Unit 3 Series 7
The maximum amount that can be invested by a client in a single issue under Regulation Crowdfunding is $107,000 $514,000 $5,000,000
$107,000
The maximum permitted offering amount under Regulation A+ is: $40,000,000 $50,000,000 $75,000,000
$75,000,000 Regulation A+ gives an exemption for offerings of up to $75,000,000. Again, the disclosure document is an offering circular, but Regulation A+ offerings require audited financials, can be listed on an exchange and are required to file financial statements with the SEC.
In order to sell restricted stock under the provisions of Rule 144, the stock must be: I fully paid II either properly margined or fully paid III held for at least 6 months IV held for at least 1 year
1 and 3
Crowdfunding offerings are typically: I made by start-up issuers II made by seasoned issuers III purchased by small investors IV purchased by large investors
1 and 3 Crowdfunding offerings are used by start-up companies to raise "seed" money, with the maximum amount permitted to be raised capped at $5,000,000 per offering. They are targeted at small investors. The investment minimum is only $2,200 and the investor is not required to meet any income or net worth tests.
The Securities and Exchange Commission is empowered to administrate which of the following Acts? I Securities Act of 1933 II Securities Exchange Act of 1934 III Trust Indenture Act of 1939 IV Uniform Securities Act
1-2-3
Which of the following statements are TRUE about a tender offer for common shares: I The offer must remain open for at least 20 business days II Each "sweetening" of the offer must extend the offer for an additional 10 business days III During the life of the offer, the issuer can buy the stock in the market in addition to buying shares via the offer IV During the life of the offer, any subscribing investors' shares that are tendered are held in escrow pending the outcome of the offer
1-2-4 The initial offer must be held out for a minimum of 20 business days under SEC rules. Each sweetening of the offer must extend the life of the offer by another 10 business days
Which statements are TRUE about a tender offer for common shares? I The offer must remain open for at least 10 business days II The offer must remain open for at least 20 business days III Each "sweetening" of the offer must extend the offer for an additional 10 business days IV Each "sweetening" of the offer must extend the offer for an additional 20 business days
2 AND 3
Which of the following securities are NOT required to be registered with the SEC? I American Depositary Receipts II Eurodollar Debt III Foreign Government Debt IV Municipal Debt
2-3-4 ADRs (American Depositary Receipts) are non-exempt securities and must be registered with the SEC under the Securities Act of 1933. ADRs are the way that most foreign corporate issues trade in the United States. The bank that structures the ADRs handles the registration. Municipal debt, U.S. Government debt and Foreign Government debt are all exempt. Eurodollar bonds are sold outside the U.S. and thus do not fall under the Act.
to be defined as an "accredited investor" under Regulation D, an individual that wishes to purchase a private placement offering must have an annual income of 200,000 300,000 400,000
200,000
An investor that has been unaffiliated with the issuer for at least 3 months is permitted to sell restricted shares under Rule 144 without being subject to the volume restrictions, after having held the shares for: 3 months 6 months 9 months 1 year
6 months Rule 144 volume limitations on the resale of restricted securities are lifted after the stock has been held, fully paid, for 6 months; as long as the seller has been unaffiliated with the issuer for at least 3 months.
All of the following securities are exempt from the registration provisions of the Securities Act of 1933 EXCEPT: U.S. Government bonds Government National Mortgage Association Pass Through certificates Collateral Trust certificate General Obligation bonds
Collateral Trust certificate Securities that are exempt from the registration provisions of the Securities Act of 1933 are principally governmental debt issues, including U.S. Government debt, U.S. Government agency debt, such as Ginnie Mae debt, and municipal debt such as general obligation bonds. Collateral trust certificates are issued by corporations, where the stock of a subsidiary is put up as collateral for the bond issue. This is a non-exempt security.
Which statement is TRUE regarding Commercial Paper? Commercial Paper may be sold without a prospectus Commercial Paper must be sold with an Offering Memorandum Commercial Paper must be sold with anOfficial Statement
Commercial Paper may be sold without aprospectus
Margins on government and municipal securities are set by (the): MSRB FINRA FRB
FINRA
Which of the following is an exempt issue? Fixed annuity contract variable annuity contract Government bond mutual fund Municipal bond unit investment trust
Fixed annuity contract
Which of the following is NOT defined as a "QIB" under the provisions of Rule 144A? Insurance Company with $1.5 billion of assets available for investment Individual with $1 billion of assets available for investment Small Business Investment Company with $1.5 billion of assets available for investment
Individual with $1 billion of assets available for investment
Permitted purchasers of Rule 144A issues are Accredited Investors Financial Institutions Qualified Institutional Buyers
QIB's
A customer who has his primary residence in Montana, has a vacation home in Colorado. An intrastate offering is being made in the state of Montana. Which statement is TRUE regarding the customer purchasing this securities offering? The customer is permitted to buy these securities The customer is prohibited from buying these securities
The customer is permitted to buy these securities To purchase an intrastate offering, the purchaser must be a primary resident of that state. Having a vacation home in another state does not invalidate that person's "primary residence."
