Job Function 1

Question 1

What is the role of selling group members in a municipal bond issue?

Answer 1

Selling group members earn a commission on each sale they make and have no financial commitment.

Question 2

What do selling group members receive for each sale they make?

Answer 2

Selling concession (a commission).

Question 3

What happens to unsold bonds by selling group members?

Answer 3

They return any unsold bonds to the syndicate member.

Question 4

What is the order period in the context of a municipal bond issue?

Answer 4

A short time following the award of a municipal issue to the winning syndicate for order allocation.

Question 5

How are orders allocated during the order period?

Answer 5

In accordance with the priority defined in the syndicate letter.

Question 6

What is the largest portion of the spread in a municipal bond issue?

Answer 6

The concession.

Question 7

Can investors place orders for a new municipal bond issue before it is awarded?

Answer 7

Yes, they can place presale orders.

Question 8

What is the priority of presale orders in a municipal bond issue?

Answer 8

They have the highest priority in terms of allocation.

Question 9

How is the takedown shared among syndicate members for presale orders?

Answer 9

Proportionately based on their participation.

Question 10

Can an underwriting syndicate have more than one manager?

Answer 10

Yes, it may have more than one manager.

Question 11

What are the shares being offered in an IPO termed before issuance?

Answer 11

Authorized shares.

Question 12

What happens to shares after they have been issued?

Answer 12

They become issued stock.

Question 13

What do shares become if they are purchased back by the corporation?

Answer 13

Treasury stock.

Question 14

What are outstanding shares?

Answer 14

Issued shares that have not been repurchased as treasury stock.

Question 15

True or False: A new issue of common stock has been filed with the SEC, and a final prospectus can be found on the SEC website. This information has been given to a customer interested in the securities. In this instance, the access-equals-delivery requirements regarding that prospectus have not been met, as a prospectus must always be physically delivered.

Answer 15

False:
A prospectus must precede or accompany a security for sale and will be deemed so if the final prospectus has been filed with the SEC. Because prospectuses filed with the SEC can be viewed on the SEC website, the access-equals-delivery requirement is satisfied.

Question 16

What must precede or accompany a security for sale?

Answer 16

A prospectus

A prospectus provides important information regarding the investment offering.

Question 17

Where can a final prospectus be viewed?

Answer 17

On the SEC website

The SEC (Securities and Exchange Commission) provides access to filed prospectuses online.

Question 18

What is the access-equals-delivery requirement?

Answer 18

The requirement that a prospectus must be accessible to investors when a security is offered for sale

This requirement ensures that investors have the necessary information before making an investment decision.

Question 19

Fill in the blank: A prospectus will be deemed delivered if the final prospectus has been _______.

Answer 19

filed with the SEC

Question 20

True or False: A physical delivery of a prospectus is always necessary.

Answer 20

False

The requirement can be satisfied through electronic access if the prospectus is filed with the SEC.

Question 21

What is Rule 144 of the Securities Act of 1933 primarily concerned with?

Answer 21

The resale of restricted and control securities.

Question 22

True or False: Rule 144 provides a safe harbor for the resale of securities without registration.

Answer 22

True.

Question 23

Fill in the blank: Rule 501 defines the term __________ in relation to accredited investors.

Answer 23

accredited investor.

Question 24

What are the two main categories of securities covered under Rule 144?

Answer 24

Restricted securities and control securities.

Question 25

Multiple Choice: Which of the following is NOT a requirement of Rule 144? A) Holding period, B) Current public information, C) Minimum purchase price, D) Volume limitations.

Answer 25

C) Minimum purchase price.

Question 26

What is the holding period for restricted securities under Rule 144?

Answer 26

Typically 6 months for reporting companies and 1 year for non-reporting companies.

Question 27

True or False: FINRA Rule 5130 deals with the sale of new issues to certain categories of investors.

Answer 27

True.

Question 28

What does FINRA Rule 5130 prohibit?

Answer 28

The sale of new issues to certain restricted persons.

Question 29

Short Answer: Who qualifies as an accredited investor under Rule 501?

Answer 29

Individuals with a net worth of over $1 million or annual income exceeding $200,000.

Question 30

Multiple Choice: Which of the following is a key purpose of Rule 144? A) To promote public companies, B) To provide liquidity for certain investors, C) To restrict trading of all securities, D) To eliminate insider trading.

Answer 30

B) To provide liquidity for certain investors.

Question 31

What is the definition of 'total takedown' in municipal underwriting?

Answer 31

Total takedown refers to the total amount of bonds that an underwriter purchases from an issuer in a municipal bond offering.

Question 32

True or False: A concession in municipal underwriting is the fee that underwriters receive for their services.

Answer 32

True

Question 33

Fill in the blank: The __________ is an additional amount that may be taken down by the underwriter to cover expenses beyond the initial concession.

Answer 33

additional takedown

Question 34

What is the primary purpose of the concession in municipal underwriting?

Answer 34

The primary purpose of the concession is to compensate the underwriter for their role in marketing and selling the bonds.

Question 35

Multiple Choice: Which of the following best describes 'additional takedown'?

Answer 35

An amount taken by the underwriter to cover extra costs associated with the bond issuance.

Question 36

Which of the following terms refer to municipal bond underwritings? A. Standby B. Best efforts C. Preliminary prospectus. D. Firm commitment.

Answer 36

A) II and IV Negotiated municipal underwritings can be performed on a firm commitment, best efforts, or all-or-none basis. Standby underwritings are used only for corporate underwritings. In a municipal underwriting, the issue is described in the official statement or, if prepared, a preliminary official statement.

Question 37

True or False) The spread in a municipal underwriting is the difference between the takedown price and the reoffering price.

Answer 37

False: The spread in a municipal underwriting is the difference between the bid and production (the price at which the bonds are reoffered to the public).

Question 38

* Undivided liability to purchase securities from the issuer * Undivided responsibility for securities that remain unsold

Answer 38

an underwriter's financial liability if a syndicate is established as an Eastern account

Question 39

What must members and their associated persons avoid regarding new issues?

Answer 39

Taking advantage of their insider status to gain access to new issues for personal benefit

Question 40

Who is responsible if a registered representatives violates rules in place to protect the investing public regarding new issues of securities.

Answer 40

Member firms, designated supervisors, and registered representatives

Question 41

Are member firms and employees allowed to buy a new equity issue at the public offering price?

Answer 41

No, they are prohibited from doing so

Question 42

What factors does FINRA consider in determining the fairness of underwriting compensation? List at least three.

Answer 42

* Size of the offering (total dollar amount) * Type of commitment (firm commitment or best efforts) * Type of securities (i.e., stocks or bonds) * Form of compensation (i.e., cash or stock) * Total value of all forms of compensation * Underwriter's relationship to the issuer * Potential conflicts of interest

Question 43

Fill in the blank: Member firms and employees are prohibited from buying a new equity issue at the _______.

Answer 43

public offering price

Question 44

the difference between an offering price and the proceeds to an issuer

Answer 44

an underwriting spread