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Series 66 > 66-2 > Flashcards

66-2 Flashcards

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Series 66 flashcards
1
Q

List the securities that are exempt from registration.

A

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

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2
Q

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

A

anti-fraud

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3
Q

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

A

$5 million

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4
Q

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

A

offering circular

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5
Q

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

A

true

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6
Q

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

A

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

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7
Q

The private placement disclosure document is the _____________________.

A

Offering Memorandum

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8
Q

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

A

Blue-Sky Laws

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9
Q

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

A

True

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10
Q

Is an option on a commodity futures contract a security?

A

Yes. The futures contract is not, but the option is a security. Options could be based on an equity, index, or currency.

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11
Q

Would an interest in a real estate condominium development be considered a security?

A

yes

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12
Q

True or False: Precious metals are not considered securities.

A

True

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13
Q

Is a voting trust certificate a security?

A

Yes

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14
Q

Is a Keogh plan considered a security?

A

No, but Keogh plan participation is considered a security.

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15
Q

Is an investment interest in livestock considered a security?

A

yes

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16
Q

Is a certificate of interest in a mining lease a security?

A

yes

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17
Q

Is a fixed annuity a security?

A

No, but variable contracts (e.g., variable annuities or variable life insurance) are considered securities.

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18
Q

Is an endowment life insurance policy a security?

A

no

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19
Q

Is a variable life insurance policy a security?

A

Yes, but a term or universal life insurance policy is not considered a security.

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20
Q

Is a universal life insurance policy considered a security?

A

no

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21
Q

Is Keogh plan participation considered a security?

A

Yes, but the Keogh plan itself is not a security.

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22
Q

Is a 401(k) plan considered a security?

A

no

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23
Q

Is treasury stock considered a security?

A

Yes. Treasury stock is stock that was issued and subsequently repurchased by the company.

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24
Q

Is a debenture considered a security?

A

Yes. A debenture is an unsecured corporate bond

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25
Q

Is a preemptive right considered a security?

A

yes

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26
Q

Is a warrant a security?

A

yes

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27
Q

Is a preorganization certificate considered a security?

A

yes

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28
Q

Is an IRA account considered a security?

A

No

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29
Q

Is a futures contract considered a security?

A

No, but an option on a futures contract is a security.

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30
Q

Is a multi-level distributorship considered a security?

A

yes

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31
Q

Is a limited partnership a security?

A

Yes

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32
Q

Is an interest in oil and gas drilling program considered a security?

A

yes

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33
Q

Is a whiskey warehouse receipt considered a security?

A

yes

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34
Q

Is an individual who represents an issuer in the sale of municipal bonds considered an agent?

A

No, since the individual is involved in the sale of exempt securities.

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35
Q

Is an individual who represents the issuer of a private placement considered an agent?

A

No, since the individual is involved in an exempt transaction.

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36
Q

Is an individual who represents the issuer in the sale of Treasury bonds considered an agent?

A

No, since the individual is involved in an exempt transaction.

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37
Q

Is an individual who represents a bank in the sale of the bank’s stock considered an agent?

A

No, since the individual is involved in an exempt transaction.

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38
Q

Is an individual who represents an issuer in the sale of stock to a bank considered an agent?

A

No, since the individual is involved in an exempt transaction.

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39
Q

Is an individual who represents an issuer in the sale of the issuer’s stock to its underwriter considered an agent?

A

No, since the individual is involved in an exempt transaction.

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40
Q

Is Jim an agent if he works in ABC’s retirement dept. and, once a year, places ABC stock in employees’ accounts?

A

No, Jim is representing the issuer in an exempt transaction.

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41
Q

True or False: Securities issued by provinces and municipalities of Canada are subject to state registration.

A

False. Securities issued by Canadian provinces or municipalities are exempt from registration.

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42
Q

Are bonds issued by the City of New York exempt from state registration?

A

yes

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43
Q

True or False: Securities issued by the states and municipalities of Mexico are exempt from registration under the USA.