An issuer making a tender offer for its non-convertible bonds and later increases the price being offered by 10%. Which statement is TRUE? The increase in the tender price has no effect on the life of the offer The increase in the tender price increases the life of the offer by another 5 business days The increase in the tender price increases the life of the offer by another 10 business days
The increase in the tender price increases the life of the offer by another 5 business days
Which statement is TRUE about the acceptance of an "indication of interest" for a registered offering during the 20 day cooling off period The indication cannot be canceled by the customer; the indication cannot be canceled by the brokerage firm The indication can be canceled by the customer; the indication cannot be canceled by the brokerage firm The indication can be canceled by the customer; the indication can be canceled by the brokerage firm
The indication can be canceled by the customer; the indication can be canceled by the brokerage firm
All of the following statements are true about an issuer making a tender offer for its non-convertible bonds EXCEPT: The initial life of the offer is 5 business days The final price given to all bondholders is not determined until the last business day of the offer The offer is contingent on a minimum amount of bonds being tendered
The offer is contingent on a minimum amount of bonds being tendered
A customer that regularly purchases new common stock issues from her broker-dealer sends an e-mail to her registered representative asking that all prospectuses be forwarded to her electronically at her e-mail address. Which statement is TRUE The registered representative can follow the customer's instructions by forwarding the request to the member firm's operations department The registered representative must advise the customer that the firm will charge an extra fee for this service The registered representative must forward the e-mail to the branch manager for handling
The registered representative can follow the customer's instructions by forwarding the request to the member firm's operations department
A registered representative has prepared a research report about a new issue that is "in registration." Which statement is TRUE The research report may be sent to any customer expressing an "indication of interest" The research report may only be sent to customers who have bought new issues within the preceding 12 months The research report may not be sent
The research report may not be sent Since this issue is "in registration," it is in the 20-day cooling off period. The only permitted written communications during this period are the red herring preliminary prospectus, and a tombstone announcement (which, in reality, is not published until the effective date). This research report cannot be sent, since it would be considered to be a prohibited "offer to sell" the securities.
All of the following are exempt securities under Securities Act of 1933 EXCEPT US gov bonds US gov bond trusts muni bonds
US gov bond trusts U.S. Government Bond Trusts are an investment company whose shares (actually, these are termed "units") must be registered with the SEC under the Securities Act of 1933. Government bonds, municipal bonds, and Small Business Investment Company issues are all exempt securities under the 1933 Act.
the Securities and Exchange Commission is empowered to administrate all of the following Acts EXCEPT Securities Act of 1933 Trust Indenture Act of 1939 Investment Company Act of 1940 Uniform Securities Act
Uniform Securities Act The Uniform Securities Act is more commonly known as the "Blue Sky" state law, and is adopted "state by state." The SEC, a Federal agency, has no jurisdiction over activities within each state and does not administrate this Act. The SEC does administrate the Securities Act of 1933; the Securities Exchange Act of 1934; the Trust Indenture Act of 1939; and the Investment Company Act of 1940.
