SIE Unit 1

ABC Corp stock is trading at BID 75.32, ask 75.35 5 x 12. What is the spread? A) $0.35 B) $3.00 C) $0.30 D) $0.03

$0.03 The spread is the difference between the bid and ask. In this example it is three cents.

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

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

The current quote for PQR Inc. common stock is bid 42, ask 42.10, 4 × 5. A customer who places an order to buy at the market will likely pay how much for the purchase? A) This cannot be determined based on this quote B) $8,420 C) $8,400 D) $4,210

$8,420 Your customer will likely buy at the ask (42.10) or very close to it. The ask size is 500 shares, so the market can absorb the entire order (42.10 × 200 = $8,420). Customers who are selling receive the bid. Those who are buying pay the ask. The size shows bid × ask: 400 shares may be sold at 42 and 500 shares are available to buy at 42.10.

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

25 days For new issues that qualify for listing on an exchange or Nasdaq, the prospectus delivery requirement period in the aftermarket is 25 days. If the new issue will be specifically quoted by the OTC Markets Group the period is 90 days. An additional public offering (APO) for a non-NMS security, the requirement for delivery is 40 days. There is no requirement for an APO of an NMS security.

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

25 days For new issues that qualify for listing on an exchange or Nasdaq, the prospectus delivery requirement period in the aftermarket is 25 days. If the new issue will be specifically quoted by the OTC Markets Group the period is 90 days. An additional public offering (APO) for a non-NMS security, the requirement for delivery is 40 days. There is no requirement for an APO of an NMS security.

A client entering a sell limit order at 43 would accept which of these trades? A) 44 B) 42.90 C) 42.50 D) 42

44 A sell limit at 43 means the investor will only accept a price of 43 or better (higher). Certainly, if the client is willing to sell at 43, she would be even happier to receive 44.

How long can a good 'til canceled order remain in force without being reconfirmed by the customer? A) 36 months B) 6 months C) 12 months D) 24 months

6 months Good 'til canceled orders historically have been canceled at the end of April and October. Some firms will cancel them more frequently, but for the order to stay in effect longer than six months, the customer would need to reinstate or reconfirm the order.

To fill a customer buy order over the counter, your broker-dealer requests a quote from a market maker for 600 shares. The response is 20 bid, and ask 20.15. If the order is placed, the market maker must sell A) 600 shares at $20 per share. B) 600 shares at $20.15 per share. C) 100 shares at $10.15 per share. D) 600 shares at no more than $20 per share.

600 shares at $20.15 per share. This is a buy order. The quote was for 600 shares, and the dealer did not place any qualifiers on the quote. The dealer is committed to selling 600 shares at the ask.

Question #21 of 27 Question ID: 1467544 Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147? A) 80% of the issuer's revenue must be generated from the state of California. B) 80% of the issuer's proceeds will be used in the state of California. C) 80% of the issuer's customers must be located in the state of California. D) 80% of the issuer's assets are located in the state of California.

80% of the issuer's customers must be located in the state of California. The 80% rule is that the company must meet at least one of the three 80% rules: 80% of revenue from the state, 80% of the proceeds earmarked for the state, or 80% of company assets in the state. The rule is the percentage of revenue, not the percentage of customers, from the state. Theoretically Cypress could have a majority of its customers from outside the state, so long as it has a few large customers generating at least 80% of revenue within the state it meets the requirement of Rule 147.

A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following? A) A fully disclosed introducing firm B) An investment company C) A depository trust D) A carrying firm

A carrying firm Most firms choose to introduce their customers to another member firm known as a clearing or carrying firm to handle back-office tasks, such as clearing trades, sending trade confirmations, settlement and reporting compliance, trade execution, and custody of customer funds and securities.

ABC Broker-Dealer maintains an inventory of MMNO common stock. They transact purchases and sales with customers using this inventory. In this example, ABC is acting as what? A) A transfer agent B) An agent C) A broker D) A market maker

A market maker Broker-dealers who incorporate proprietary trading into their business model are known as market makers. As a market maker, the broker-dealer trades in their own account attempting to profit. A firm making markets may be a carrying firm or a fully disclosed firm. Commissionable transactions are those done by brokers for customer accounts not proprietary trades.

