issuer. C. any person who has submitted an indication of interest. D. any person who purchases shares of the issue.

Any person who purchases shares of the issue Under both the Securities Act of 1933 and the Uniform Securities Act, a prospectus must be given to any purchaser of a new issue of common stock. Under federal law, the time limit is no later than completion of the trade. Under state law, the prospectus has to be delivered prior to the sale, not the offer. Those solicited by an agent will generally received the red herring (preliminary) prospectus, not the final prospectus. And those who receive the red herring may submit an indication of interest. Those turning in an indication of interest are required to receive a final (effective) prospectus only if they decide to purchase.

Which of the following securities of Synergy, Inc., an issuer whose stock trades on the Nasdaq Stock Market, does not have an exemption from registration with the state? A. Synergy, Inc., senior bonds B. Synergy, Inc., preferred stock C. Synergy, Inc., debentures D. Synergy's oil and gas limited partnership units (Synergy, Inc., is the general partner)

Synergy's oil and gas limited partnership units (Synergy, Inc., is the general partner) Synergy's oil and gas limited partnerships are not issued by Synergy, Inc.; Synergy is only the general partner. The oil and gas partnerships are issued by separate legal entities; they do not have the blue-sky exemptions. They must be registered in the states in which they are sold, unless they have some other exemption. Any security equal or senior in claim to an exempted common stock is exempted as well. The company's preferred stock, senior bonds, and debentures all have blue-sky exemptions from state registration because the company's common stock is traded on the Nasdaq Stock Market.

Under the National Securities Markets Improvement Act of 1996, which of the following describe federal covered securities? 1. A security registered under the Uniform Securities Act 2. A security registered under the Investment Company Act of 1940 3. A security of a company traded on the Nasdaq Stock Market 4. A security issued by the U.S. government

A security registered under the Investment Company Act of 1940, a security of a company traded on the Nasdaq Stock Market, and a security issued by the U.S. government A federal covered security has a federally imposed exemption from state registration, so selecting a choice that includes registering under the USA cannot be correct. The list includes most securities exempt from registration under the federal Securities Act of 1933 (those issued by the U.S. government and state and local governments). In addition, it includes a number of securities registered with the SEC, primarily those traded on the exchanges and Nasdaq, as well as investment companies registered under the Investment Company Act of 1940.

Which of the following are issuers of securities? 1. ABC Manufacturing Corporation borrows in the capital markets by selling bonds every few months. 2. Dot.Com, Inc., in an initial public offering, sells all its securities to the public within a few minutes after the shares go public. 3. XYZ Corp., in an initial public offering, fails to sell any shares to the public because it is not an attractive investment. 4. YYY Corp., with 1 million shares outstanding, sells additional shares to the public in a primary offering.

ABC Manufacturing Corporation borrows in the capital markets by selling bonds every few months; Dot.Com, Inc., in an initial public offering, sells all its securities to the public within a few minutes after the shares go public; XYZ Corp., in an initial public offering, fails to sell any shares to the public because it is not an attractive investment; & YYY Corp., with 1 million shares outstanding, sells additional shares to the public in a primary offering ABC Manufacturing Corp. is an issuer raising debt capital, whereas Dot.Com, Inc., is an issuer raising equity capital. YYY Corp. is an issuer raising equity capital by selling additional new shares in a public primary offering. XYZ Corp. is an issuer despite its failure to sell any shares. The USA defines an issuer as a person that issues or proposes to issue a security. It is not necessary that an issuer actually issue the shares it proposes to issue.

In the Howey decision, the U.S. Supreme Court held that in order for an investment contract to be considered a security, it must represent A. debt in a publicly traded corporation whose managers are engaged in commercial activity. B. an investment of money in a common enterprise with the expectation of profit from the efforts of the investor. C. an investment of money in a common enterprise with the expectation of profit from the managerial efforts of others. D. personal interest in a business.

An investment of money in a common enterprise with the expectation of profit from the managerial efforts of others In the Howey decision, the U.S. Supreme Court held that a security must represent an investment of money in a common enterprise with the expectation of profit from the managerial efforts of others.