To claim a private placement exemption a Form D must be filed with the SEC a Form 144 must be filed with the SEC a registration statement must be filed with the SEC
a Form D must be filed with the SEC
Under SEC rules, the purchaser of a Regulation D private placement must complete and sign a(n hypothecation agreement accredited investor questionnaire arbitration agreement
accredited investor questionnaire
Credit can be extended on new issues: immediately after the offering is complete after 30 days have elapsed from the completion of the offering after 60 days have elapsed from the completion of the offering
after 30 days have elapsed from the completion of the offering
Stabilization rules for new issues are: set by FINRA covered under the Securities Act of 1933 covered under the Securities Exchange Act of 1934
covered under the Securities Exchange Act of 1934
All of the following events would require a corporation to file an 8K report with the SEC EXCEPT declaration of (a): divesture merger dividend brankruptcy
dividend
The President of PDQ Corporation buys PDQ shares in the open market. After holding them for 3 months fully paid, the President wishes to sell the shares. The shares can be sold immediately after holding the securities for an additional 3 months after holding the securities for an additional 6 months
immediately
The Self Regulatory Organizations (SROs) are private companies government sponsored enterprises membership organizations
membership organizations
All of the following must be sent to broker-dealer customers semi-annually EXCEPT a broker-dealer's balance sheet subordinated loan amounts securities inventory amounts
securities inventory amounts There is no requirement for a broker-dealer to disclose its inventory positions to customers. Semi-annually, customers receive a balance sheet (which includes a listing of subordinated loans - these are loans to broker-dealers where the lender subordinates his claim to all other creditors and are included as part of the firm's capital base) and a net capital computation from the broker-dealer.
A high-ranking officer of ABC Corporation owns 10,000 shares of ABC Corporation control stock that she wishes to sell under the provisions of Rule 144. The company has 900,000 shares outstanding. The average weekly trading volume over the preceding 4 weeks was 3,000 shares. The maximum permitted sale under Rule 144 is: 1,000 shares 3,000 shares 9,000 shares
9,000 shares Rule 144 allows the sale of the greater of 1% of the outstanding shares or the weekly average of the preceding 4 weeks trading volume every 90 days. 1% of 900,000 shares = 9,000 shares. This is greater than the 3,000 share average trading volume over the preceding 4 weeks, so this is the maximum permitted sale.
For an institutional investor to qualify as a "QIB" under Rule 144A, the institution must have at least: $1,000,000 of assets that it invests on a discretionary basis $10,000,000 of assets that it invests on a discretionary basis $100,000,000 of assets that it invests on a discretionary basis
$100,000,000 of assets that it invests on a discretionary basis Rule 144A allows issuers to sell minimum $500,000 units of private placements to so-called "QIBs" - Qualified Institutional Buyers; and these QIBs can trade the units with other QIBs. Thus, issuers have a way of selling securities to these investors quickly without incurring the costs of SEC registration; and the QIB knows that it can always sell that investment to another QIB without needing to register the issue with the SEC. A Qualified Institutional Buyer must be an institutional investor (not an individual) with at least $100 million of discretionary funds available for investment. Included are investment companies, insurance companies, banks, trust funds, employee benefit plans, and employee retirement funds.
Which of the following activities are allowed once a registration statement for a new issue is filed with the SEC? I Sending a customer a "red herring" preliminary prospectus II Accepting an indication of interest from the customer III Accepting a deposit from the customer IV Accepting a firm order from the customer
1 and 2
If a foreign broker-dealer that does not have U.S. based operations wishes to solicit customers in the United States, the broker-dealer: I must establish an SEC-registered U.S. subsidiary II is not required to establish an SEC-registered U.S. subsidiary III can effect its business through another registered U.S. broker-dealer IV cannot effect its business through another registered U.S. broker-dealer
1 and 3
Under Regulation Crowdfunding: I The maximum investment amount is $107,000 II The maximum investment amount is $514,000 III The maximum offering amount is $5,000,000 IV The maximum offering amount is $10,000,000
1 and 3
When is a foreign broker-dealer permitted to solicit U.S. based clients? I If the foreign broker-dealer establishes an SEC-registered U.S. subsidiary II If the foreign broker-dealer only offers exempt securities III If the foreign broker-dealer only deals with major institutional investors IV If the foreign broker-dealer only deals with accredited investors
1 and 3
Which statements are TRUE about an issuer making a tender offer for its non-convertible bonds? I The minimum life of the initial offer is 5 business days II The minimum life of the initial offer is 10 business days III Each "sweetening" of the offer must extend the offer for another 5 business days IV Each "sweetening" of the offer must extend the offer for another 10 business days
1 and 3
Which statements are TRUE about stabilizing bids? I A stabilizing bid is placed by the syndicate manager II A stabilizing bid is placed by each syndicate member III Only 1 stabilizing bid is permitted at any time IV Any number of stabilizing bids can be placed at any time
1 and 3
Which of the following statements are TRUE about private placements? I Private placements are exempt transactions II Private placements are non-exempt transactions III To claim a private placement exemption, a Form D must be filed with the SEC IV To claim a private placement exemption, no filing with the SEC is required
1 and 3 Private placements are exempt transactions under the Securities Act of 1933. No registration is required. The issuer must file a Form D with the SEC within 15 days of the offering to claim the exemption. Form D notifies the SEC that the issue is being offered in compliance with the exemption.
