Unit 8
The SEC is charged with administering the federal securities laws, under which the Municipal Securities Rulemaking Board (MSRB) exists. So the SEC has jurisdiction over the MSRB. However, financial institutions come under the jurisdiction of banking regulatory authorities.
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In order for a corporation to meet the definition, it must have a net worth of at least $_ million.
$5 million
No fund is permitted to own more than ___ percent of the outstanding shares of another registered investment company.
3%
Which of the following is responsible for administration of the Bank Secrecy Act? A) The Financial Crimes Enforcement Network. B) Security Services. C) Department of Health and Human Service. D) Securities and Exchange Commission.
A) The Financial Crimes Enforcement Network.
According to the Securities Exchange Act of 1934, who appoints the SEC Commissioners? A) The President. B) The Federal Reserve Board governors. C) A Senate committee. D) The entire Senate.
A) The President.
For purposes of the definition found in Rule 501 of Regulation D of the Securities Act of 1933, the term accredited investor would not apply to: A) an investment adviser representative. B) an investment company registered under the Investment Company Act of 1940. C) an officer of the company involved in the underwriting. D) a large employee benefit plan.
A) an investment adviser representative.
Rule 482 of the Securities Act of 1933 deals with: A) omitting prospectuses. B) private placements. C) intrastate offerings. D) registration under coordination.
A) omitting prospectuses. Rule 482 describes a form of allowable mutual fund advertising, commonly referred to as an omitting prospectus.
Which of the following statements is TRUE regarding the civil liability provisions of the Securities Act of 1933? A) Purchasers may waive their rights to suit under the civil liability provisions if done so by the purchase contract. B) If the registration statement contains misrepresentations that were made deliberately, criminal penalties, in addition to civil ones, may be levied. C) The statute of limitations for civil suits is three years from the date of discovery. D) Only those who actually signed the registration statement are exposed to potential liability.
B) If the registration statement contains misrepresentations that were made deliberately, criminal penalties, in addition to civil ones, may be levied.
_______ has the power to regulate margin requirements.
Board of Governors of the Federal Reserve System
XYZ Corporation is registering a new issue of common stock. A final prospectus must be delivered within the statutory time limits to: A) any person solicited by a registered agent. B) any person who has submitted an indication of interest. C) any person who purchases shares of the issue. D) any person who is employed by the issuer.
C) any person who purchases shares of the issue.
The Securities Exchange Act of 1934 granted the SEC the power to regulate all of the following EXCEPT: A) broker/dealers. B) securities information processors (SIPs). C) margin requirements. D) transfer agents.
C) margin requirements.
If an individual accumulates a holding of more than five percent in the voting stock of a publicly traded company, notification must be made to all of the following EXCEPT: A) the exchange where the security is traded. B) the SEC. C) the Administrator of the state in which the customer resides. D) the issuer's board of directors.
C) the Administrator of the state in which the customer resides.
Under the Securities Act of 1933, securities issued by a charitable organization are exempt if: A) the organization is operated by funds through government grants. B) no commissions are paid on sales of its securities. C) the organization is nonprofit. D) a minimum of five percent of its assets are distributed each year.
C) the organization is nonprofit.
Under the Securities Exchange Act of 1934, which of the following is TRUE regarding the jurisdiction of the SEC over a person who violates the rules of the Municipal Securities Rulemaking Board? A) The SEC has the authority to investigate such violations only if the person is a financial institution. B) Only the MSRB has the authority to investigate violations of its rules. C) The SEC has the authority to investigate such violations even if the person is a financial institution. D) The SEC has the authority to investigate such violations unless the person is a financial institution.
D) The SEC has the authority to investigate such violations unless the person is a financial institution.
In 1933, Congress passed the Securities Act which required the registration of new issues before their offering to the public. However, the law contained a number of exemptions including that for: A) corporate common stock listed on the NYSE. B) obligations of the Canadian government. C) stock issued by regulated insurance company. D) equipment trust certificates issued by a regulated common carrier.
D) equipment trust certificates issued by a regulated common carrier. Although each of these is considered an exempt security under the Uniform Securities Act, only the securities of a regulated common carrier carry an exemption from federal registration.
Which of the following are regulated under the Securities Exchange Act of 1934? I. Broker/dealers. II. Investment advisers. III. Pension plans. IV. Transfer agents.