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

A preliminary prospectus A preliminary prospectus is also known as a red herring. The red herring does not include key information about the issue such as price and the number of shares offered. The term is derived from the disclaimer printed in red on the cover page.

Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a regional investment banker based in Seattle, to run the sale. This is an example of A) a CRUT. B) a secondary offering. C) an IPO. D) an APO.

A secondary offering The shares that are to be sold belong to a person (Clarence Mod), not the issuer. This is a secondary offering. An APO or an IPO are both issuer transactions. A charitable remainder unitrust (CRUT) is an estate planning tool often used by the wealthy, but is not something you are likely to see on this exam.

Which of the following will not be found in a final prospectus? A) Agreement among underwriters B) Effective date and offering price C) Business plan and use of the proceeds D) Statement that the Securities and Exchange Commission (SEC) neither approves nor disapproves of the issue

Agreement among underwriters The agreement among underwriters is not a part of a prospectus.

The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these is correct regarding the rules for initial public offerings (IPOs) and additional public offerings (APOs)? A) An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 90 days. B) An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. C) An APO of a stock listed on the NYSE requires delivery for a period of 25 days. D) An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days.

An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. The prospectus delivery rules include the following: IPO for listed or Nasdaq—25 days APO for listed or Nasdaq—none IPO for non-Nasdaq—90 days APO for non-Nasdaq—40 day

Your investor is short 300 shares of Seabird Airlines common stock. In order to close this position the investor would enter which of the following orders? A) Sell 3 Seabird Airlines Put options and issue exercise instructions B) Buy 300 shares of Seabird Airlines C) Sell 300 shares of Seabird Airlines D) Buy 3 Seabird Airlines Put options and issue exercise instructions

Buy 300 shares of Seabird Airlines The customer is short the stock and must buy the shares to cover the position. Exercising the long puts would result in selling even more shares. A seller of an option does not have the right to exercise.

Member firms violate rules regarding sales of new equity issues to restricted persons when they do which of the following? I. Sell a new issue to one of their own customers. II. Sell blocks of the new issue to accounts of partners or officers of the member firm. III. Sell shares to the grandparent of a member affiliate. IV. Sell to accountants or attorneys acting on behalf of the underwriters. A) I and II B) I and IV C) II and IV D) I and III

C) II. Sell blocks of the new issue to accounts of partners or officers of the member firm. IV. Sell to accountants or attorneys acting on behalf of the underwriters. Rules prohibit the sale of a new equity issue to other brokers, partners, officers, employees of firms in the syndicate or selling group offering the issue, and their immediate or supported family members. For purposes of this rule, aunts, uncles, and grandparents are not considered immediate family.

Your broker-dealer executes trades for other broker-dealers and after execution settles those transactions for them. Your firm would be classified as which of the following? A) Introducing firm B) Fully disclosed firm C) Limited broker-dealer D) Carrying firm

Carrying Firm Carrying firms, or clearing broker-dealers, can execute trades, clear and settle transactions, take custody of customer funds and securities, and handle all back-office tasks, such as sending trade confirmations and statements for themselves as well as for other broker-dealers.

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

Distributing a red herring No selling or soliciting is allowed during the cooling off period. Distributing a red herring (a preliminary prospectus) is allowed.

Which of the following activities would be handled by a carrying firm and not an introducing firm? A) Issuing statements for customer accounts B) Holding custody of a customer's securities C) Answering customer inquiries D) Soliciting trades

Holding custody of a customer's securities Holding customer assets is a task handled by a carrying firm rather than an introducing firm. All of the other activities listed here are common to all broker-dealers.

The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these comply with those rules for initial (IPO) and additional (APO) public offerings? I. An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. II. An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. III. An APO of a stock listed on the NYSE requires delivery for a period of 25 days. IV. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. A) III and IV B) I and IV C) I and II D) II and III

I. An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. IV. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. The prospectus delivery rules include the following: IPO for listed or Nasdaq—25 days APO for listed or Nasdaq—none IPO for non-Nasdaq—90 days APO for non-Nasdaq—40 day

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

II. An offering can be a combination of primary and secondary. IV. An additional primary offerings (APO) is a primary offering. An offering can be a combination of primary and secondary. These are known as split offerings. Both IPOs and APOs are primary offerings, where the issuer receives the sale proceeds.