Which of the following statements are TRUE about Regulation A offerings? I The maximum offering amount permitted under the exemption is $75,000,000 within a 12 month period II An offering circular must be provided to all purchasers III Sales are limited to purchasers who are "resident" in the state where the issuer resides IV The issue can only be sold to a maximum of 35 non-accredited investors
1 and 3 Regulation A is intended to make it easier for smaller issuers to raise capital. There are 2 "tiers" to the rule. Tier 1 gives a exemption from registration to offerings of no more than $20 million in a 12 month period. Tier 2 requires more detailed information, including audited financial statements, and can be used for offerings of up to $75 million. Note that Tier 2 is also known as Regulation A+. While no prospectus is required, each buyer must be given disclosure in an Offering Circular. There is no limitation on the number of purchasers or the number of states in which this offering is made.
A husband owns 20% of the equity of a listed corporation, with his wife holding a 5% equity position in that corporation. If the wife wishes to sell her holding, she: I is considered to be an "affiliate" under Rule 144 II is not considered to be an "affiliate" under Rule 144 III must file a Form 144 to sell IV does not have to file a Form 144 to sell
1 and 3 Rule 144 applies to both sales of restricted stock by anyone, and to sales of registered shares by "control" persons, such as an officer of a company selling that company's stock. The husband is a control person under Rule 144 since he owns more than 10% of the issuer's stock. To sell that company's shares, he must comply with the provisions of Rule 144. The Rule also applies to sales by "affiliates" of control persons. The wife is considered to be an "affiliated person" and any sales by her must also comply with the Rule.
If the Securities and Exchange Commission sets the effective date for a new issue in registration, which of the following statements are TRUE? I All proper documents have been filed with the SEC II Additional documents must be filed with the SEC III The SEC approves of the new issue IV The issue may be offered to the public
1 and 4
Which of the following activities are prohibited during the "cooling off" period? I Sale of the issue to the public II Acceptance of an indication of interest III Distribution of a preliminary prospectus IV Distribution of an advertisement
1 and 4
Which of the following statements are TRUE regarding corporate reports sent to shareholders? I The 10K report consists of the annual financial statements II The 10K report consists of the quarterly financial statements III The 10Q report consists of the annual financial statements IV The 10Q report consists of the quarterly financial statements
1 and 4
Which of the following statements are TRUE regarding the preliminary prospectus? I The preliminary prospectus may be sent to a potential customer prior to that customer expressing an indication of interest II The preliminary prospectus may not be sent to a potential customer prior to that customer expressing an indication of interest III The preliminary prospectus constitutes an offer to sell the issue IV The preliminary prospectus does not constitute an offer to sell the issue
1 and 4
Stabilizing bids can be entered at which of the following? I Below the public offering price II At the public offering price III Above the public offering price
1 or 2
Rule 144 allows the sale, every 90 days, of: I 1% of the outstanding shares II 10% of the outstanding shares III the weekly average of the prior 4 weeks' trading volume IV the weekly average of the prior 8 weeks' trading volume
1 or 3, whichever is greater Rule 144 allows the sale, every 90 days, of the greater of 1% of the outstanding shares of that company; or the weekly average of the prior 4 week's trading volume
Under the provisions of the Securities Exchange Act of 1934, which of the following must be registered? I The exchanges that trade securities II Member firms III Sales employees of member firms IV Clerical employees of member firms
1-2-3
A wealthy customer has been asked by his neighbor to invest in the private placement of a "start-up" technology company as a venture capital investor. This is the first time that the customer has considered such an investment. The customer contacts his registered representative and asks: "Aside from the investment risk associated with a "start-up" company, what are the other issues that I should consider before making such an investment." The registered representative should inform the customer that: I because these securities are not registered with the SEC, such an offering would be illegal in the United States II because the securities are not registered with the SEC, they can only be resold in the public markets if the company effects a registered primary distribution and is current in its SEC filings III public resale of these securities can only occur if the customer holds the securities for 6 months "at risk" and then sells the securities in measured quantities IV these securities can only be resold by the customer to underwriters that will buy the securities into their inventory and then register them with the SEC
2 and 3
The Securities and Exchange Commission was: I created under the Securities Act of 1933 II created under the Securities Exchange Act of 1934 III given regulatory authority over securities exchanges IV given regulatory authority over futures exchanges
2 and 3
An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares: I a 6 month holding period must be completed II there is no holding period requirement III a Form 144 must be filed with the SEC IV there is no requirement to file a Form 144 with the SEC
2 and 3 "Control stock," which is registered stock of a company bought in the open market by an officer or director of that company, is subject to all Rule 144 requirements when the officer or director wishes to sell, except for the 6 month holding period. The 6 month holding period is required for restricted stock, but not for control stock.