I & IV.
Under the Investment Company Act of 1940, SEC rules permit mutual funds to make sales charge discounts available to: I. employee benefit plans. II. single purchasers making large purchases. III. employees of the investment company and its affiliates.
I, II, III.
Under the Investment Company Act of 1940, SEC Rule 12b-1 allows a fund to charge distribution and sales expenses to net assets as a percentage of the total assets. Normally, the cost of distribution of the shares is paid by the underwriter out of the sales load paid by the individual purchaser. For a fund to impose 12b-1 charges, which of the following conditions apply (applies)? I. The board of directors has sole approval authority. II. The majority of the outstanding shares has sole approval authority. III. Both the board and the majority of outstanding shares must approve it. IV. A distribution plan must be written.
III & IV.
The Investment Company Act of 1940 requires that a mutual fund do which of the following? I. Provide a monthly balance sheet to investors. II. Have $100,000 minimum capitalization prior to making a public offering. III. Provide semiannual reports to shareholders. IV. Not acquire more than five percent of the outstanding shares of another registered investment company.
II. Have $100,000 minimum capitalization prior to making a public offering. III. Provide semiannual reports to shareholders.
The SEC may investigate any situation it believes may have violated federal securities laws, its own rules, and rules of the SROs (i.e., exchanges, FINRA, MSRB). The SEC does not enforce state securities statutes or state or federal banking laws.
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Investment companies must send financial reports to shareholders: A) monthly. B) semiannually. C) quarterly. D) annually.
B) semiannually.
Section 15 of the Investment Company Act of 1940 spells out many of the specific requirements for the contract between a management investment company and its investment manager. Among those requirements is that: I. no contract may be terminated with more than 60 days notice in writing. II. the initial contract is for a maximum of 1 year and then may be renewed on either an annual or biannual basis. III. unless a specific exemption applies, the fund may not engage in margin trading. IV. the contract must be in writing.
I & IV.
To be in compliance with the Securities Act of 1933, the sale of which of the following securities would require delivery of a prospectus? I. Primary offering of a closed-end investment company registered under the Investment Company Act of 1940. II. Primary offering of 5-year U.S. treasury notes sold to an individual investor. III. Private placement sold under the provisions of Regulation D. IV. Sale of shares of an open-end investment company whose first public offering was 23 years ago.
I & IV. Any primary offering, unless the security is exempt, requires timely delivery of a prospectus. Treasury notes and private placements are exempt.
Under section 13(d) of the Securities Exchange Act of 1934, a person who acquires more than 5% of a class of securities registered under the act must, within 10 days, file a report of beneficial ownership with: I. the SEC. II. the issuer. III. the exchange where traded.
I, II, III.
Under the Securities Act of 1933, the term "person" could refer to which of the following? I. A subdivision of a government. II. An unincorporated amateur athletic club. III. A nonprofit, charitable corporation.
I, II, III.
Identify the accredited investors from the list below. I. An individual with a net worth of $800,000 and an annual salary of $150,000 II. A married couple with a net worth of $2 million consisting of a home worth $500,000 and pension plans and other assets worth $1.5 million III. An insurance company IV. A corporation with a net worth of $3 million
II & III.
Under the Securities Exchange Act of 1934, the authority of the SEC to investigate violations of rules extends over: I. the state securities statutes. II. the federal securities acts and rules of the SEC. III. the SROs.
II & III.
Under the Investment Advisers Act of 1940, it is legal for an investment adviser to: I. rebate the commission on a mutual fund sale to a client who has already paid a fee for investment advice. II. keep the commission on a mutual fund sale when the client who purchased the shares has already paid for investment advice. III. reduce a client's advisory fee by any commissions earned on mutual fund sales to that client.
II & III. Rebating commissions on mutual fund sales is prohibited.
Under the rules of the Securities Exchange Act of 1934, trading in a client's account would be considered excessive if: I. the agent receives a commission from trading. II. trading was conducted without considering the client's investment objectives. III. trading is inappropriate in view of a client's resources.
II & III. Trading is considered excessive if the agent induces a client to trade securities in transactions that are excessive in size or frequency in view of the financial resources, investment objectives, and character of the client's account.