All of the following are false descriptions of different securities offering types except A) in a secondary offering new issue, underwriting proceeds go to the issuer. B) in a primary additional issue, underwriting proceeds go to the issuer. C) in an additional primary offer (APO) issue, underwriting proceeds go to existing stockholders. D) in an initial public offering (IPO), underwriting proceeds go the majority shareholders.

In a primary additional issue, underwriting proceeds go to the issuer As with all primary offerings, new issue (IPO), or additional issue, underwriting proceeds go to the issuing company.

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

Indications of interest before the effective date A preliminary prospectus cannot be distributed before the registration date. Between the registration and effective dates, it is used to solicit or gauge indications of interest. After the effective date, sales can be solicited and a final prospectus would be available and must be used to do so.

A broker-dealer's business model allows for only the purchase and sale of securities for retail customer accounts. It does not execute, settle, or clear its customer's transactions, nor does it tend to any back-office functions such as sending trade confirmations or forwarding proxies. This broker-dealer would best be described as what type of firm? A) Full service B) Clearing agent/carrying agent C) Market making D) Introducing/fully disclosed

Introducing/fully disclosed A fully disclosed introducing broker-dealer is what the word implies—it introduces its customer's business to a clearing firm. Clearing firms (often called carrying firms or agents) hold funds and securities and settle transactions (clear and process) for their correspondent introducing firms. Essentially, the clearing firm acts as the introducing firm's back office.

On Friday, July 1 your customer purchased 10 3% T-bonds maturing in 15 years. This trade will settle on A) July 3 B) July 2 C) July 6 D) July 5

July 5 Treasuries settle T+1 (next business day after the trade). A trade on Friday would normally settle on Monday, but this Monday is a holiday (Independence Day). Remember the July 4 and December 25 are not settlement days.

Which of the following is true regarding a member firm operating under Financial Industry Regulatory Authority (FINRA) membership or the membership of another self-regulatory organization (SRO)? A) Member firms are required to be full-service broker-dealers. B) Member firms can offer all types of investment products, such as stocks, bonds, mutual funds, options, and others or limit the products they offer to only a few. C) Member firms may never incorporate proprietary trading into their business model. D) Member firms must always accommodate dealing with retail investors and not limit business to that done with other industry professionals.

Member firms can offer all types of investment products, such as stocks, bonds, mutual funds, options, and others or limit the products they offer to only a few. Member firms can offer all types of investment products such as stocks, bonds, mutual funds, and derivatives like options and others (be full service) or limit the products they offer to only a few. They need not adopt proprietary trading into their business model but can if they wish to. Likewise, they need not accommodate doing business with retail customers if they wish to deal only with other industry professionals, such as institutional investors.

All of the following are exempt issuers except A) Modulux, Inc., a home manufacturer. B) Alta Loma Community Foundation. C) the Southwest Railroad Co. D) the City of Alta Loma.

Modulux, Inc., a home manufacturer. Common carriers (e.g., railroads), municipalities, and charities are all examples of exempt issuers under the Securities Act of 1933. A for-profit corporation is not exempt.

Which of the following is not part of the secondary markets? A) Mutual fund market B) Third market C) The exchanges D) Over-the-counter market

Mutual Fund Market Mutual funds, as open-end investment companies, do not trade in the secondary markets.

If left unexecuted, a good til cancel (GTC) order will automatically be canceled when? A) On the first business day of April and the first business day of October B) On the last business day of June and the last business day of December C) On the last business day of April and the last business day of October D) On the cancel date specified by the customer at the time the order is entered

On the last business day of April and the last business day of October GTC orders are valid until executed or canceled. Any GTC orders left unexecuted are automatically canceled on the last business day of April and the last business day of October. If the customer wishes to have the order remain working beyond those specific days, the customer must reenter the order.

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

Placing a tombstone ad No selling or soliciting is allowed during the cooling off period. Publishing a tombstone is considered an announcement, not a solicitation. The final prospectus is not available during the cooling off period.

Which of these will be found in the final prospectus but is not in the preliminary prospectus? A) Company history B) Next year's sales C) Public offer price D) Planned use of the proceeds

Public offer price The public offer price may vary up until the release date. Next year's sales are counted next year, and could not be in the prospectus. The issuer's history and planned use of the proceeds is in both documents.

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

Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter Market makers are broker-dealers who sell out of their own account in the secondary market. Underwriters are broker-dealers who help issuers bring their securities to market in the primary market.

