Ch 2 deck 8

Question 1

In registration period regular business communications are allowed

Answer 1

By reporting issuers (including forward looking info)

By non-reporting issuers (but NO forward looking info)

Question 2

For an IPO, In the post-effective period, research analysts that work for a company that is either a lead manager or a co-manager may not

Answer 2

make public appearances regarding the issuer for 40 days from the beginning of the offering.

Question 3

time during post effective period in which research analysts may not make public appearances regarding the issuer is called

Answer 3

quiet period

Question 4

For a follow-on offering, In the post-effective period, research analysts that work for a company that is either a lead manager or a co-manager may not

Answer 4

make public appearances regarding the issuer for 10 days from the beginning of the offering. (called quiet period)

Question 5

There is an exception to the “quiet period” rule for

Answer 5

“actively traded” securities

Question 6

Allowed in the post-effective period

Answer 6

offers

sales

Question 7

In the post effective period sales must be

Answer 7

accompanied or proceeded by a prospectus

Question 8

FINRA rule 5130 was put in place to make sure that an initial public offering is offered fairly to

Answer 8

all public investors

Question 9

FINRA rule 5130 was put in place to make sure that an IPO does not give an advantage

Answer 9

to insiders or people in the financial industry

Question 10

FINRA Rule 5130 prohibits a member firm (broker/dealer) from selling shares of an IPO

Answer 10

to an account in which a “restricted person” has a beneficial interest

Question 11

FINRA Rule 5130 Restricted persons are

Answer 11

–FINRA members and other broker-dealers
–
Broker-dealer personnel including registered representatives and including their family members
- Anyone working for a broker dealer (not just registered reps)
–Lawyers, accountants, financial consultants, or anyone else acting in a fiduciary capacity to the lead underwriter

–Portfolio managers
–
Individuals with a significant ownership interest (+10%) in the broker-dealer
-

Question 12

Under FINRA Rule 5130 Broker-dealers and agents of broker-dealers may not retain shares

Answer 12

of the IPO for their own accounts to sell at a later time (unless exceptions are met)

Question 13

FINRA Rule 6130 prohibits a member or associated person from executing a transaction in a security being distributed in an IPO otherwise than

Answer 13

on an exchange before the security opens for trading on the exchange.

Question 14

Under FINRA Rule 6130 sales in the security cannot be executed until

Answer 14

the security opens for trading

Question 15

Rule 430A allows companies to retroactively insert

Answer 15

pricing information into the registration statement as of the registration statement’s effective date.

Question 16

Pricing information submitted with the registration is usually

Answer 16

in the form of a price range

Question 17

This allows companies can insert the chosen price after the registration statement has become effective by

Answer 17

filing a 424(b) prospectus supplement with the new price

Question 18

When a company files a 424(b) prospectus supplement with a new price the SEC

Answer 18

Does not need to review this supplement

Question 19

A company can file a 424(b) prospectus supplement with a new price the SEC if the change in price is

Answer 19

not 20% greater or less than the upper and lower limits of the range

Question 20

If a company cannot file a 424(b) prospectus supplement with a new price because the new price is outside limits, it must

Answer 20

revise the registration statement and file a post-effective amendment to the registration statement

Question 21

Rule 430A allowing retroactive insertion of pricing is available for

Answer 21

firm commitments offerings

Question 22

424(b) prospectus supplement with a new price must be filed within

Answer 22

15 business days of effective date of registration

Question 23

If an issuer fails to file a 424(b) prospectus supplement with a new price within 15 days it must

Answer 23

file a post-effective amendment to the registration statement

Question 24

The price range submitted with the registration statement is usually

Answer 24

range of $2 for stocks under $20

a range of 20% of highest point in the range for stocks over $20

Question 25

Accounts fall under Rule 5130 if a restricted person

Answer 25

had beneficial interest in at least 10% of the account

Question 26

The Rule 5130 restricted account definition that includes accounts in which a restricted person has beneficial interest in 10% of the account extends to

Answer 26

immediate family members
Children
Spouses
Parents
In-laws (of siblings, children and parents)
Siblings
Anyone else to whom the restricted person provides material support

Question 27

Under Rule 5130 “material support” is defined as

Answer 27

directly or indirectly providing more than 25% of a person’s income in the prior calendar year

OR

Lives in the same household

Question 28

Under FINRA Rule 5130 an underwriter can place a portion of a public offering in its investment account when

Answer 28

It is unable to sell that portion to the public

Question 29

Exception to rule 5130 restriction on broker-dealers retaining shares of an IPO for their own accounts to sell at a later time

Answer 29

Must meet all the following:

• only applies to sold shares
• it was disclosed in the prospectus
• it is subject to a written agreement
• there is a statement from the lead underwriter that they couldn’t find any buyers
• the shares will not be sold within three months

Question 30

Rule 5131 prohibits

Answer 30

spinning

Question 31

When a member firm promises shares an IPO to persons who are in a position to direct securities business to the firm in the future

Answer 31

Spinning

Question 32

Under Rule 5131 persons who are in a position to direct securities business to the firm in the future include

Answer 32

Officers and directors who have used the broker-dealer for investment banking services in the last 12 months or plan to use them in future

Question 33

For an IPO, In the post-effective period, research analysts that work for a company that is a member of the syndicate may not speak publicly about the offering for

Answer 33

25 days

Question 34

For communications rules purposes in JOBS act, an emerging growth company is defined as

Answer 34

A Company with less than $1 billion in annual revenue that had its first IPO no more than five years ago

Question 35

Banks are now allowed to publish research reports on emerging growth companies

Answer 35

Immediately after they take them public. The old rule required of 40 calendar day quiet period for IPOs (watch - may not be incorporated into exam)