Which of the following would be a nonissuer transaction? 1. XYZ Corporation sells 100,000 shares of previously issued common stock out of its treasury. 2. GEMCO Mutual Fund sells 100,000 shares of XYZ Corporation common stock out of its portfolio. 3. Curt sells 1,000 shares of Giggle common stock to Chuck in an isolated transaction. 4. Dave reinvests his dividend into additional shares of GEMCO Mutual Fund.

GEMCO Mutual Fund sells 100,000 shares of XYZ Corporation common stock out of its portfolio & Curt sells 1,000 shares of Giggle common stock to Chuck in an isolated transaction In a nonissuer transaction, the proceeds of the sale go to someone other than the issuer. When a mutual fund liquidates a holding in its portfolio, the fund receives the proceeds, not the issuer. One individual selling his stock to another is the classic example of an isolated nonissuer transaction. A corporation selling stock out of its treasury receives the money from the sale, and dividend reinvestment purchases shares directly from the mutual fund.

Which of the following would be considered an issuer transaction as defined in the Uniform Securities Act? A. In its capacity as a market maker, LMN Securities Co. sells 200 shares of GEMCO common stock to the corporate treasurer of GEMCO, buying for the company's investment account. B. GEMCO, traded on the Nasdaq Stock Market, sells 5,000 shares of its stock to LMN Securities Co., a registered market maker in GEMCO stock. The stock was donated to GEMCO by a former officer of the firm. C. Ken, the largest shareholder in ABC Corporation, sells 100,000 shares in a registered secondary transaction. D. Barb, the largest shareholder in XYZ Corporation, purchases an additional 50,000 shares on the NYSE.

GEMCO, traded on the Nasdaq Stock Market, sells 5,000 shares of its stock to LMN Securities Co., a registered market maker in GEMCO stock. The stock was donated to GEMCO by a former officer of the firm

Federal covered securities, as defined under the Uniform Securities Act, A. include shares of an investment company registered with the SEC under the Investment Company Act of 1940 B. would not include securities senior to a common stock listed on the NYSE C. must be registered in the state before they can be offered within the state D. must be registered with the SEC before they can be offered in the state

Include shares of an investment company registered with the SEC under the Investment Company Act of 1940 It is true that many federal covered securities are registered with the SEC. However, the term also includes those exempt from registration, such as government and municipal bonds. Although these investment company securities are exempt from registration in any state, the state may still require a notice filing, including a consent to service of process and payment of fees, for these offerings to be sold in the state. If the common stock is a covered security, as one listed on the NYSE would be, then any security with a senior claim, such as preferred stock or bonds, would also be considered federal covered.

A private company can become a public company through A. a buyout. B. a special purpose acquisition company. C. a private placement. D. a liquidation.

A special purpose acquisition company An SPAC raises money through an IPO. It then takes that money and purchases one or more private companies. The effect of this is that the formerly privately held company is now publicly traded through the shares of the SPAC. Private placements allow a private company to raise capital but not take it public. Buyouts can result in a public company going private. When a company liquidates, it no longer exists.

Each of the following persons is able to issue securities except A. a partnership. B. a credit union. C. an individual. D. a corporation.

An individual

Under both federal and state law, an exemption from registration is granted to municipal bonds. Qualifying for that exemption would be all of the following except A. bonds issued by a school district. B. bonds issued by a state. C. bonds issued by a city. D. bonds issued by the U.S. Treasury.

Bonds issued by the U.S. Treasury Municipal bonds are those issued by any governmental unit from the state level on down. This includes political subdivisions and local entities such as school, park, and road districts. Treasury bonds are government, not municipal, bonds.

Which of the following securities are not subject to state registration under the Uniform Securities Act? 1. Equipment trust certificates issued by a railroad subject to federal regulation 2. Preferred stock of a bank holding company listed on the New York Stock Exchange 3. Subordinated convertible debentures issued by the Dominion Electric Company of Canada, a public utility regulated by the Canadian federal government 4. Shares of a savings and loan association authorized to do business in the state

Equipment trust certificates issued by a railroad subject to federal regulation; preferred stock of a bank holding company listed on the New York Stock Exchange; subordinated convertible debentures issued by the Dominion Electric Company of Canada, a public utility regulated by the Canadian federal government; & shares of a savings and loan association authorized to do business in the state Securities exempt under the USA include bank issues, savings and loan issues, and common carriers or public utilities regulated by the U.S. or Canadian federal government. Securities issued by bank holding companies that trade on SEC-regulated exchanges are federal covered securities and are not subject to state registration.