Ensuring that the investing public is fully informed about a security and its issuing company when shares are first sold in the primary market is covered under which of the following federal acts? A) Securities Act of 1933 B) Securities Exchange Act of 1934 C) Uniform Securities Act D) Investment Company Act of 1940

Securities Act of 1933 Companies looking to offer securities to the public must provide a prospectus to those who are approached to purchase the shares. This requirement ensures that the investing public is fully informed about a new security and its issuing company.

Your client, Jane Anderson, has owned QRS for a few years but has now turned bearish on QRS. What transaction would you recommend? A) Sell QRS to close B) Buy QRS to open C) Buy QRS to close D) Sell QRS to open

Sell QRS to close Because Anderson already owns the stock, this would be a closing transaction, and because she is bearish it would be a sell.

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

The Securities Act of 1933 The shelf offering (registration) provision under the Securities Act of 1933 allows issuers to quickly raise capital when needed or when market conditions are favorable.

Which of the following would be required for a good 'til canceled order to remain in force for more than six months? A) The broker-dealer would need to reconfirm the order for it to remain in force B) The specialist on the NYSE would need to reconfirm the order C) Nothing; it stays on the books until the customer cancels it D) The customer would need to reconfirm the order

The customer would need to reconfirm the order Good 'til canceled orders historically have been canceled the end of April and October. Some firms will cancel them more frequently, but for the order to stay in effect longer than six months, the customer would need to reinstate the order.

Which of the following securities are exempt from the Securities Act of 1933? A) 30-year AAA corporate bonds B) Treasury notes C) Treasury bond funds D) Common stock

Treasury Notes Securities issued by the federal government are exempt from the Securities Act of 1933. A mutual fund that invests in these securities is not.

On Monday, August 1, your customer purchased 10 Treasury notes at a price of 99.5 that mature in three years. Cash to pay for the purchase must be delivered by what date? A) Tuesday, August 2 B) Wednesday, August 3 C) Monday, August 1 D) At maturity

Tuesday, August 2nd Trades for government securities settle in one business day.

Ron buys 522 shares of Narcissus, Inc., common stock in a cash account on Monday, March 19. He deposits cash in the account sufficient to cover the trade on March 20. How soon would he be able to withdraw those shares? A) Thursday, March 22 B) Friday, March 23 C) Tuesday, March 20 D) Wednesday, March 21

Wednesday, March 21 This is a regular way settlement of a corporate security (T+2). The trade is fully paid for so the customer may request the shares be moved on or after settlement on Wednesday, March 21.

The preliminary prospectus for an IPO indicates that the number of shares to be sold may be increased as much as 15% if market demand is sufficient. This is called A) a flexible offering. B) a shelf offering. C) an adjustment offering. D) a Green Shoe option.

a Green Shoe option. This is a Green Shoe offering, based on a rule first used in the IPO for the Green Shoe Manufacturing Company (now known as Stride-Rite). A shelf offering occurs when the shares may be held and sold later under Rule 415. The other names are fictional.

Your customer is quite nervous about the stock market but expresses his belief that equities are still the place to save for retirement over the long term. He places a trade for 500 shares of an equity index fund. Overall your customer is likely A) a tiger. B) a bear. C) a bull. D) unsure of where the market is going.

a bull This customer has expressed confidence in stocks and has invested money to back up his belief. He is not confused at all. He recognizes that the equities can produce nerve-wracking consequences but have the best record of long-term growth, He is a bull.

Modulux, Inc., a NYSE listed manufacturer, is offering 5 million shares to the public, which will raise capital to build a new plant. The new technology and design should allow Modulux to increase market share significantly in the modular home business. This offer is A) a secondary offering. B) an APO. C) an IPO. D) a venture offering.

an APO There are two important points to consider (1) This is an offering of stock to raise money for the issuer, which is (2) a primary transaction. The company's stock is actively trading in the secondary markets so this must be additional shares. This is an additional public offering (APO).