A

True. An exemption is provided to securities issued by foreign governments with whom the U.S. has diplomatic relations.

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44
Q

Securities issued by any government with whom the U.S. has _____________ relations are exempt from state registration.

A

diplomatic

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45
Q

True or False: Securities issued by the U.S. Treasury and U.S. agencies are deemed exempt securities under the USA.

A

True

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46
Q

________ issued by insurance companies are exempt from state registration.

A

Bonds

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47
Q

True or False: Securities of a Canadian company, but listed on the NYSE, are exempt from state registration.

A

True

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48
Q

Are bonds issued by a charitable organization subject to state registration?

A

No. Securities issued by non-profit organizations are exempt from registration.

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49
Q

What criteria must be met for commercial paper to be exempt from registration?

A

A 270-day maximum life, minimum denomination of $50,000, rated in one of the top-three categories according to an NRSRO

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50
Q

An executor of an estate sells a block of securities that are not registered. Is this a violation?

A

No. This is an example of an exempt transaction.

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51
Q

Would securities that are traded on the Toronto Stock Exchange be subject to state registration requirements?

A

No. These secondary market transactions are considered exempt from registration according to the USA.

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52
Q

True or False: Bankers’ Acceptances rated AAA, maturing in 6-months, and issued in $25,000 denominations are exempt.

A

False. Because the BAs were not issued in at least $50,000 denominations, registration is required.

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53
Q

Is a private placement defined as an exempt transaction or as an exempt security under the USA?

A

exempt transaction

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54
Q

Under the USA, private placements are exempt if securities are offered to ____ or fewer retail clients over ____ months.

A

10 or fewer clients over 12 months

55
Q

True or False: Agents selling unregistered, non-exempt securities to banks and trust companies are violating the USA.

A

False. Transactions with banks and trust companies are considered exempt transactions.

56
Q

If a Nasdaq stock trades in the secondary market, does the USA consider it an exempt security or exempt transaction?

A

exempt security

57
Q

Are securities traded on the OTCBB or the Pink Sheets exempt?

A

no

58
Q

True or False: Bonds issued by a railroad are exempt from state registration.

A

True. Securities issued by a railroad, common carrier, or public utility are exempt at the state level.

59
Q

Are securities issued by a software company exempt from state registration?

A

no

60
Q

True or False: According to the USA, debt issued by a fraternal organization would NOT be considered exempt.

A

False. Securities issued by non-profit organizations are exempt from state registration.

61
Q

What does the USA consider a security issued by an investment company that is registered under the Inv. Co. Act of 1940?

A

The securities are considered federal covered.

62
Q

Non-issuer trading of securities subject to reporting requirements of the Act of 1934 are _________ transactions.

A

exempt

63
Q

True or False: Occasional, secondary market transactions in an OTCBB stock are considered exempt transactions.

A

False. Only non-recurring secondary market transactions are considered exempt transactions.

64
Q

Is an isolated, non-recurring, non-issuer transaction in OTCBB or Pink Sheets stock subject to registration?

A

No, it is an exempt transaction

65
Q

Is an unsolicited, non-issuer transaction in an OTC stock exempt from state registration?

A

yes, because it is unsolicited

66
Q

True or False: The sale of securities to a pension plan is considered an exempt transaction under the USA.

A

True

67
Q

Registration by Filing (Notification) requires issuers to be in business at least _____ months preceding registration.

A

36 months

68
Q

An intra-state offering would use which method of state securities registration?

A

qualification

69
Q

What method of state securities registration requires issuers to wait to hear from the Administrator before selling?

A

qualification

70
Q

To use Filing (Notification) to register stock, the offering price must be at least $______ per share.

A

$5.00

71
Q

Registration by Filing (Notification) requires that the underwriting commission be no more than _____%.

A

10%

72
Q

Registration by Coordination has a minimum cooling-off period of _____ days.