Sales made under the provisions of Rule 506(b) of Regulation D must be reported on A. Form 506. B. Form U4. C. Form 13F. D. Form D.

Form D Form D is the form that must be filed electronically with the SEC no later than 15 days after the first sale of securities in the offering.

Fearing loss of a potential sale, an agent omits facts that a prudent investor requires to make informed decisions. Under the Uniform Securities Act, this action is A. fraudulent for exempt securities only. B. not fraudulent if there was willful intent to omit the information. C. fraudulent for nonexempt securities only. D. fraudulent for both exempt and nonexempt securities.

Fraudulent for both exempt and nonexempt securities

Which of the following would not be considered a nonissuer transaction as defined in the Uniform Securities Act? A. In its capacity as a market maker, XYZ Securities sells 200 shares of Gemco common stock to the corporate treasurer of Gemco, buying for the company's investment account. B. Buffy Warren, the largest shareholder in Barkshire Mathaway, purchases an additional 50,000 shares on the NYSE. C. Gemco, traded on the Nasdaq Stock Market, sells 5,000 shares of its stock to LMN Securities Co., a registered market maker in Gemco stock. The stock was donated to Gemco by a former officer of the firm. D. Gates Williams, the largest shareholder in Maxihard Corporation, sells 100,000 shares in a registered secondary transaction.

Gemco, traded on the Nasdaq Stock Market, sells 5,000 shares of its stock to LMN Securities Co., a registered market maker in Gemco stock. The stock was donated to Gemco by a former officer of the firm A nonissuer transaction is one in which the issuer does not receive the proceeds of the sale. When a stockholder sells his shares, he is the one who receives the money, not the issuer. Purchases are never considered issuer transactions because the money is going out, not coming in. When an issuer sells shares, whether in a primary or secondary transaction (as is the case with the donated shares), if it receives the proceeds, it is an issuer transaction.

Which of the following would be included in the USA's definition of "exempt transaction"? 1. Isolated nonissuer transactions. 2. Private placements. 3. Sales by fiduciaries. 4. Sales of registered nonexempt securities by agents to their individual clients.

Isolated nonissuer transactions, private placements, & sales by fiduciaries The term" exempt transaction" includes sales by fiduciaries, private placements and isolated nonissuer transactions. Any solicited sale to an individual client, even of a properly registered security, is not an exempt transaction.

In the event that a filing with the state securities Administrator is found to have material misstatements or omissions, a correcting amendment must be filed A. within seven business days of the discovery. B. with a new consent to service of process. C. promptly. D. with the Administrator and the SEC fraud division within five business days of the discovery.

Promptly If a filing with the Administrator is found to have material misstatements or omissions, an amendment must be filed promptly with the office of the Administrator.

In which of the following does registration of an issue become effective when ordered by the Administrator? A. Coordination B. Integration C. Qualification D. Notice filing

Qualification The effective date of registration by qualification is set by the Administrator. The effective date under registration by coordination is set by the SEC, and notice filing is merely the filing of certain documents in order for the registrant to be able to offer securities in that state.

The acronym SPAC stands for A. special premium asset corporation. B. supervisory principal account certification. C. senior partner authorization certificate. D. special purpose acquisition company.

Special purpose acquisition company SPAC refers to a special purpose acquisition company. An SPAC is a shell company that is formed to raise capital through an IPO for the purpose of acquiring a private company or business to be identified after the IPO.

Securities issued by which of the following are exempt from the registration and disclosure requirements of the Uniform Securities Act (USA)? 1. The United States or any territory 2. A state or political subdivision of a state 3. A common carrier (e.g., a railroad) regulated in respect to its rates and charges by the United States or a state 4. Banks and savings institutions

The United States or any territory, a state or political subdivision of a state, a common carrier (e.g., a railroad) regulated in respect to its rates and charges by the United States or a state, & banks and savings institutions The Uniform Securities Act exempts all of the securities listed from registration and disclosure requirements. Banks and common carriers are under the regulatory supervision of other government agencies.