The Mod Family Foundation is a $500,000,000 charitable foundation headed by Clarence Mod. The foundation is seeking to purchase a large block of WeariTech, Inc., a Nasdaq listed company, for the foundation's portfolio. Seacoast Securities is assisting with this secondary market transaction. In this example, the Mod Family Foundation is A) an issuer. B) a retail investor. C) an institutional investor. D) a venture capitalist.

an institutional investor With half a billion in assets, the foundation is an institutional investor. We know that they are not acting as a venture capitalist because the company is already trading, and these shares are to be purchased in the secondary markets.

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

an underwriter. A broker-dealer (investment banker) that works with an issuer to bring the issuer's securities to the market by offering the securities for sale to investors is best described in this context as an underwriter.

Seacoast Securities, a broker-dealer member firm, maintains an inventory of SFT common stock. The firm assists a customer with a purchase of SFT common stock and charges a commission for the service. Seacoast is acting in what capacity? A) As a principal B) As an underwriter C) As a market maker D) As a broker

as a broker Broker-dealers who incorporate proprietary trading into their business model are known as market makers. As a market maker, the broker-dealer trades in their own account attempting to profit. A firm making markets may be a carrying firm or a fully disclosed firm. However, in this example, the trade was not in a stock in which the firm makes a market. They charged a commission. Commissionable transactions are those done by brokers for customer accounts not proprietary trades.

A business entity that performs the function of receiving and delivering payments and securities on behalf of both parties to a securities transaction is called a A) transfer agent. B) broker-dealer. C) clearing agency. D) depository.

clearing agency This is the function of a clearing agency. Although there are some broker-dealers that do act as clearing agents, being a broker-dealer does not always include providing the services of a clearing agent. The broker-dealer would need to meet all of the requirements of being a clearing agent.

Secondary markets exist to do all of these except A) support the existence of primary markets. B) allow investors to easily liquidate securities. C) decrease liquidity in the national markets. D) allow individual investors easy access to investment vehicles.

decrease liquidity in the national markets. Secondary markets are focused on providing, not decreasing liquidity. Ultimately, a fair and orderly secondary market makes securities more attractive, supporting the functioning of the primary markets.

A term indicating that a security is tradable and all of the requirements of the contract to sell the security have been met and the security is ready to be transferred is A) regular way settlement. B) good delivery. C) seller's option. D) buyer's options.

good delivery To make settlement, good delivery must be made. Good delivery means that all the conditions of the contract have been met.

It is expected that financial markets A) have securities prices determined by a board of directors. B) have transparent pricing for assets. C) be limited to stocks and bonds and not include derivatives like options. D) be nonregulated to allow for free trade.

have transparent pricing for assets. A number of different assets, such as equities (stocks), debt (bonds), currencies, and derivative products like options can be offered and traded in the financial markets. These markets are expected to have transparent pricing aligning with supply and demand and to adhere to basic rules and regulations.

A shelf registration A) is good for four years and requires a supplemental prospectus be filed before each sale. B) is good for three years and requires a prospectus to be filed only once. C) is good for two years and requires a supplemental prospectus be filed before each sale. D) is good for four years and requires a prospectus to be filed only once.

is good for two years and requires a supplemental prospectus be filed before each sale. Once filed, a shelf registration is good for two years and allows the issuer to sell portions of a registered shelf offering over the two-year period without having to reregister the security. However, a supplemental prospectus must be filed with the SEC before each sale. A well-known seasoned issuer (WKSI) may have a three year period.

During the cooling-off period the disclosure document that may be delivered to interested parties is called the A) final prospectus. B) cool off period prospectus. C) summary prospectus. D) preliminary prospectus.

preliminary prospectus The document available during the cooling-off period in the preliminary prospectus, also called a red herring.

Both the individual and institutional investor are able to easily buy and sell securities to meet their objectives through A) secondary markets. B) outdoor malls. C) primary markets. D) biennial markets.

secondary markets This is the primary purpose of the secondary markets.

A customer is given a quote for ABC as: 17.00 - 17.25 6 × 12. This quote indicates the customer can A) purchase 1,200 shares for $17 per share. B) purchase 1,800 shares at $17.25 per year. C) sell 600 shares for $17 per share. D) sell 1,200 shares at $17.25 per share.

sell 600 shares for $17 per share. Customers can purchase at the offer (the lowest price someone else is willing to sell) and sell at the bid (the most someone else is willing to sell). With this in mind, the customer can buy up to 1,200 shares at $17.25 or sell up to 600 shares at $17.

