Business for the BD

Question 1

Correspondence

Answer 1

25 or fewer retail persons - Principal can approve pre- or post-distribution

Question 2

Retail Communication (Sales Literature)

Answer 2

More than 25 retail persons - required Principal approval pre-distribution

Question 3

OCC Disclosure Document (ODD)

Answer 3

Options Clearance Corporation - required WITHIN 15 DAYS of account APPROVAL

Question 4

Advertisements for Derivaties

Answer 4

Approval required 10 DAYS PRIOR to first use

Question 5

Cooling Off Period

Answer 5

“Quiet Time” - minimum of 20 days, not allowed to comment

Question 6

What can you do during the Cooling Off Period

Answer 6

Send out a Preliminary Prospectus, Indications of Interest (IOI), and Tombstone

Question 7

What is another name for a Preliminary Prospectus?

Answer 7

Red Herring

Question 8

What is the difference between a Preliminary Prospectus and a Final Prospectus?

Answer 8

A Red Herring does not contain the final offering price

Question 9

True of False: Indications of Interests (IOIs) are non-binding on some parties

Answer 9

False: Non-binding on ALL parties

Question 10

Tombstone

Answer 10

Advertisement that discloses NO BUYING/SELLING - able to post during Cooling Off Period

Question 11

Underwriting Agreement

Answer 11

Agreement between Issuer (Corp) and Underwriters (BD Firms)

Question 12

Selling Group Agreement

Answer 12

Agreement between Underwriters (BD Firms) and their Selling Group Members (Clients)

Question 13

True or False: Selling Group Members are never liable for unsold securities

Answer 13

True

Question 14

What are the different types to Blue Sky with your State Administrator?

Answer 14

Coordination, Qualification, and Notification

Question 15

Notice of Sale

Answer 15

Published in the Daily Bond Buyer - applicable for Municipal Bonds

Question 16

What is the difference between what the public pays and what the Issuer receives?

Answer 16

Spread

Question 17

What are the different components (from smallest to largest) of a Spread?

Answer 17

Management Fee, Additional Takedown, Selling Concession

Question 18

Total Takedown [equation]

Answer 18

Applicable to Municipal Bonds: Additional Takedown + Selling Concession

Question 19

True or False: The Total Takedown is the single largest component of a Spread

Answer 19

False: Selling Concession
(remember: pay attention to the full question - SINGLE largest component. Total Takedown = Additional Takedown + Selling Concession)

Question 20

True or False: Municipal Bonds are exempt from registering under the ‘33 Act

Answer 20

True

Question 21

OS

Answer 21

Official Statement - the prospectus for Municipal Securities

Question 22

QIB

Answer 22

Qualified Institutional Buyer - AUM needs to be $100MM or more

Question 23

Accredited Investor

Answer 23

BDs with their Series 7 are considered Accredited Investor
Non-S7 BDs: $1MM net worth exc. primary restidence and/or making $200k/yr for the last 2 years ($300k when married and filing jointly)

Question 24

Reg D Offerings

Answer 24

Exempt from SEC Registration (‘33 Act)

Question 25

Reg A Offerings

Answer 25

Raise up to $50MM under Reg A

Question 26

Rule 147

Answer 26

Intrastate Offerings of securities - subject to 80% test of Issuer (at least 80% of holders must be in-state of offering)

Question 27

True or False: You do not have to be qualify for registration with Blue Sky of your state in order to offer under Rule 147

Answer 27

False: You must qualify for registration with Blue Sky

Question 28

How long must you hold a security in order to convert it from unregistered to registered?

Answer 28

6 months

Question 29

Rule 144A

Answer 29

QIBs are able to purchase unregistered foreign and domestic securities

Question 30

In what way are foreign securities able to be sold to US investors?

Answer 30

Via Rule 144A or as ADRs