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Flashcards in Regulations Deck (27):

Rule 415 covers what?

3year shelf registration for seasoned companies. Means they no longer need to file for approval from sec for 3 years when issuing new issues. Results in less cost and no 20 day cool off period. CANNOT BE USED ON ipos


What would be examples of an exempt security? And what is it exempt from?

Any issue being put out by the U.S government is exempt to the securities act of 1933 and does not need to be registered before offered to the public


Other exemptions to the securities act of 1933 are what?

Government issues, issuer already covered under other laws, non-profit issues, and other exemptions


What four kinds of government debt are exempt

Direct obligations of the U.S government. Agency sponsored obligations. Municipal issues. And foreign government issues including canada issues.


What issues are exempt due to being covered by other laws and regulations?

Insurance company issues except for variable annuities are covered by insurance laws which predate 1933.
Bank issues which are covered by bank laws predating 1933
Common carriers such as railroads and trucking companies covered by the interstate commerce commission laws which predates 1933


What are examples of non-profit issues?

Issues of benevolent corporations such as farmers coops.
Issues of non profit charitable or educational issuers


What are examples of other exempt securities that do not fall into the other three categories of government, insurance, or non profits?

Bankers acceptances and other short term issues maturing in under 270 days And issues of small business investment companies.


If an issue is non-exempt it must be offered how?

Registered with the SEC and issued with a prospectus.


Rule 147 covers what exempt offering?what are the requirements to qualify?

Intrastate offerings.
•100% of issue must be sold to residents of that state.
• issuer must be a resident of that state
• for 9 months following issuance these issues may only be sold to residents if that state
•covered by blue sky laws-federal registration exempt but must comply with state laws


Regulation D covers what exempt issue? And what are the requirements to qualify for this exemption clause?

Private placements and offerings.
• can be sold to no more than 35 non accredited investors and an unlimited number of accredited.
•can be sold in any state, any dollar amount, any unit amount.
•no prospectus is needed HOWEVER full disclosure must be given to investors through a "offering circular"
•see rule 504-506 on how much disclosure must be released.
• issuer must make sure all non accredited investors are still "sophisticated investors"


Regulation A covers what exempt issue? And what is required to file for Reg. A?

Small dollar amounts.
Under reg a. An issuer can issue securities under $5,000,000 a year without having to be registered with the SEC.
Full disclosure must be made available via an offering circular


Rule 144 covers what issue of exempt securities?
Requirements for these issues?

Issues that would otherwise need a prospectus. This allows for a holder of restricted stock (was never registered) to sell stock publicly without registering that stock.
Seller must have held said shares fully paid for 6 months or more.
Seller cannot use this more than 4 times per year.
• this rule also applies to control stock. Stock owned by an officer in a cooperation or a qualifying family member


What are the requirements to be classified as an accredited investor?

•Any individual with a net worth of $1,000,000 excluding residence value.
•Any individual with an income of at least $200,000 for the past two years •any couple with an income of $300,000 per year and a reasonable way to sustain that income.
•funds and institutions exceeding certain monetary values are classified as accredited investors as well


In what circumstance can a privately offered exempt issuing covered under reg d. Advertise?

Only if the issue is sold strictly to accredited investors can they advertise for a non registered issuing covered by Reg.D


An exempt security covered under Reg. D must offer varying levels of disclosure in the offering circular. Based on escalating dollar scale of the offering. Rules 504,505,506 state what $ amounts and disclosures?

504: under $1,000,000 minimum disclosure with no specifics needing be offered to investors
505: under $5,000,000 moderate disclosure to investors. Specifics include certified financial statements of the issuer
506: unlimited $ amount offerings. More disclosures including financial statements of issuer and other financial statements.


Rule 144 A covers what?

Allows for qualified institutional buyers to buy restricted securities without registering them with the sec and allows for resale of those to other qib. QIB= any institution holding $100,000,000 in investment accounts.