When investors open a position by going long the security, they can close the position by A) opening a new position in the security. B) selling the security short. C) buying the security. D) selling the security.

selling the security Going long a security means that it was purchased. If a position was opened by purchasing the security, it would be closed by selling it.

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

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.

Public offerings of securities are regulated under A) the Securities Act of 1934. B) the Securities Act of 1933. C) the Consumer Protection Act. D) Financial Industry Regulatory Authority (FINRA)'s communications with the public rules.

the Securities Act of 1933. In a public offering, securities are offered and sold to the investing public. Public offerings of securities are regulated under the Securities Act of 1933.

A bearish sentiment means that a person believes A) the security will decline in value. B) the security will increase in value. C) the company will devour its competition. D) the firm appears to be slow and lumbering.

the securities will decline in value Bearish means one believes the security will decline in value.

Potential risks of owning common stock include all of the following except A) market risk. B) low priority in liquidation. C) business risk. D) unlimited liability.

unlimited liability. As a common stockholder, an investor cannot lose more than she invested.

Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is A) the pre-filing period. B) the cooling-off period. C) the mandated waiting period. D) the posteffective period.

the cooling-off period. The period of time after the offering is filed, but before the SEC releases the security for sale, is called the cooling-off period.

When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is A) the effective date. B) the due date. C) the exudate. D) the time upon which the SEC approves the securities.

the effective date The effective date is when the SEC clears an issue to be sold to the public; the registration becomes effective. At no time does the SEC approve, disapprove, or make any representation that the information in the registration documents is accurate.

Electronic market centers designed primarily for institutional investors describes A) the fourth market. B) the exchanges. C) the OTC market. D) the third market.

the fourth market. The market centers that operate through electronic communication networks are known as the fourth market. These centers were created to serve large institutional investors like mutual funds and pension plans. The fourth market reduces the transparency of trading activity by these organizations and allows them to trade more efficiently.

All of the following are false descriptions of different securities offering types except A) in an initial public offering (IPO), underwriting proceeds go the majority shareholders. B) in an additional primary offer (APO) issue, underwriting proceeds go to existing stockholders. C) in a secondary offering new issue, underwriting proceeds go to the issuer. D) in a primary additional issue, underwriting proceeds go to the issuer.

In a primary additional issue, underwriting proceeds to the issuer As with all primary offerings, new issue (IPO), or additional issue, underwriting proceeds go to the issuing company.

An investor sold MJS stock, a stock not currently owned in her portfolio. This is A) a limited-risk position. B) a long position. C) a bearish position. D) a closing transaction.

a bearish position. With no other position in MJS stock when the stock is sold, this is an opening short transaction. Now being short the stock, this is a bearish position—hoping that the stock falls in price so that it can be purchased back later at a lower price for a profit. The risk with a short position is that the stock can move upward in price, and because there is no limit on how high a security's price may rise, a short seller has unlimited loss potential.

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

a primary offering. A primary offering is one in which the proceeds raised go to the issuing corporation, municipality, or government. The corporation in this case looks to increase its liquid capital by offering bonds. Primary offerings of bonds may be made by an issuer publicly, as is the case, or privately. This question points to an additional public offering (APO) of securities, not an initial public offering.

An individual who purchases securities for a personal account is called A) an institutional investor. B) a market maker. C) a retail investor. D) an accredited investor.

a retail investor An individual who makes investments such as the purchase of securities for his account rather than for an organization is a retail investor. This investor may be accredited, but there is no way to know for sure given the limited information.

An order that when triggered becomes a limit order is called a A) market order. B) stop limit order. C) limit order. D) stop order.

a stop limit order An order that triggers the entry of a limit order is a stop limit order. A stop order triggers a market order.

A company, in order to raise capital for expansion, wants to sell shares of stock to investors. The company's common stock is not currently trading in the secondary market. This offering is known as A) a combination offering. B) an additional public offering (APO). C) a subsequent public offering (SPO). D) an initial public offering (IPO).

An initial public offering (IPO) The first time an issuer distributes securities to the public, it is called an IPO. Because the issuer (the company) receives the proceeds from the investors who are investing in the company, all IPOs are primary issuer transactions. If the company issues additional shares at a later time, that is an example of an APO.