A

10 days

73
Q

Which method of state securities registration would likely be used for an IPO being offered in several states?

A

coordination

74
Q

Registration by Coordination requires issuers to meet requirements of the USA as well as what other Act?

A

The Securities Act of 1933

75
Q

True or False: A state may require a registration fee from the issuer of a Nasdaq security.

A

False

76
Q

True or False: A state may require notice filing by an issuer of an NYSE security.

A

True. Notice filing is the requirement to provide the state with the same information that was filed with the SEC.

77
Q

True or False: An Administrator may not require a sales report from the issuer of an OTC security.

A

False

78
Q

True or False: Soliciting orders for unregistered, non-exempt securities is prohibited.

A

True

79
Q

Accepting orders for unregistered, non-exempt securities is allowed if clients attest that the trade was _____________.

A

unsolicited

80
Q

Define an investment contract (according to the Howey Test).

A

An investment of money, in a common enterprise, with expectation of a profit due to efforts of third-party management.

81
Q

True or False: Securities issued by registered investment companies are considered federal covered securities.

A

True

82
Q

True or False: Securities traded on the NYSE may be required to pay a registration fee to a state Administrator.

A

False

83
Q

After receiving an effective date, what information may an issuer change by amending its registration statement?

A

The number of shares being offered. A new registration is required to change offering price or underwriter compensation.

84
Q

Regarding federal covered securities, may an Administrator cancel a registration?

A

No

85
Q

Regarding federal covered securities, may an Administrator prohibit the sale of the security in his state?

A

No

86
Q

Regarding federal covered securities, may an Administrator require the issuer to complete the notice filing?

A

Yes. Notice filing is the process by which information filed with the SEC is also filed/shared with the Administrator.

87
Q

As it applies to persons and securities, what does the term “exemption” mean in the USA?

A

Exemption signifies that a person or security is not subject to registration under the USA.

88
Q

An individual who represents an issuer in selling registered, non-exempt securities for compensation is an ________.

A

agent

89
Q

True or False: Variable annuities are not securities and are, therefore, not subject to registration.

A

False. Any variable products are considered securities. However, fixed insurance products are not securities.

90
Q

True or False: IRAs and Keogh plans are considered securities.

A

False. The participation in these plans (what goes in the plan) is considered a security, but the plan itself is NOT.

91
Q

True or False: Options on commodities are securities.

A

True. Options are always considered securities (e.g., options on futures, a currency, an index, or equities).

92
Q

True or False: Two friends, anticipating a rise in value, purchase property. The property is considered a security.

A

False

93
Q

Identify the three forms of state securities registration.

A

Notification (filing), coordination, qualification

94
Q

How would a well-established corporation register a subsequent offering to be sold in multiple states?

A

Notification (filing)

95
Q

True or False: Paperwork related to coordination is filed with the Administrator at the same time as the SEC filing.

A

False. Registration will become effective simultaneously with SEC registration, but need not be filed at the same time.

96
Q

What is the minimum cooling-off period for registration by notification?

A

5 days

97
Q

Do the anti-fraud provisions of the USA apply to exempt securities?

A

yes, nothing is exempt from fraud

98
Q

True or False: A trade of unregistered, non-exempt securities between two BDs would be a violation of the USA.

A

False. This is an exempt transaction.

99
Q

If registering an IPO, an issuer would most likely use what form of state registration?

A

coordination

100
Q

What form of state registration is not available in all states?

A

Notification (filing)

101
Q

The only form of state registration that has its effective date set by the Administrator is _______________.

A

qualification

102
Q

The solicitation of buyers for unregistered, non-exempt securities is _____________.

A

prohibited

103
Q

True or False: Securities issued by municipalities of Mexico are exempt under the USA.

A

True. An exemption applies to securities issued by foreign governments with whom the U.S. has diplomatic relations.

104
Q

True or False: Securities issued by municipalities of Canada are exempt under the USA.

A

True

105
Q

Transactions between the issuer and its underwriter are considered ________ transactions.

