SIE Chapter 2

An issuer that currently has $150 million in outstanding capitalization and has an average daily trading volume of $1 million would have a restriction period for their add-on offering of A. 0 days. B. 1 day prior to the effective date. C. 5 days from the effective date. D. 40 days from the effective date.

A. 0 days.

Which of the following is FALSE regarding a Rule 147 offering? A. 100% of the proceeds must be invested in the state. B. 80% of the issuer's assets must be in the state. C. 80% of the issuer's revenues must be generated in the state. D. 100% of the purchasers must reside in the state.

A. 100% of the proceeds must be invested in the state.

XYZ Corporation is planning an add-on offering. XYZ currently has outstanding shares and is now raising additional capital to build a new manufacturing plant. The quiet period in which no research may be published on XYZ will last for how many days? A. 3 days from the effective date B. 12 days from the effective date C. 30 days from the effective date D. 40 days from the initial filing of the registration statement

A. 3 days from the effective date

Which of the following must be sold by prospectus? A. ABC Bank Corp 6% debenture B. LMN County 4% bond C. Illinois 5% bond D. ABC Bank 6% debenture

A. ABC Bank Corp 6% debenture

All of the following are true regarding Electronic Communications Networks (ECNs) EXCEPT A. ECNs cannot execute mutual fund trades. B. They are used for Fourth Market trades. C. They facilitate trades between institutions. D. Transactions are executed without the broker.

A. ECNs cannot execute mutual fund trades.

All of the following are types of new stock underwritings EXCEPT A. Not held. B. Standby. C. Firm. D. All or none.

A. Not held.

A research analyst has a meeting with an employee from investment banking. This is A. Permissible if the meeting is attended by a compliance officer. B. Permissible only when they are working on the same underwriting. C.Prohibited until after the cooling-off period. D. Prohibited under all circumstances.

A. Permissible if the meeting is attended by a compliance officer.

Most restricted stock is acquired through which of the following types of offerings? A. Private placement B. Direct participation program C. Registered secondary D. Regulation A

A. Private placement

In a public offering, officers of the corporation are selling their personal shares along with the IPO of the corporation itself. The sale of shares by corporate officers is called A. Secondary. B. Primary. C. Combination. D. Rule 144.

A. Secondary.

A guaranteed bond is one that is guaranteed by another company or entity. We would typically see a guaranteed bond used in which of the following situations? A. Spinoff B. Registered secondary offering C. Competitive bid underwriting D. Merger

A. Spinoff

Which of the following terms would be used to describe a pre-offering solicitation under Reg A+? A. A preliminary prospectus B. Testing the waters C. Statement of additional information D. An omitting prospectus

B. Testing the waters

A director of a public corporation wishes to sell some of his stock in the company. Under SEC Rule 144, how long is the holding period? A. 3 months B. 6 months C. 12 months D. 24 months

B. 6 months

An analyst publishes a quarterly newsletter on technology stocks. The analyst regularly follows 15 young tech companies in this report. One of these companies is issuing stock through an APO. Which of the following is true? A. During the offering period, the analyst must feature this company individually in the report. B. During the offering period, the analyst may include this company but give it no special recognition. C. The analyst must suspend the newsletter during the offering period. D. During the offering period, the analyst must omit this company from the report.

B. During the offering period, the analyst may include this company but give it no special recognition.

A well-known seasoned issuer is issuing securities in an APO. To meet Act of '33 disclosure requirements, the issuer may use a/an A. Offering memorandum. B. Free-writing prospectus. C. An S-1. D. Offering circular.

B. Free-writing prospectus.

Which of the following distributions are registered secondary offerings? I. A vice president selling unregistered stock received through employee stock options; II. A corporation issuing additional authorized stock to expand operations; III. A corporation giving stock to shareholders in lieu of a cash dividend; IV. A family member selling founder's stock along with an add-on offering A. I and II B. I and IV C. II and III D. II, III and IV

B. I and IV

Which of the following is known as a trade in the Fourth Market? A. Composite B. Instinet C. Listed Securities Trading OTC D. CBOE

B. Instinet

All of the following apply to a red herring EXCEPT A. It's given to investors before the prospectus is finalized. B. It includes the price of the security. C. It helps to determine demand for a new issue. D. It's also known as the preliminary prospectus.

B. It includes the price of the security.

All of the following are required to register under Rule 145 for mergers and acquisitions EXCEPT A. A leveraged buy-out. B. Stock splits or stock dividends. C. An acquisition in which the acquirer is using both cash and securities. D. A merger involving a stock offering.