Which statements are TRUE regarding intrastate offerings? I Intrastate offerings are subject to Federal registration II Intrastate offerings are subject to State registration III Intrastate offerings are exempt from Federal registration IV Intrastate offerings are exempt from State registration
2 and 3 The Federal Government has no jurisdiction over intrastate offerings. The Federal Government only has jurisdiction over interstate offerings. Thus, intrastate offerings of securities are exempt from Federal registration, but still are subject to registration within that State under the State's Blue Sky laws.
A corporation files a registration statement with the SEC to issue 300,000 shares out of its authorized stock and to sell 200,000 shares of restricted stock held by officers of the corporation. Which statements are TRUE? I This is a primary distribution of 500,000 shares II This is a primary distribution of 300,000 shares III Proceeds from the sale of 500,000 shares will go to the company IV Proceeds from the sale of 300,000 shares will go to the company
2 and 4
Which of the following statements are TRUE regarding Rule 415, the shelf registration rule? I Rule 415 allows seasoned issuers to file a blanket registration statement which covers a period of 1 year II Rule 415 allows seasoned issuers to file a blanket registration statement which covers a period of 3 years III The issuer must comply with the 20-day cooling off period requirement IV The issuer avoids the 20-day cooling off period requirement
2 and 4 SEC Rule 415, the "shelf registration rule" allows "seasoned issuers" to file a blanket registration statement with the SEC, covering a period of 3 years, for any securities that the issuer may wish to sell. It is only available to "seasoned" companies that already have completed a registered IPO, that have been registered for 1 year, and that have a minimum market capitalization of $75 million. If the seasoned issuer wishes to sell any securities during this 3 year period, it simply files a notification with the SEC that it is selling under that registration statement. This procedure avoids the "20 day cooling" off period, and allows seasoned issuers to enter the market quickly (such as when interest rates have dipped) to sell their securities.
Which of the following are defined as "accredited investors" under Regulation D? I Non-profit organization with assets in excess of $2,000,000 II Trust with assets in excess of $5,000,000 whose purchase is directed by a sophisticated person III Partnership with assets in excess of $5,000,000 formed for the specific purpose of acquiring the securities offered IV A bank or savings and loan institution
2 and 4 There is no limit on the number of accredited investors that can purchase a private placement under Regulation D. Regarding institutional investors, any investment company, insurance company, bank, or savings and loan is accredited. A non-profit organization, trust, or institutional investor is accredited if it has at least $5,000,000 of assets and was NOT formed with the intent of buying the private placement. The idea here is that people could attempt to get around the 35 non-accredited investor limit by having these non-accredited investors contribute to a trust that would buy the issue. If the trust accumulated $5,000,000 for investment, it would be accredited. But the rule disallows this if the trust is formed for the purpose of buying the private placement!
Restricted securities can be sold under Rule 144 if: I they are sold on a dealer basis II they are sold on an agency basis III solicitation of orders to buy is restricted to customers expressing interest within the past 10 days IV the issuer is reporting currently to the SEC
2-3-4 Rule 144 requires that restricted securities be sold on an agency basis only. Your firm cannot act as a market maker in "144" shares. Solicitation of orders to buy "144" shares is prohibited (to stop you from soliciting potential customers to buy 144 shares, which would tend to push up the stock price). However you are allowed to recontact individuals expressing buying interest in "144" transactions within the past 10 days. Since 144 shares are being sold in the open market, the issuer must comply with SEC issuer reporting rules to maintain the public market in the securities.
