Unit 1

An investor enters a sell stop limit order at 60. Following the order entry, trades occur at 62, 60, 59, 61, and 63. The investor will most likely receive A) 59. B) 60. C) 61. D) 63.

C) 61.

A company's management team has agreed to issue additional shares of common stock in part to provide an employee stock ownership plan. It is agreed the issuance of the stock is not urgent and can wait until more favorable market conditions exist. What type of registration is most suitable under these conditions? A) An expansion registration B) An employee stock ownership plan (ESOP) registration C) A shelf registration D) A shadow registration

C) A shelf registration

All of the following issuers are exempt issuers except A) SmallTown Charitable Trust. B) ABC Railroad Trust. C) ABC Railroad Power Systems, Inc. D) Smalltown Savings and Loan.

C) ABC Railroad Power Systems, Inc.

A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle? A) Monday, April 5 B) Friday, April 2 C) Tuesday, April 6 D) Wednesday, April 7

C) Tuesday, April 6

Underwriters for an IPO of Seabird Airlines stock have been taking indications of interest for shares of an upcoming new issue. These indications of interest are A) binding on all parties. B) binding on the underwriters only to make available the shares once the effective date is reached. C) nonbinding on all parties. D) binding only on the parties who tendered the indications to purchase the shares once the effective date is reached.

C) nonbinding on all parties.

Which of these statements is true regarding shelf offerings? A) Shelf registration allows the issuer to sell portions of a registered shelf offering over a four-year period without having to reregister the security. B) The registration statement is effective upon completion of the cooling-off period. C) Shelf registration allows the issuer to sell portions of a registered shelf offering over a five-year period without having to reregister the security. D) For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale.

D) For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale.

The market for Dizzy Rides Inc., is at $52 per share. Your customer would like to sell his shares for $55, and believes the stock will climb to that level in the next two to three weeks. What order should he place? A) Sell limit 55 B) Sell limit 55 AON C) Sell limit 55 FOK D) Sell limit 55 GTC

D) Sell limit 55 GTC

Which of the following acts requires the registration of most new issues? A) The Securities Investor Protection Act of 1970 B) The Securities Exchange Act of 1934 C) The Securities Market Improvement Act of 1975 D) The Securities Act of 1933

D) The Securities Act of 1933

You quote ABC stock to a customer 67 bid for 1,000 shares, 700 offered at 67.10. Which of the following is true? A) 67.10 is currently the highest price any buyer is willing to pay. B) 67.00 is the ask price. C) 67 is currently the lowest price any seller is willing to accept. D) The quote's inside spread is 0.10.

D) The quote's inside spread is 0.10.

A customer enters the following order: Sell 1,000 shares of XYZ at 23. Which of the following executions would the customer accept? A) 23.50 B) 21.25 C) 22.50 D) 22.90

A) 23.50

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

A) 35

A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place? A) Friday, July 5 B) Tuesday, July 2 C) Monday, July 8 D) Wednesday, July 3

A) Friday, July 5

A customer enters an order that must be executed in its entirety when entered or canceled immediately. This is known as A) a fill-or-kill (FOK) order. B) an immediate or cancel (IOC) order. C) an all-or-none (AON) order. D) a day order.

A) a fill-or-kill (FOK) order.

An investor who has a short position in 500 shares of JKH common stock would eliminate that position by A) entering a closing purchase order for 500 shares of JKH. B) entering an opening purchase order for 500 shares of JKH. C) entering a closing sale order for 500 shares of JJK. D) entering a closing purchase order for 500 shares of ABC.

A) entering a closing purchase order for 500 shares of JKH.

Raising funds is generally accomplished by corporations through the issuance of stock (equity) or bonds (debt). This is done in A) the capital market. B) the secondary market. C) the funding market. D) the currency market.

A) the capital market.

Josie Reese, one of your clients with an option account, calls and asks you to remind her when she is required to settle if she bought a call today. You would tell her A) trade date plus 1 business day. B) trade date plus 3 business days. C) trade date plus 2 business days. D) trade date.

A) trade date plus 1 business day.

Which of the following could not be considered an institutional investor? A) Insurance company B) An accredited investor C) Bank D) QIB

B) An accredited investor

Which of the following would most likely indicate shares of stock were held in electronic form? A) Held in safe keeping B) Held in street name C) Are in custodial name D) In trust name

B) Held in street name

Seacoast Securities, a broker-dealer, maintains an inventory in DEF, Inc., common stock. When transacting business in DEF stock, Seacoast is most likely acting in what capacity? A) Agent B) Market maker C) Underwriter D) Broker

B) Market maker

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 bond by a broker-dealer acting as an underwriter C) Sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker D) Sale of $10 million of corporate stock by a broker-dealer acting as a market maker

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

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

B) unlimited liability.

The current quote for All American Motors Corp. stock is bid 52-ask 52.05 5 × 2. Your customer places an order to sell 300 shares. How much will he likely receive, before commission? A) $15,615 B) Cannot be determined because only 200 shares are available on this side of the quote C) $15,600 D) $5,200

C) $15,600

Issuance and trading of securities are regulated at more than one governmental level. These would include regulations at which of the following? County level City level Federal level State level A) I and IV B) I and II C) III and IV D) II and III

C) III and IV

Subject to market liquidity, which of the following orders is most likely to be executed immediately? A) All-or-none (AON) order B) Limit order C) Market order D) Fill-or-kill order

C) 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 subsequent public offering (SPO). B) a combination offering. C) an initial public offering (IPO). D) an additional public offering (APO).