All of the following are exempt from state registration except A. fixed-income securities issued by a bank. B. fixed annuities issued by a small insurance company. C. variable annuities issued by a major insurance company. D. common stock in Mutual Savings Bank.

Variable annuities issued by a major insurance company Fixed annuities are not securities, so there is no registration required. Of the other choices listed, only variable annuities are required to be registered.

The Uniform Securities Act would consider which of the following insurance products to be a security? A. Modified endowment life insurance B. Mortgage life insurance C. Variable life insurance D. Fixed annuity

Variable life insurance

According to the Uniform Securities Act, each of the following is a security except A. a contract in soybean futures. B. an interest in a condominium project with a rental pool. C. a U.S. Treasury bill. D. a limited partnership in an oil and gas exploration program.

A contract in soybean futures Interests in a condominium complex that has a rental pool feature, U.S. Treasury bills, and limited partnership interests in oil and gas exploration programs are securities under the USA. The USA excludes certain financial instruments from the term security, such as term and whole insurance policies, commodity futures contracts, and collectibles.

An agent puts together a recommendation for a customer but is unable to attend the meeting. Another agent from the firm meets with the customer and presents the recommendation but omits some material facts. According to the Uniform Securities Act, this is A. permitted if the recommendation pertains to an exempt security. B. a fraudulent act. C. permitted if the second agent receives no compensation for presenting the recommendation. D. permitted if the second agent was unaware of the omission.

A fraudulent act The agent making a recommendation to a customer is responsible for presenting all the material facts. Material facts must be presented to a customer, regardless of the type of security sold or whether a commission is to be earned or not. Remember, a material fact is one that is critical to the investment decision-making of a client.

Under the Uniform Securities Act, when an IAR acting in the capacity of trustee of a family trust executes a transaction on behalf of the trust, it is A. an exempt security. B. an exempt transaction. C. a violation of the trustee's fiduciary responsibility. D. a nonexempt transaction.

A nonexempt transaction Among the list of exempt transactions are those made by fiduciaries, including trustees in bankruptcy, but not other trustees. Therefore, this is a nonexempt transaction. The fact that the trustee is an IAR has no bearing on the question.

Under the Uniform Securities Act, the term nonissuer refers to A. person other than the issuer. B. an investment adviser. C. a corporation. D. an agent.

A person other than the issuer Under the Uniform Securities Act, a nonissuer is any person (as defined under the act) that is not the issuer of the security. This would include an individual investor or a securities dealer selling from inventory.

Under the Uniform Securities Act, the Administrator may deny or revoke the exemption from registration for which of the following? 1. A security issued by a nonprofit organization 2. Investment contracts of employee benefit plans 3. An exempt transaction not involving a federal covered security

A security issued by a nonprofit organization, investment contracts of employee benefit plans, & an exempt transaction not involving a federal covered security The Administrator may deny or revoke any transaction exemption except those involving a federal covered security. The only security exemption where the Administrator has this power is in the case of securities issued by nonprofit organizations and investment contracts of employee benefit plans. The order must pertain to a specific transaction or security.

As defined in the Uniform Securities Act, which of the following is not a security? A. Common stock of ABC National Bank, which is a member of the Federal Reserve System B. Options on a federal covered security C. Annuity providing a fixed monthly payout D. Interest real estate limited partnership (RELP) program

Annuity providing a fixed monthly payout Variable annuities are securities, while fixed annuities are not. Options contracts, interests in limited partnership programs, and common stock are securities under the USA. The key to questions like this is to remember those things that are not securities.

An interest in which of the following is a security under the Uniform Securities Act? 1. Evidence of indebtedness 2. Certificate of deposit for a security 3. Oil and gas drilling program 4. Cattle feeding program

Evidence of indebtedness, certificate of deposit for a security, oil and gas drilling program, & cattle feeding program The best strategy is to memorize the short list of things that are not securities rather than try to remember all of the things that are. An example of a certificate of deposit for a security is an ADR. Oil and gas drilling programs and cattle feeding programs are types of DPPs. A common example of an evidence of indebtedness is a bond or a debenture.

Which of the following is not a security? A. Variable annuity B. Corporate debt C. Corporate equity D. Participating whole life insurance that pays annual dividends

Participating whole life insurance that pays annual dividends Whole life insurance policies, even those that pay dividends, are not securities; variable life and variable annuities are. Corporate equity is stock, and corporate debt is bonds and debentures.