B. Stock splits or stock dividends.

A "Chinese Wall" is A. A separation between the managing underwriter and the syndicate members. B. A separation between the issuer and the syndicate. C. A separation between investment banking and the other functions inside a broker/dealer. D. A separation between the trading department and the back office inside a broker/dealer.

C. A separation between investment banking and the other functions inside a broker/dealer.

Jack owns a small manufacturing company in the Northeast. The company is publicly traded; however, its capitalization is very small. Jack would like to expand his operations over the next 2 years. Which of the following types of offerings will best suit the manufacturing company's needs? A. An immediate offering at the market B. An initial public offering, or IPO C. A shelf offering D. A registered secondary offering

C. A shelf offering

Which of the following is NOT an exempt transaction? A. An issue sold in one state B. An issue sold to 800 accredited investors C. An issue of 5-year Treasury notes D. An issue of $3.5 million over 1 year

C. An issue of 5-year Treasury notes

ABC Corporation owns a division that manufactures a niche product used in the automotive industry. ABC feels that this division would be better served as its own entity, separate from the parent company. If ABC chooses to separate this portion of its manufacturing business, the process is a A. Secondary offering. B. Merger. C. Spinoff. D. Stock distribution.

C. Spinoff.

XYZ Corporation is a well-known seasoned issuer (WKSI) and is planning to expand operations. XYZ will need additional capital in stages for this expansion. If XYZ does a shelf offering, how much time will it have to issue additional shares before it has to refile? A. 90 days to bring the shares to market and place the money in escrow for use at a later date B. 1 year from the effective date of the shelf offering C. Up to 3 years from the effective date of the shelf offering D. Up to 5 years from the effective date of the shelf offering

C. Up to 3 years from the effective date of the shelf offering

A restaurant chain is planning an IPO. They have already filed a registration statement with the SEC and the effective date is scheduled for tomorrow. According to the regulatory guidelines covering IPOs, no research may be released for what period of time? A. 10 days from filing the registration statement with the SEC B. 30 days from the effective date C. 30 days from filing the registration statement with the SEC D. 10 days from the effective date

D. 10 days from the effective date

A tender offer is A. An offer to sell stock at a price below current market value. B. An offer extended to convertible securities at a parity exchange rate. C. An offer to exchange stock at current market value on a specified date. D. An offer to buy stock at a price above current market value.

D. An offer to buy stock at a price above current market value.

Which of the following does NOT describe the OTC market? A. A competitive dealer mark B. A negotiated market C. A decentralized market D. An open outcry auction market

D. An open outcry auction market

Under Reg D rule 506, how much money can be raised within 12 months? A. $1 million B. $5 million C. $10 million D. An unlimited amount

D. An unlimited amount

XYZ Corp is planning a subsequent primary offering to raise additional capital for expansion. One of the executives at XYZ Corporation has a large holding of unregistered shares which he would like to sell in the open market. Which of the following would be the most suitable offering for this situation? A. Registered secondary B. Subsequent primary C. Shelf offerings D. Combined offering

D. Combined offering

Which of the following are true of restricted stock? I. The purchase must be paid for in its entirety. II. It must be held for 2 years before resale. III. A broker/dealer can act as an agent. IV. Shares are registered with the SEC. A. II and III B. II and IV C. I and II D. I and III

D. I and III

A ZZZ Corp analyst includes ABC's 6% debenture in the analyst's newsletter. ZZZ Corp is currently underwriting an ABC stock offering. This is permissible A. Under no circumstances. B. Only with advance SRO approval. C. ZZZ Corp is not the managing underwriter. D. If the bonds are not convertible.

D. If the bonds are not convertible.

Which of the following transactions uses an offering circular? A. Rule 144A B. Reg D C. Rule 147 D. Reg A

D. Reg A

If a company offers a new issue of $5 million or less during a 12-month period, files an offering statement with the SEC, and gives an offering circular to prospective buyers, the company can take advantage of A. Regulation D. B. Rule 144. C. Blue-sky laws. D. Regulation A

D. Regulation A

A corporation can avoid registration requirements in the issuance of securities by engaging in a private placement under A. Regulation A. B. Rule 144. C. Rule 147. D. Regulation D.

D. Regulation D.

Which of the following would be a restricted person associated with an IPO? A. A new registered representative's grandparents B. The registered representative's first cousin C. An uncle of a registered representative D. The father-in-law of a registered representative

D. The father-in-law of a registered representative

The underwriting agreement is between whom? A. The syndicate members B. The syndicate members and the selling group C. The underwriters and the public customers purchasing the new offering D. The issuer and the managing underwriter

D. The issuer and the managing underwriter