Under Rule 415, which permits seasoned corporate issuers to file a "shelf" registration statement for securities offerings, the filing covers a period of 30 days 90 days 3 years 5 years
3 years
Under the Securities Act of 1933, new issues are not marginable until how many days have elapsed from the effective date? 30 days 45 days 60 days
30
Under Regulation D regarding private placements, how many non-accredited investors are allowed to invest in the offering 10 35 50
35 Regulation D permits a private placement to be sold to a maximum of 35 non-accredited investors and an unlimited number of accredited (wealthy and institutional) investor
A corporate issuer is obligated to file an 8K report of significant events within how many business days of the event? 1 2 3 4 10
4 days
A seller who has filed Form 144 can sell 1% of the outstanding shares or the weekly average of the last 4 week's trading volume. This amount may be sold: 1 time a year 2 times a year 3 times a year 4 times a year
4 times a year
An investor must file a 13D report with the SEC if a 5% or greater common stock holding is purchased of one issuer 10% or greater common stock holding is purchased of one issuer 15% or greater common stock holding is purchased of one issuer
5% or greater common stock holding is purchased of one issuer. Investors who accumulate a 5% or greater position in the common stock of one registered issuer are required to file a 13D notice with the SEC within 10 business days of date that the 5% threshold was passed. This information is made public (and is of great interest to the management of the company, since the new large stockholder will probably want a say in how the company is being run!) There is no requirement to file for holding a large portion of a corporation's debt.
Under Rule 144, no filing is required if the sale amount every 90 days does not exceed: 5,000 shares worth a maximum of $50,000 5,000 shares worth a maximum of $500,000 10,000 shares worth a maximum of $100,000
5,000 shares worth a maximum of $50,000
Under Rule 147, intrastate offerings cannot be resold out of state for how long after the initial sale date? 6 months 12 months 18 montths
6 months Rule 147 requires that resale of securities sold under the intrastate exemption be restricted to intrastate only for 6 months following first sale. Thereafter, they can be resold interstate. Note, however, that because these securities were never registered with the SEC, they cannot be publicly traded. The only way to resell them is in a "private transaction."
Which Regulation D offering can be advertised? An offering made to a maximum 10 accredited investors and 10 non-accredited investors an offering made to a maximum of 35 non-accredited investors and 35 accredited investors An offering made to an unlimited number of accredited investors and no non-accredited investors
An offering made to an unlimited number of accredited investors and no non-accredited investors
Which statement is TRUE regarding Banker's Acceptances? Banker's Acceptances may be sold without a prospectus Banker's Acceptances must be sold with a prospectus
Banker's Acceptances may be sold without a prospectus Since Bankers Acceptances are an exempt security under the Securities Act of 1933, they may be sold without a prospectus. The prospectus is the disclosure document for new issues that are not exempt from registration. The Official Statement is the disclosure document for municipal bonds (which are an exempt issue). An Offering Memorandum is the disclosure document for a private placement - which is a security sold in an exempt transaction.
Which of the following securities is NOT exempt from the Securities Act of 1933? Municipal revenue bond issues Common carrier issues Income bond issues
Income bond issues Income Bonds (a.k.a. Adjustment Bonds) are issued to existing bondholders by corporations which are in default. On these bonds, the corporation is only obligated to pay the interest on the bonds if it has sufficient income. Since these are corporate issues, they are not exempt. U.S. Government bonds, municipal bonds, and common carrier issues (airlines, railroads, etc.) are all exempt.
Which statement is TRUE regarding purchase limitations under Regulation A? Accredited investors buying Tier 1 offerings are subject to purchase limitations Non-accredited investors buying Tier 2 (Regulation A+) offerings are subject to purchase limitations accredited investors buying Tier 2 (Regulation A+) offerings are subject to purchase limitations
Non-accredited investors buying Tier 2 (Regulation A+) offerings are subject to purchase limitations
Under Regulation D, purchasers of private placement offerings must be given full disclosure through a(n) prospectus registration statement form D Offering memorandum
Offering memorandum
Which statement is TRUE regarding Regulation A+ Offerings are limited to a maximum of 35 non-accredited investors Offerings are limited to a maximum size of $75,000,000 The offering approved by the Securities and Exchange Commission
Offerings are limited to a maximum size of $75,000,000
A start-up company looking to raise a small amount of "seed" capital would most likely use Regulation Crowdfunding Reg A Reg D
Regulation Crowdfunding Crowdfunding" is the raising of capital by small start-up businesses through relatively small investment amounts. These are private placement securities that are exempt from registration with the SEC. The intent is to help early-stage companies raise investment capital with little regulatory burden, improving job formation and economic growth in the U.S. economy. SEC Regulation Crowdfunding sets the ground rules for these offerings.