Under the Uniform Securities Act, a security that is exempt from the registration requirements is also exempt from which of these? 1. The requirements for filing of advertising and sales literature 2. The antifraud provisions 3. The civil liabilities provisions

The requirements for filing of advertising and sales literature An exempt security is only exempt from the registration requirements and the requirements for filing of advertising and sales literature. There are no exemptions from the antifraud provisions. Civil liability arises anytime a security is sold or advice is rendered in violation of the act, regardless of whether any security involved was registered or exempt.

Which of the following would be considered a security under the provisions of the Uniform Securities Act? A. Gold bullion B. An endowment contract issued by a life insurance company licensed to do business in the state C. A fixed annuity contract issued by a life insurance company not authorized to do business in the state D. A certificate of interest in a real estate limited partnership offering

A certificate of interest in a real estate limited partnership offering It is always best to remember what is not a security than try to remember all of the things that are. All insurance contracts, other than variable ones, are not securities. Commodities, including precious metals, are not securities.

Which of the following securities is not exempt from the registration provisions of the Securities Act of 1933? A. A high-quality corporate promissory note maturing in 180 days B. An equity security issued in only one state and solely to residents of that state C. A U.S. government bond D. A new stock being offered in three states

A new stock being offered in three states Government securities, money market instruments (the promissory note is another way of saying commercial paper), and intrastate offerings are exempt from the registration provisions of the 1933 Act. A stock being offered in three states would have to register with the SEC and possibly with those states.

According to the Uniform Securities Act, the sale of a security to an insurance company is A. an exempt transaction only if the insurance company is authorized to do business in this state. B. an exempt security. C. an exempt transaction. D. always a private placement.

An exempt transaction Sales of securities to financial institutions are exempt transactions. Insurance companies are a typical example of a financial institution used on the exam. The only relevance of the company being authorized to do business in this state applies to whether or not securities it issues are exempt in this state.

The primary purpose of the securities registration requirements of the Uniform Securities Act is to ensure that proper disclosure is made available to potential investors. However, not all securities are required to register. Which of the following qualify for an exemption from registration under the act? A. Bonds that are obligations of the People's Republic of North Korea B. Commercial paper with no more than nine months to maturity that is in one of the three highest ratings by a nationally recognized rating agency and in a minimum denomination of $10,000 C. Common stock issued by life insurance companies authorized to conduct insurance sales in that state D. Equipment trust certificates issued by railroads whose rates are not subject to regulation by a state or federal agency

Common stock issued by life insurance companies authorized to conduct insurance sales in that state

The National Securities Markets Improvement Act of 1996 (NSMIA) affects federal and state laws in that A. state law preempts federal law. B. federal laws and state laws remain the same. C. federal securities laws preempt state laws. D. the Uniform Securities Act supersedes the Investment Advisers Act of 1940.

Federal securities laws preempt state laws The NSMIA defines the functions and respective responsibilities of the SEC and state Administrators. State law does not preempt federal law, and the NSMIA requires states to adapt their securities laws to comply with the standards required by the NSMIA.

What is the procedure by which federal covered securities, registered under the Investment Company Act of 1940, file their offerings with state securities Administrators? A. Coordination B. Notice filing C. Federal covered securities need not file with state securities Administrators D. Qualification

Notice filing Notice filing primarily applies to securities issued by investment companies, such as mutual funds, registered under the Investment Company Act of 1940. Offerings of securities that are not federal covered securities must be registered with the states by either coordination or qualification, unless exempt.

Under the Uniform Securities Act, which of the following types of transactions can be entered into legally with unregistered, nonexempt securities? A. Rights offering to existing shareholders with underwriting compensation of $0.05 per share to the soliciting broker-dealers B. Public offering of stock in a new corporation C. Private placement offered to more than 50 institutional purchasers in the state D. Solicited transactions with individual clients located within the state

Private placement offered to more than 50 institutional purchasers in the state Private placements involve the sale of nonexempt securities to investors without the need for registration. There is no numerical limit to the number of offers that may be made to institutional buyers. However, offers to noninstitutional buyers are limited to a maximum of 10 in any 12-month period. Rights offerings are only exempt if there is no compensation, and only unsolicited orders are exempt transactions.

