Chapter 6 Flashcards Preview

Series 7 > Chapter 6 > Flashcards

Flashcards in Chapter 6 Deck (50)
1

True or False: The SEC judges an offering’s investment merit and provides approval.

False

2

List the securities that are exempt from registration.

Government/municipal bonds, commercial paper, bankers' acceptances, bank issues, non-profit and small business issues

3

Though some securities are exempt from registration, nothing is exempt from the ____________ provisions of the Act.

anti-fraud

4

Regulation A exemption is allowed if issuers raise no more than $____________ over 12 months.

$5 million (capital, not share limit)

5

The ____________________ is the disclosure document concerning a Regulation A issue.

Offering Circular

6

True or False: 100% of investors must be state residents to qualify for an intrastate exemption.

True

7

Securities issued under the intrastate exemption may not be sold outside the state until ____________ have passed.

9 months

8

What is the rule that issuers must follow to qualify for an intrastate exemption?

80% of assets located in-state, 80% of revenue produced in-state, and 80% of proceeds raised are used in-state.

9

____ is the maximum number of non-accredited investors allowed in a Private Placement.

35

10

The private placement disclosure document is the _____________________.

Offering Memorandum

11

May a preliminary prospectus (red herring) be sent during the cooling-off period?

yes

12

Indications of interest are _______________ on both the customer and BD.

non-binding

13

What should an RR do if a client sends a check to purchase securities going through the cooling-off period?

return the check to the customer

14


True or False: If a registration statement has not been filed with the SEC, BDs may not discuss new issue information.

True

15

The ____________________ will not appear in a red herring.

Final Offering Price

16

What rules govern the registration of an issue in any state in which it will be offered?

Blue-Sky

17

True or False: Blue-Sky Laws apply to broker-dealers and agents operating within a state.

True

18

In a firm commitment underwriting, unsold securities are retained by ________________.

the syndicate

19

In a best-efforts underwriting, unsold securities are retained by ______________.

the issuer

20

What type of underwriting is cancelled if the entire issue is not sold?

All-or-None

21

What type of underwriting is cancelled if a specified portion is not sold?

Mini-Max

22

A ___________ underwriting is used for shares not purchased through a rights offering.

Stand-By

23

____________ is the only form of price manipulation allowed by the SEC.

Stabilization

24

True or False: Stabilization is designed to artificially raise the price of a new issue.

False. Keep the price from falling

25

Is there a maximum number of stabilizing bids that may be placed?

yes. one, usually placed by syndicate manager

26


The highest price at which a stabilizing bid may be placed is the ________________________.

public offering price

27

The New Issue Rule covers what new issues?

all equity IPO's

28

True or False: BDs and their employees may buy shares of equity IPOs from the syndicate.

False

29

Besides BDs and their employees, who else is restricted from purchasing equity IPOs?

An employee's immediate family if materially supported by, or sharing household with, the employee

30

An offering of shares of the issuer and selling shareholders (e.g., officers) is a _____________________ offering.

combined primary/secondary offer

31

The ___________ clause gives underwriters the ability to buy additional shares from the issuer to cover over-allotments.

Green Shoe

32

The Green Shoe Clause allows the issuer to expand the offering by a maximum of ____%.

15%

33

For how long may a new issue be sold under a shelf registration?

up to 3 years

34

True or False: Shelf Registration gives flexibility to the issuer by allowing delayed or continuous sales.

True

35

The holding period for unregistered (restricted) securities under Rule 144 is __________.

6 months

36

What is the maximum sale allowed under Rule 144?

1% of the outstanding shares or average trading volume over the last 4 weeks - whichever is greater

37

Once Form 144 is filed, owners have __________ to sell their securities.

90 days

38

Does Rule 144 require a specific holding period for control stock?

No, but the SEC must be notified when a sell order is placed and volume limitations apply.

39

True or False: Form 144 must be filed for any sale of restricted or control stock, regardless of the size.

False. If a sale is for 5,000 shares or fewer, and has a market value of $50,000 or less, no notification is required.

40

QIB stands for ___________________________.

Qualified Institutional Buyer

41


QIBs are financial institutions that have at least $_________________ invested in securities of non-affiliated issuers.

$100 million

42

Rule 144A exempts sellers from the holding period and volume limitations of Rule 144 if trading is done with a _____.

QIB

43

Reclassifications, merger or consolidation activities, and transfers of assets are regulated under what provision?

Rule 145

44

Underwriters that have made a firm commitment to an issuer are acting in a ________________ capacity.

principal/dealer

45


Underwriters operating under a best-efforts agreement with an issuer are acting in a ________________ capacity.

agency/broker

46

What is the difference between a syndicate member and a firm in the selling group?

Syndicate members assume liability, while firms in the selling group do not.

47


According to the Equity IPO Rule, firms must update the eligibility of purchasers ___________ .

annually

48

Are immediate family members of member firm employees always restricted from purchasing equity IPOs?


Not if the individual receives no material support and is not purchasing from the firm employing their family member

49

What does Rule 145 of the Securities Act of 1933 cover?


Registration/prospectus requirements of any reclassification of securities (primarily from mergers or acquisitions).

50

Accredited investors have net worth of at least $_________ or pre-tax income in each of the last two years of $________.

$1,000,000

$200,000