Narcissus, Inc., a social media company, has shares selling at $52. Your customer likes the company but thinks it is currently a bit too high and would like to buy the stock if the price declines to $50 per share. Which of the following orders meets this customer's request? A) Buy puts with a 50 strike B) Buy stop at 50 C) Buy limit @ 50 D) Buy stop at 55, limit 50

Buy limit @ 50 This order instructs the broker to buy at a price of $50 or better. Entering a buy stop at 50 would trigger the order immediately, becoming a market order to buy at the current price. The stop limit would not trigger until the stock rose to 55, then it would be an order to buy at 50, so the stock would have to rise to at least 55 then drop to 50 or below. Owning the puts gives him the right to sell the stock at the strike of 50, not buy it.

Which of these broker-dealers would most likely have correspondent firms? A) A self-clearing firm B) A market maker C) An introducing broker-dealer D) A fully disclosed broker-dealer

a self-clearing firm A self-clearing (or carrying) firm holds funds and securities of the fully-disclosed or introducing firm's customers and performs related functions, such as sending confirmations and statements for them. Those firms, for whom the carrying firm performs those services, are known as its correspondents.

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 must begin anew from that same date once the corrected registration is received. B) It continues and is not impacted by the issuance of the deficiency letter by the SE. C) 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. D) It is halted and does not resume until 20 days following the corrected registration is received.

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.

The market for Sierra Verde Coffee Company stock is at $72 per share. Your customer would like to sell his shares for $75, and believes the stock will climb to that level in the next two to three weeks. Which order should he place? A) Sell limit 75 AON B) Sell limit 75 FOK C) Sell limit 75 GTC D) Sell limit 75

Sell limit 75 GTC Only the good-til-canceled (GTC) order will live past today. All the others will cancel if unexecuted by the end of the day. If there is no qualifier, then it is a day order. Fill-or-kill (FOK) orders cannot be filled immediately or canceled. An all-or-none (AON) order would need to also be marked GTC to go into the next day.

An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase A) closed-end funds on the secondary market. B) a municipal bond in a state where the officer does not reside. C) a new issue initial public offering (IPO) at the public offering price. D) call or put options on a stock in the secondary market.

a new issue initial public offering (IPO) at the public offering price. As restricted persons, officers of broker-dealer firms or other institutional investors are prohibited from purchasing a new issue (IPO) at the public offering price.

The ABC Chemical Corporation wishes to advertise its upcoming offering of common stock in a tombstone advertisement that they, the issuer, will place. When placing the tombstone advertisement, which of the following would be least likely to appear? A) The expected price range of the offering B) The total number of shares being offered C) The name of the issuer D) The names of the investment bankers underwriting the issue

The names of the investment bankers underwriting the issue In most cases, the names of the firms underwriting the issue only appear in the tombstone ad when they, rather than the issuer, have placed the ad. In this instance, with the tombstone advertisement placed by the issuers, the names of the underwriters would not likely appear.

A broker-dealer that concentrated its business efforts on proprietary trading would most likely be functioning as A) an investment adviser. B) an investment banker. C) an underwriter. D) a market maker.

a market maker When a broker-dealer buys and sells securities for its own account as the major portion of its business model (e.g., proprietary trading), it is functioning primarily as a market maker (i.e., making markets in those securities). Investment banking and underwriting both primarily involve assisting issuers with bringing new securities issues to public investors. Investment advisers sell advice, they do not trade securities.

A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in A) the capital market. B) the currency market. C) the secondary market. D) the funding market.

the capital market Raising new capital is generally accomplished through the issuance of stock (equity capital) or bonds (debt capital). This is done in the capital market. When an issuer offers stock and the proceeds from the sale are added to the company's capital, it is called a primary offering. By contrast, a secondary offering is one in which one or more shareholders in the corporation sell all, or a portion of their equity holdings to the public. The proceeds of a secondary offering are paid to the selling shareholder(s), not the company.

Your customer has purchased $10,000 in U. S. Treasury bonds. These securities A) are required to be delivered in the form of physical paper certificates. B) can be transferred in either physical or book-entry form in accordance with the purchasers request. C) will have evidence of ownership recorded in book-entry form. D) cannot be delivered in physical certificates because they exceed the amount for paper certificate delivery.

will have evidence of ownership recorded in book-entry form. All U.S. government securities no matter what the denomination or amount are delivered, transferred, and have ownership recorded in book-entry form.