Under the Uniform Securities Act, a private placement is considered an exempt transaction if A. the sale is unsolicited. B. the number of noninstitutional offers is limited to a maximum of 10 in any 12-month period. C. the security is rated in the top three grades by a recognized rating agency. D. no payment is made with any purchase.

The number of noninstitutional offers is limited to a maximum of 10 in any 12-month period

Under the Securities Act of 1933, the SEC A. approves securities registered with it. B. attempts to make certain that all pertinent information is fully disclosed. C. guarantees that the statements made in the prospectus and registration statement are accurate. D. passes on the investment merit of the security.

Attempts to make certain that all pertinent information is fully disclosed Every prospectus carries the SEC disclaimer on the front cover in bold type. All the SEC can hope for is full disclosure of the pertinent information.

Laurel is an agent of Harbor Securities. Her most active customer told her that he is thinking about buying 10,000 shares of a technology company's stock for which Harbor will be participating in the underwriting syndicate. The SEC release date for the stock is anticipated within 10 business days. What may Laurel accept from the client today? A. Laurel may not accept anything from the customer until the effective date. B. Laurel can accept an indication of interest accompanied by a payment equal to 50% of the expected offering price. C. Laurel can accept an indication of interest. D. Laurel can accept a request for a copy of Harbor's most recent research report on the stock.

Laurel can accept an indication of interest Because a security is in registration until released by the SEC for public sale, orders may not be taken. Customers may submit a nonbinding indication of interest. That indication of interest may not include any form of payment. Orders may not be accepted for a security while it is in registration. During the cooling-off period, no research reports or any other type of literature may be distributed. The only exception is the red herring (preliminary prospectus).

Which of the following sales would be exempt from the antifraud provisions of the Uniform Securities Act (USA)? A. Sale of a nonexempt security B. Sale of an exempt security C. Sale of whole life insurance D. Sale of an exempt security in an exempt transaction

Sale of whole life insurance The antifraud statutes of the USA apply only to securities. Whole life insurance is not a security. However, the sale would be subject to the antifraud provisions of the state insurance code.

Which of the following are exempt from the registration requirements of the Uniform Securities Act? 1. Securities issued by a nonprofit organization 2. Securities guaranteed or issued by a federal savings and loan 3. T-bills 4. Unit investment trusts registered with the SEC

Securities issued by a nonprofit organization, securities guaranteed or issued by a federal savings and loan, T-bills, & unit investment trusts registered with the SEC Securities issued by nonprofit organizations, federal savings and loans, and the U.S. government (i.e., Treasury bills, Treasury bonds) are exempt from the registration requirements of the Uniform Securities Act. Unit investment trusts that are registered under the Investment Company Act of 1940 are federal covered securities and, therefore, are exempt.

A customer requests information on a new mutual fund and asks her agent to circle the important information in the prospectus and information he thinks will be of special interest to her. This is permitted A. without restriction. B. if approved by a principal. C. under no circumstances. D. if accompanied by an unmarked prospectus.

Under no circumstances

Among the many exempt transactions under the Uniform Securities Act are the private placement and the preorganization certificate or subscription. While these two exemptions have several requirements in common, they have which of the following differences? 1. The private placement exemption places a limit on the number of sales to retail investors, while the preorganization certificate places a limit on the number of offers to all investors.​ 2. Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription. 3. It is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate. 4. Commissions may be paid on the sale of a private placement to noninstitutional clients, while no remuneration is payable on the sale of a preorg

Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription & it is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate The term sale means that there has been an exchange of value. No money changes hands in the case of a preorganization certificate or subscription. It is simply a commitment to invest when the corporation's charter has been granted. On the other hand, a private placement is a sale because the seller receives payment—value is exchanged. The state will consider a private placement an exempt transaction if it is anticipated that individual (noninstitutional) investors are purchasing for investment only, not immediate resale. No holding period restrictions are placed on preorganization certificates. Only in the case of a sale of a private placement to an institutional client is it permissible to pay commissions. Finally, Choice I has it backwards. When referring to retail (noninstitutional) investors, there is a limit to the number of offerees (10), while in the preorganization certificate, the number of subscribers is limited to 10, regardless of whether they are retail or institutional.