The "pennystock rule" applies to customer purchases of securities that are not exchange listed which are priced below:
A. $10 per share
B. Five dollars per share
C. Two dollars per share
D. One dollar per share

The correct answer is be five dollars per share


The Securities Exchange Act of 1934 established "self regulatory organizations" or also known as SROs and in powered these organizations to do all of the following except:
A. Set guidelines for fair dealings with the public
B. Establish commission rates to be charged to the public
C. Take administrative action against broker-dealers that violate industry regulations
D. Establish arbitration procedures to settle intra- industry disputes

The correct answer is B
The Securities Exchange Act of 1934 empowered self regulatory organizations such as FINRA and the CBOE to set guidelines for fair dealings with the public, to handle complaints against broker-dealers for securities law violations, to take administrative action against broker-dealers that violate industry regulations, and to establish arbitration procedures to settle intra- industry disputes. Fixed commission rates are prohibited under the Securities Exchange Act of 1934 these are set by the member firms


Which of the following statements are true about the "blue sky" laws?
A. Broker dealers and their sales representatives who are residents must register in the state under these laws
B. Broker-dealers and their sales representatives who are nonresidents that direct offers into the state must register in the state under these laws
C. States may suspend or expel broker-dealers and sales representatives for violation of the laws
D. If firms comply with the provisions of the Securities Exchange Act of 1934 then they are in compliance with state laws

The correct answer is a B and C


Which of the following must be approved or reviewed by the municipal principle?
A. each new account
B. Each municipal transaction
C. Each customer complaint
D. Each official statement

The correct answers are a B and C
Under MSR B rules, the principal must approve each new account approved each municipal trade and handle the resolution of customer complaints. The official statement is the disclosure document for new municipal issues prepared by the bond counsel since it is lawyer prepared there is no requirement for municipal principal approval of the document


Under MSRB rules all of the following records must be kept for specified time periods except:
A. Customer complaints
B. Customer account statements
C. Official statements
D. Trade comparisons

The correct answer is C
There is no requirement to keep official statements filed at the firm. The underwriter for the issuer files a copy of the official statement with MSRB be, which puts it up on EMMa website for public access.


Under the securities act of 1975 the municipal securities rulemaking board was created and empowered to regulate all of the following except:
A. Disclosure of new information by municipal issuers
B. Recordkeeping and settlement procedures of municipal broker-dealers
C. Disclosure of information on confirmations to customers
D. Suitability requirements for making recommendations of municipal securities

The correct answer is a


Fines assessed for convictions involving violations of insider trading laws are paid to the:
A. Internal Revenue Service
B. Department of treasury
C. Securities and Exchange Commission
D. Department of Justice

The correct answer is the Department of treasury


A 13 D notice would be filed when?
A. Corporation has change in its Board of Directors
B. Investor accumulates a 5% or greater position in common stock of an issue
C. Corporation reports its annual results to the Securities and Exchange Commission
D. Investor wishes to sell shares of restricted stock in the public market

The correct answer is B
Choice a would require a filing of an 8K by the Corporation
Choice c would require the filing of a 10K by the Corporation
And choice do you would require a filing of a form 144 by the seller


Stabilizing bids can be entered at which of the following?
A. Below the public offering price
B. At the public offering price
C. Above the public offering price

The correct answer is a and B stabilizing bids can only be entered at or below the public offering price


New corporate bond issues in excess of $5 million are:
A. Exempt securities under the securities act of 1933
B. Nonexempt securities under the securities act of 1933
C. Subject to the trust indenture act of 1939
D. Exempt from the trust indenter act of 1939

The correct answer is B and C
New corporate bond issues are nonexempt securities under the securities act of 1933 and must be registered and sold under a prospectus. In addition corporate bond offerings in a test of $5 million fall under the trust indenture act of 1939 requiring the bonds be sold under a trust indenture


Enforcement of MSRB rules for bank dealers is performed by all of the following except the:
A. Office of comptroller of currency
B. Municipal securities rulemaking board
C. Federal reserve board
D. Federal deposit insurance Corporation

The correct answer is B
Enforcement of these rules for bank dealers that are not subject to regulation under FINRA is performed by the bank regulatory bodies