A

exempt

106
Q

May a state prevent the sale of a federal covered security in its state?

A

no

107
Q

Regarding the underwriting of an issue, what is the purpose of holding a due diligence meeting?

A

To ensure the accuracy and completeness of all information being distributed to the public

108
Q

Under Reg. D, a private placement may be sold to how many non accredited investors?

A

no more than 35

109
Q

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

A

Accredited investors have net worth of at least $1,000,000 or pre-tax income in each of the last two years of $200,000.

110
Q

A new issue being offered in one state only is _________ from federal registration under SEC Rule ______.

A

exempt; rule 147

111
Q

What percentage of investors must be residents of the state for a security to be eligible for a 147 exemption?

A

100%

112
Q

What is the general definition of an issuer?

A

Any person who issues or proposes to issue a security, such as government entities and corporations.

113
Q

An _______of an ________ is an individual who represents an issuer in effecting transactions with the general public.

A

agent of an issuer

114
Q

What’s an issuer transaction?

A

A transaction in which the issuer receives the proceeds.

115
Q

True or False: A transaction by an executor is exempt.

A

True. Any transaction by an executor, administrator, trustee in bankruptcy, or conservator is considered exempt.

116
Q

Who must prove that an exemption exists?

A

the party claiming the exemption

117
Q

True or False: Under the Uniform Securities Act, municipal bonds are federal covered securities.

A

False. Municipal bonds are exempt securities. Federal covered securities include listed stocks and mutual funds shares.

118
Q

False. Municipal bonds are exempt securities. Federal covered securities include listed stocks and mutual funds shares.

A

securities

119
Q

According to the Securities Act of 1933, when is an investment pool considered a federal covered security?

A

When it registers as an investment company under the Investment Company Act of 1940

120
Q

What four elements are required for an investment contract to be considered a security?

A

1) An investment of money, 2) A common enterprise, 3) Efforts made by a third party, 4) An expectation of profits

121
Q

True or False: Under the Uniform Securities Act, debentures issued by a Canadian bank are exempt from registration.

A

True

122
Q

A car dealer gives 100 shares of stock to all new car buyers. Is this considered a sale of securities?

A

Yes. Since the gift is contingent upon a purchase, it is considered a sale of the security.

123
Q

Describe what it means for a security to be registered.

A

The security may be legally offered or sold in the state.

124
Q

True or False: A certificate of interest in a mining title is a security under the USA.

A

True. Certificates of interest in mining or drilling titles are securities under the Uniform Securities Act.

125
Q

True or False: Exchange-listed futures contracts are securities.

A

False. Futures and forward contracts are not securities.

126
Q

True or False: Securities listed on the NYSE are exempt from state registration.

A

True

127
Q

Under the USA, is a federal covered security trading in the secondary market an exempt security or an exempt transaction?

A

exempt security

128
Q

Under the USA, is stock issued by an electric company an exempt security or an exempt transaction?

A

Securities issued by public utilities are considered exempt securities.

129
Q

NSMIA indicates that securities listed on the NYSE, NASDAQ and Toronto Exchange are _________________ securities.

A

federal covered

130
Q

Is an individual who represents an issuer in the sale of registered stock considered an agent?

A

Yes. An individual who represents an issuer of securities being offered publicly must register as an agent.

131
Q

True or False: Charitable organizations may issue securities.

A

True, they may issue bonds

132
Q

List some securities that are considered federal covered and exempt from registration.

A

Those listed on national exchanges (e.g. NYSE, NASDAQ) and investment company securities (e.g., mutual fund shares)

133
Q

True or False: Federal covered securities issuers may be required to pay a filing fee to an Administrator.

A

True. Certain types of federal covered securities issuers may be required to pay a filing fee.

134
Q

Name some of the federal covered securities.

A

Securities listed on an exchange, issued by an investment company, and sold as a private placement (Reg. D Rule 506)

Series 66 (12 decks)

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