Which of the following are exempt securities under the Uniform Securities Act? 1. A security issued by a bank 2. A Canadian government bond 3. A security listed on the NYSE 4. A security issued by a charitable or other nonprofit organization

A security issued by a bank, a Canadian government bond, a security listed on the NYSE, & a security issued by a charitable or other nonprofit organization The securities exempt from the registration requirements of the Uniform Securities Act include securities issued by the U.S. or Canadian government or any state, province, or political subdivision; securities issued or guaranteed by any foreign government with which the United States has diplomatic relations; securities issued by banks, savings and loans, insurance companies, and credit unions; securities issued or guaranteed by common carriers and public utilities (e.g., railroads); securities listed on national exchanges (e.g., NYSE, Nasdaq); securities issued by nonprofit, religious, or charitable organizations; commercial paper; investment contracts issued in connection with employee benefit plans; and any securities issued by cooperatives or associations.

Which of the following is not an accredited investor? A. A registered open-end investment company with net assets of $600,000 B. An individual with a net worth, including the value of her primary residence, that is greater than $1 million C. An individual whose income was greater than $200,000 in each of the two most recent years with a reasonable expectation of reaching that level again this year D. Any organization not formed for the purpose of purchasing securities with a net worth in excess of $5 million

An individual w/ a net worth, including the value of her primary residence, that is greater than $1 million

A closed-end investment company is registered under the Investment Company Act of 1940. Its shares trade on the Nasdaq Stock Market. To qualify their shares for sale in the state, they would probably use A. qualification. B. coordination. C. supplementation. D. notice filing.

Notice filing Regardless of where shares of this closed-end investment company trade, like all investment companies registered under the Investment Company Act of 1940, it is a federal covered security. The company is basically exempt from state registration and is only required to follow a procedure known as notice filing.

Under the National Securities Markets Improvement Act of 1996, the federal covered security exemption from state registration includes which of these? 1. Securities issued by investment companies registered under the Investment Company Act of 1940 2. Securities traded on the Nasdaq Stock Market 3. Securities traded on the New York Stock Exchange 4. Securities traded on the NYSE American LLC (formerly known as the American Stock Exchange [AMEX])

Securities issued by investment companies registered under the Investment Company Act of 1940, securities traded on the Nasdaq Stock Market, securities traded on the New York Stock Exchange, & securities traded on the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]) Federal covered securities refer to securities exempt from registration because they are regulated, or covered by federal legislation. The National Securities Markets Improvement Act of 1996 (NSMIA) eliminated dual regulation of securities by both federal and state securities legislation. The term federal covered security also refers to any security listed on a national securities exchange, any security equal to or senior in standing to one listed on a national securities exchange, or a right or warrant to purchase a security listed on a national securities exchange.

Under the Securities Act of 1933, all of the following must sign a registration statement for a new issue of nonexempt securities except A. the chief financial officer of the issuer. B. a majority of the members of the board of directors. C. the managing underwriter of the issuer. D. the chief executive officer of the issuer.

The managing underwriter of the issuer The registration statement, which is an issuer document, must be signed by members of the board, as well as by the CEO and the CFO. It is also signed by the lawyers and accountants representing the issuer who express their opinions on the legal and accounting aspects of the proposed new issue.

Under the Securities Act of 1933, which of these may be an accredited investor? 1. A bank, insurance company, investment company, or employee benefit plan valued in excess of $5 million 2. A wealthy person, in some cases 3. Partners, officers, and directors of the issuer for a particular issue

A bank, insurance company, investment company, or employee benefit plan valued in excess of $5 million; a wealthy person, in some cases; & partners, officers, and directors of the issuer for a particular issue Accredited investors are financial institutions, wealthy persons meeting specific requirements, and (for a particular issue) persons involved in the management of the issuer.

Registration statements for securities under the Uniform Securities Act are effective for A. one year from the date of issue. B. a period of time determined by the Administrator for each issue. C. one year from the previous December 31. D. one year from the effective date.

One year from the effective date Securities registration statements are generally effective for one year from the effective date.