Which of the following is an exempt security under the Securities Act of 1933? Unit Investment Trust Small Business Investment Company open end investment company
Small Business Investment Company Small business investment companies are an exempt security under the Securities Act of 1933. Other investment companies - whether they be open-end or closed-end management companies; or unit investment trusts; are non-exempt and must be registered with the SEC.
Which statement is FALSE about stabilizing bids? Stabilization is permitted during the 20-day cooling off period Only 1 stabilizing bid is permitted at any time Stabilization is permitted under Regulation M
Stabilization is permitted during the 20-day cooling off period Stabilization of new issue prices in the aftermarket is permitted under Regulation M. The bid cannot be placed until the effective date; it is not permitted during the 20-day cooling off period. Only 1 stabilizing bid is permitted at any time. The manager of the syndicate places the stabilizing bid on behalf of the syndicate
Which of the following securities are exempt from registration under the Securities Act of 1933? I Insurance company issues II Bank issues III Savings and loan issues IV Common carrier issues
all the above When the Securities Act of 1933 was written, issuers that were already regulated under other laws were generally exempted from the provisions of the Act. Insurance companies were already regulated under State insurance laws; banks and savings and loans were regulated by both State and Federal banking laws; common carriers were regulated by the Interstate Commerce Commission (now part of the Department of Transportation).
all of the following are required to sell "144" stock EXCEPT: seller's representation letter buyer's representation letter issuer's representation letter broker's representation letter
buyer's representation letter To effect Rule 144 transactions, certain representations are required to ensure that the sale is not being made in contravention of the rule. The issuer must represent that the corporation is current with all required SEC filings because it is prohibited to use Rule 144 to sell if this is not the case. The seller must represent that the securities have been held fully paid for 6 months, otherwise Rule 144 cannot be used. Finally, the broker must represent that it did not solicit the transaction and that it acted as agent in executing the transaction. There is no representation required on the part of the buyer - when the restricted stock is sold through the rule, the buyer receives "clean" unrestricted shares from the transfer agent.
Which of the following statements is TRUE regarding a brokerage firm holding fully paid customer securities? Brokerage firms: can hold fully paid customer securities without restriction can hold fully paid customer securities if the dollar value of the positions is kept in a depository institution can hold fully paid customer securities if they are segregated from other marginable securities and are kept in safekeeping
can hold fully paid customer securities if they are segregated from other marginable securities and are kept in safekeeping
A customer is long 1,000 shares of ABCD stock and has gone "short against the box" 400 shares of ABCD stock. If there is a tender offer for the shares of ABCD Corporation, the customer can tender 400 shares can tender 600 shares can tender 1,000 shares
can tender 600 shares A customer is only considered to be "long" to the extent of his or her "net" long position in a security. This customer is long 1,000 shares of ABCD and short 400 shares of ABCD, for a net long position of 600 shares. This is the amount that can be tendered (remember that the customer must replace the 400 shares borrowed to sell short, leaving him or her with the remaining 600 shares out of the 1,000 owned.)
A new issue offering to a maximum of 35 non-accredited investors that has not been registered with the SEC is: exempt under Regulation A exempt under Regulation D exempt under Rule 144
exempt under Regulation D Regulation D allows a "private placement" exemption if an issue is sold to a maximum of 35 "non-accredited" investors. The issue can be sold to an unlimited number of "accredited" (wealthy and institutional) investors under this exemption and still be considered a private placement.
A registered representative receives an order from a corporate issuer to buy 100,000 shares of that issuer's stock in the market just before the market close. The registered representative should accept the order from the customer reject the order and report the company to the SEC inform the company that this is a possible market manipulation under the Securities Exchange Act of 1934
inform the company that this is a possible market manipulation under the Securities Exchange Act of 1934
A registered representative receives an order from a corporate issuer to buy 500,000 shares of that issuer's stock in the market, 5 minutes prior to market close. The registered representative should: reject the order accept the order as given inform the company that this is a possible market manipulation under the Securities Exchange Act of 1934
inform the company that this is a possible market manipulation under the Securities Exchange Act of 1934
What risk is the greatest concern in a Rule 144A transaction? inflation marketability interest rate
marketbility Rule 144A issues are private placement securities sold in minimum $500,000 blocks only to QIBs - Qualified Institutional Buyers (institutions with at least $100MM of assets available for investment). Whereas normal private placements cannot be traded, these can be traded from QIB to QIB. The market for this is PORTAL, but trading activity is thin in this market, especially as compared to the market for publicly traded securities.
