Ch. 9 Flashcards
An underwriter is most likely registered as a ____________.
Broker dealer
Name two prohibitions that relate to being an insider.
- No shorting of the stock
- No keeping it short swing profits
The final ________ ______ will not appear in a red herring.
Offering price
T/F: the SEC judges an offerings investment merit and provides approval
F
The SEC may suspend trading on an exchange for up to _____ days.
90
The cooling off period for a federal securities registration is a minimum of _____ days.
20
If a mutual fund intends to advertise its performance figures, what must be deducted?
All management fees and expenses
What percentage of investors must be residents of the state for a security to be exempt under Rule 147?
100%
List some items that may be found on an income statement of a corporation.
Revenues, expenses, net income, or net loss
May an agent sell mutual fund shares to a client after giving the client an omitting prospectus?
Yes, as long as she offered to give. The customer the standard prospectus
Criminal penalties for violating the IA Act of 1940 may not exceed $_____ and/or imprisonment not exceeding ______ years.
$10,000; five
T/F: 100% of investors must be state residents to qualify for the Rule 147 intrastate exemption.
T
The Securities Act of 1933 regulates __________.
New issues
A new issue being offered in one state only is _________ from federal registration under SEC Rule _______.
Exempt; 147
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
Due to a significant event, when is an issuer required to file a Form 8-k?
Within four business days of the event. However, compliance with Regulation FD may require filing sooner
The SEC may suspend trading on an exchange for up to _______ days with notification to the _____________.
90 ; President of the US
Is shareholder approval required for a mutual funds adviser to be allowed to deviate from the funds investment policy?
Yes
If a client owns more than 5% of a publicly traded company, what form is required to be filed with the SEC?
Form 13D
What are treble damages?
The civil penalty for insider trading, which is three times the profit made or loss avoided
Does the Investment Company Act of 1940 consider an investment company’s legal counsel an affiliated person?
No. An affiliated person is an officer, director, partner, employee, or 5% or greater owner of the shares
May a preliminary prospectus (red herring) be sent during the cooling off period?
Yes. The red herring is used to obtain indications of interest from potential purchasers
T/F: An intrastate offering is exempt from registration under the Securities Act of 1933.
T
The SEC may suspend trading in any security for up to _____ business days.
10
T/F: Private placement offerings are exempt from registration under the Securities Act of 1933.
T
What is the maximum penalty for criminal violations of the Investment Company Act of 1940?
Five years in prison and/or a $10,000 fine
If the SEC intends to suspend all trading, who must receive advance notification?
The President of the US, who just notify the SEC that he does not disapprove of the decision
What US Government agency, created by the 1934 Act, enforced securities laws?
The SEC
Insiders must return short swing profits, which are profits earned on stock that has been held for less than _____ months.
Six
When must a mutual fund prospectus be delivered?
At or prior to the time of solicitation or when marketing materials are sent.
The criminal penalty for insider trading by an individual is a maximum $________ and/or ____ years in prison.
$5 million; 20 years
What is NOT required to be reported on an 8-k filing?
The location change of a subsidiary of a company
What is Form 13F?
A report filed by investment managers with discretion over securities that exceed $100 million
The Securities Exchange Act of 1934 regulates the __________ ________.
Secondary Market
The SEC may suspend trading in a security for up to ______ days.
10
What is the purpose of providing investors with a preliminary prospectus (red herring)?
To disclose information and obtain indications of interest
T/F: Under the Securities Act of 1933, the sale of mutual fund shares is an example of an exempt transaction.
F; mutual funds are generally offered to the public, sold by prospectus, and required to be registered with the SEC
Regarding the underwriting of an issue, what is the purpose of holding a due diligence meeting?
To ensure the accuracy and completeness of all of the information being distributed to the public.
What is required for a mutual fund to be allowed to use the funds assets to pay the costs of distributing shares?
Shareholder approval
Indications of interest are ___________ on both the customer and BD.
Non-binding
Identify the acronym: SRO
Self regulatory organization
What are some of the forms that publicly traded companies must file with the SEC?
Registration statements, 10-k, 10-q, 8-k, proxy statements, and possibly scheduled 13D
What must issuers have to qualify for the Rule 147 intrastate exemption?
The issuer must have its principal place of business in that state
How many 10-a forms must a reporting issuer file per year?
Three. While 10-w forms must be filed quarterly, a 10-k is filed at the end of the year in lieu of a fourth 10-q
During the registration cooling off period, what should an agent do if a client sends a check to purchase securities?
Return the check to the customer
A corporations financial reports are reported to the SEC each year on Form _____.
10-k
Identify the acronym: FINRA
Financial Industry Regulatory Authority
What is the purpose of a Tombstone Ad?
It calls attention to the new issuance of securities and members of the syndicate
According to the Investment Company Act of 1940, who are considered affiliated persons of an investment company?
Officers/directors, members of the advisory board, employees, or owners of 5% or more of the voting stock
What is the primary purpose of the Securities Act of 1933?
Provide investors with full and fair disclosure regarding new issues (prospectus)
Schedule _____ must be files within ______ days if an investor acquires more than 5% of a publicly traded company.
13D; 10 days
Define omitting prospectus.
A written communication for mutual fund shares that contains limited information (less than a regular prospectus)
What information will not be found in a preliminary prospectus?
The final public offering price and the effective date
Under Reg D, securities distributed through a private placement may be sold to how many non accredited investors?
No more than 35
What form is filed with the SEC to announce that a firm is filing for bankruptcy?
Form 8-k
Under Reg D private placement, _______ is the maximum number of non accredited investors allowed.
35