Which of the following are exempt from registration under the Uniform Securities Act? 1. Preferred stock issued by ZXZ Corporation, whose common stock is traded on the NYSE 2. Common stock issued by a national bank 3. Equipment trust certificates issued by a railroad company regulated by a state or federal agency 4. A debenture traded in the over-the-counter market issued by a corporation whose common stock trades on the NYSE

Preferred stock issued by ZXZ Corporation, whose common stock is traded on the NYSE, common stock issued by a national bank, equipment trust certificates issued by a railroad company regulated by a state or federal agency, & a debenture traded in the over-the-counter market issued by a corporation whose common stock trades on the NYSE All the securities listed are exempt from registration under the Uniform Securities Act. Preferred stock issued by corporations whose common stock trades on the NYSE is a federal covered security and is exempt from registration with the states. The same is true for a debenture of a company registered on the NYSE, even though the debenture is traded over the counter. The issuers of equipment trust certificates (railroads) are regulated by other agencies, and issuers of bank securities (commercial banks) are regulated by the Federal Reserve and Office of the Comptroller of Currency (OCC); their securities are exempt from registration by the states. The National Securities Markets Improvement Act of 1996 (NSMIA) prohibits dual regulation of securities.

Which of these may not be required of a federal covered security? 1. Paying a filing fee 2. Providing a consent to service of process 3. Submitting copies of any information filed with the SEC 4. Using a state-sanctioned legend on the offering documents

Using a state-sanctioned legend on the offering documents Federal covered securities may be required to pay a filing fee, provide a consent to service of process, and submit copies of any and all documentation filed with the SEC, if requested. However, requiring a legend or other similar statement is beyond the jurisdiction of the state on a federal covered security.

As a federal covered security, the KAPCO Growth Fund is required to notice file under the laws of State A. The Administrator of State A can request a report of what information that has not already been furnished to the SEC? A. The schedule of compensation to the fund manager B. Proxy statements C. A listing of the officers and directors of the issuer D. A report of the amount of the federal covered security sold in the state

A report of the amount of the federal covered security sold in the state Because those companies that are required to notice file are levied a fee based on the amount of securities sold in the state, information relating to the amount of sales in the state must be reported.

Under the Securities Act of 1933, which of the following are exempt securities? 1. Securities issued by the U.S. government, government agencies, and any state or municipality 2. Any security issued by a religious, educational, charitable, or not-for-profit institution 3. Any security issued by a federal or state bank, savings and loan association, building and loan association, or similar institution 4. Any interest in a railroad equipment trust

Securities issued by the U.S. government, government agencies, and any state or municipality; any security issued by a religious, educational, charitable, or not-for-profit institution; any security issued by a federal or state bank, savings and loan association, building and loan association, or similar institution; & any interest in a railroad equipment trust Most of the securities exempt from registration and prospectus delivery requirements in the Securities Act of 1933 are also exempt under the Uniform Securities Act. Securities exempt under the Securities Act of 1933 include government issues, commercial paper, securities issued or guaranteed by financial institutions, regulated common carrier issues, and nonprofit charitable or religious institutions. Three securities are exempt under the Uniform Securities Act and not exempt under the Securities Act of 1933: - Stocks and bonds issued by insurance companies - Securities issued by foreign governments - Securities listed on certain exchanges not exempt under the Securities Act of 1933

Ways in which offerings under Rule 506(c) of Regulation D of the Securities Act of 1933 differ from those under Rule 506(b) include each of these except A. the issuer must take "reasonable steps" to verify that all purchasers are accredited investors in a 506(c) offering, while no such obligation falls upon issuers in a 506(b) offering. B. all purchasers of the Rule 506(c) securities must be accredited investors as defined in Rule 501, whereas Rule 506(b) permits a limited number of sophisticated but not accredited investors. C. securities issued under Rule 506(c) are federal covered, while those under Rule 506(b) are not. D. general solicitation is permitted under Rule 506(c) offerings; no advertising is permitted under Rule 506(b).

Securities issued under Rule 506(c) are federal covered, while those under Rule 506(b) are not Under the NSMIA, any security issued under the federal transaction exemption offered under Rule 506, either (b) or (c), is considered a federal covered security. Rule 506(c) permits advertising (general solicitation) but requires that the issuer take reasonable steps to ensure all purchasers meet the accredited investor standard. In a Rule 506(b) offering, up to 35 nonaccredited investors are permitted with no limit placed on the number of accredited investors.