Banker's Acceptances are: capital market instruments exempt from the Securities Act of 1933 money market instruments exempt from the Securities Act of 1933
money market instruments exempt from the Securities Act of 1933
The SEC requires financial reports from all of the following EXCEPT: municipal issuers corporate issuers municipal broker-dealers
municipal issuers
All of the following are included in the 10K report filed by corporate issuers with the SEC EXCEPT income statement balance sheet net capital computation
net capital computation Corporate annual reports contain the following audited financial statements - Income Statement; Balance Sheet; Statement of Changes to Retained Earnings (this shows earnings added for the year and dividends paid from retained earnings for that year); and Statement of Sources and Uses of Cash (this shows cash received that year from income earned; stock and bond offerings; and disposals of equipment; and cash paid that year for equipment purchases, pay-down of debt; dividends, etc.) Net capital computations are only required for broker-dealers registered with the SEC.
Which of the following activities are allowed prior to the filing of the registration statement? I Sending a customer a "red herring" preliminary prospectus II Accepting an indication of interest from the customer III Accepting a deposit from the customer IV Accepting a firm order from the customer
none of the above prior to the filing of the registration statement, nothing can be done. Once the registration statement is filed, a preliminary prospectus may be used to obtain indications of interest. Once the registration is effective, the final prospectus can be used to offer and sell the issue
A foreign broker-dealer that is not SEC registered is permitted to deal with clients in the United States under no circumstances only if the clients are sophisticated only if the clients are major institutional investors
only if the clients are major institutional investors
Restricted shares subject to sale under Rule 144 are most commonly acquired through: private placements tender offers registered secondary distributions
private placements Restricted shares are normally acquired through private placements. If there is a public market for the stock at a later date, to sell the restricted shares in the market, they must either be registered or sold under a Rule 144 exemption.
Which SEC rule gives an exemption to offerings of no more than $75 million within a 12 month time frame rule 144 rule 144 Reg A Reg D
reg A
"Qualified Institutional Buyers" are permitted to buy and trade large blocks of unregistered securities among themselves under rule 144 rule 144A rule 147 rule 415
rule 144A Rule 144A should not be confused with SEC Rule 144. Rule 144A allows qualified institutional buyers ("QIBs") to buy and trade between themselves large blocks of privately placed issues. Thus, issuers can sell private placements to these QIBs, who can then trade the private placement issues among themselves. This market is not available to individuals. Do not confuse Rule 144A with Rule 144, which covers the sale of "restricted" and "control" stock in the open market.
Under SEC rules, filing of the Form 144, required when selling restricted stock, is the responsibility of the issuer broker dealer seller transfer agent
seller
Broker-dealers are required to report their computed Net Capital to customers: monthly quarterly semi annuallly
semi annually
Under SEC Rule 145, all of the following corporate distributions by an issuer are exempt from the requirement to file a registration statement EXCEPT stock dividend fractional stock split stock spin off
stock spin off
All of the following statements are true about margin on securities EXCEPT the FRB sets margins for exempt securities the FRB sets margins for non-exempt securities FINRA sets margins for non-exempt securities
the FRB sets margins for exempt securities
All of the following statements are true if the SEC sends a deficiency letter to the issuer regarding an issue in registration EXCEPT disclosure in the registration documents is not complete the 20-daycooling off period starts again once the amendment is filed the effective date of the issue is unaffected by the deficiency notice
the effective date of the issue is unaffected by the deficiency notice
When a customer buys a new stock issue from a syndicate member, the customer pays the public offering price as stated in the prospectus plus a commission the public offering price as stated in the prospectus without any commission
the public offering price as stated in the prospectus without any commission New stock issues are sold under a prospectus that states the Public Offering Price which is inclusive of any compensation to the underwriter (the spread). Additional commissions or charges above the P.O.P. are not allowed.
An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares, the officer must meet all of the following requirements EXCEPT filing of the Form 144with the SEC a maximum of 4 sales per year are permitted the stock must be held for 6 months, fully paid
the stock must be held for 6 months, fully paid
Restricted securities can be sold under Rule 144 if all of the following conditions are met EXCEPT: they are sold on a dealer basis they are sold on an agency basis the issuer is reporting currently to the SEC
they are sold on a dealer basis
Under Regulation D regarding private placements, how many accredited investors are allowed to invest in the offering? 10 35 50 unlimited
unlimited Regulation D permits a private placement to be sold to a maximum of 35 non-accredited investors and an unlimited number of accredited (wealthy and institutional) investors