C) an initial public offering (IPO).

The price an investor can sell a security is called the A) ask. B) offer. C) bid. D) POP.

C) bid.

Private placements are primarily sold to A) investment bankers. B) general public investors. C) institutional investors. D) individuals who do not meet the definition of accredited investor.

C) institutional investors.

The federal law requiring companies offering public equity or debt securities to provide a prospectus to investors is known as A) the Trust Indenture Act of 1939. B) the Securities Exchange Act of 1934. C) the Securities Act of 1933. D) the Securities Investors Protection Act of 1970.

C) the Securities Act of 1933.

Electronic communication networks (ECNs) are part of A) the exchanges. B) the OTC market. C) the fourth market. D) the third market.

C) the fourth market.

The transfer agent for a corporation is responsible for each of the following except A) canceling old and issuing new certificates. B) maintaining records of ownership. C) ensuring that its securities are issued in the correct owner's name. D) acting as an intermediary between the buy and sell sides of a transaction.

D) acting as an intermediary between the buy and sell sides of a transaction.

The spread a dealer makes is best described as A) none of these. B) the total commission. C) the ask plus the bid. D) the ask minus the bid.

D) the ask minus the bid.

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

D) $0.03

Shares held in electronic form at a clearing house under a broker-dealers account are A) are in custodial name. B) held in street name. C) held in safe keeping. D) in trust name.

B) held in street name.

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

B) limited partnership.

Under the de minimis exemption, an initial public offering of common stock may be sold to an account where restricted persons have a beneficial interest as long as their interest in the account does not exceed A) 25%. B) 20%. C) 5%. D) 10%.

D) 10%.

A company with previously issued shares outstanding wants to issue more shares to the public. These new shares are issued in what is known as A) an initial public offering (IPO). B) a secondary market offering. C) a secondary registration. D) An additional public offering (APO).

D) An additional public offering (APO).

Which of the following choices would best describe a follow-on offering? A) An offering to the employees of the issuing company B) The common stock that is issued attached to a rights offering C) An initial public offering (IPO) that has additional shares added by the issuer on the effective date D) An issue of shares by a public company that is already listed on an exchange

D) An issue of shares by a public company that is already listed on an exchange

A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised? A) Municipal bond market B) Government bond market C) Secondary market D) Capital market

D) Capital market

Which of the following is an exempt issue? A) Treasury mutual fund B) Variable life insurance C) Variable annuity D) Fixed annuity

D) Fixed annuity

A final prospectus contains all of the following except A) history of the business. B) description of the management. C) the use of the proceeds. D) SEC approval.

D) SEC approval.

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

B) the final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see.

Your customer inherits several thousand shares of a telecom company. He sells a portion of the position to raise some cash to buy a new boat. Which of these is true? A) This is a short sale of the stock (he never purchased it). B) This is a primary market transaction. C) This is a restricted sale of the stock. D) This is a secondary market transaction.

D) This is a secondary market transaction.

A document that substitutes for the owners signatures on the back of a stock or bond certificate is called a A) security substitution letter. B) certificate power. C) signature substitution letter. D) stock or bond power.

D) stock or bond power.

Which of the following is true of an additional public offering? A) The issuer receives all of the proceeds from the sale. B) Existing shareholders receive all of the proceeds of the sale. C) The investors are a combination of institutional and retail investors, and the issuer receives none of the proceeds from the sale. D) The issuer receives some of the proceeds, and existing shareholders receive some of the proceeds from the sale.

A) The issuer receives all of the proceeds from the sale.

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 carrying firm B) A depository trust C) An investment company D) A fully disclosed introducing firm

A) A carrying firm

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

A) II and IV

On Tuesday, July 3, your customer bought 15 SBRD 30 September calls at 4. On Friday, August 10, the calls are in the money and your customer issues exercise instructions. On which days did the trade and the exercise settle? A) July 5 and August 14 B) July 5 and August 12 C) July 6 and August 13 D) July 4 and August 11

A) July 5 and August 14

Your customer notes that the amount of commission they paid your broker-dealer firm for their purchase of 100 shares of DEF, Inc., common stock is about 1% of the purchase price. On this trade your firm most likely acted in what capacity? A) On an agency basis B) On a principal basis C) As an underwriter D) As a market maker

A) On an agency basis

Which of the following is not required to endorse a stock certificate for transfer? A) Proper endorsement by all owners B) Signatures of the receiving registered representative C) The correct number of shares are delivered D) Certificates in good condition

B) Signatures of the receiving registered representative

Which of the following best describes how a sell stop at 39 order would be filled? A) The next price above 39 after the market rises to 39 B) The next available price after the market price falls to 39 C) The next available price after the market price rises to 39 D) The next price below 39 after the market falls to 39

B) The next available price after the market price falls to 39

A customer placed an order to purchase 300 shares of DEF Corp. preferred stock. The broker-dealer sourced the shares from another broker-dealer that makes a market in the stock. The customer's firm acted as A) an insurance agent. B) a broker. C) a market maker. D) a dealer.

B) a broker.