Chapter 2

Question 1

What do American depository receipts do?

Answer 1

Allow an investor to invest in a foreign company using US dollars.

Question 2

Characteristics of American Depository Receipts

Answer 2

US Issued by depository bank, Pay dividends in US dollars, represent foreign security in domestic market

Question 3

What is Rule 144 stock

Answer 3

allows selling restricted, unregistered, or controlled securities publicly without registration if certain requirements are met

Question 4

what is a restricted security

Answer 4

is a security acquired in a private sale, meaning it was not publicly offered, and therefore cannot be freely traded on the open market without meeting specific conditions

Question 5

How long does a restricted security need to be held before it is sold?

Answer 5

6 months

Question 6

What are control stocks?

Answer 6

refers to shares of a company that are owned by a majority shareholder or group of shareholders. These shareholders have significant influence over the company’s decisions. 10% individually or combined with immediate family

Question 7

When a control person, or affiliate, wants to sell shares, what form must they complete?

Answer 7

form 144

Question 8

What is the purpose of form 144?

Answer 8

to notify the public of a proposed stock sale. It’s required when an affiliate or non-affiliate of a company intends to sell restricted or control stock.

Question 9

This grants existing stockholders the opportunity to maintain their proportionate ownership in a company by buying newly issued shares before they are made available to the public

Answer 9

Stock rights, or known as preemptive rights

Question 10

the time period during which a stock rights holder can choose to exercise the right to by a stock from an additional public offering

Answer 10

subscription period

Question 11

This type of security is usually paired with another security as a sweetener, and gives an investor the right to buy a stock at a certain price by a predetermined time.

Answer 11

Warrant

Question 12

What happens in a Forward stock split?

Answer 12

Increases number of shares and reduces the price

Question 13

What happens in a reverse stock split

Answer 13

decreases number of shares and increases price per share

Question 14

What is a tender offer

Answer 14

offer to buy a security directly from the owners of the security