Ch 9 Federal Securities Acts Flashcards
Is shareholder approval required for a mutual fund’s adviser to be allowed to deviate from the fund’s investment policy?
Yes
When must a mutual fund prospectus be delivered?
At or prior to the time of solicitation or when marketing materials are sent.
Identify the acronym: SRO
Self-Regulatory Organization (such as FINRA)
The SEC may suspend trading in a security for up to _____ days.
10 days.
The SEC may suspend trading on an exchange for up to ____ days.
90 days.
True or False: An intrastate offering is exempt from registration under the Securities Act of 1933.
True
True or False: 100% of investors must be state residents to qualify for the Rule 147 intrastate exemption.
True
What is required for a mutual fund to be allowed to use the fund’s assets to pay the costs of distributing shares?
Shareholder approval
True or False: Under the Securities Act of 1933, the sale of mutual fund shares is an example of an exempt transaction.
False. Mutual funds are generally offered to the public, sold by prospectus, and required to be registered with the SEC.
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.
What form is filed with the SEC to announce that a firm is filing for bankruptcy?
Form 8-K
Criminal penalties for violating the IA Act of 1940 may not exceed $_______ and/or imprisonment not exceeding ____ years.
$10,000 and/or imprisonment not exceeding five years.
Indications of interest are _______________ on both the customer and BD.
non-binding
The final ________ _____ will not appear in a red herring.
offering price
True or False: Private placement offerings are exempt from registration under the Securities Act of 1933.
True
An underwriter is most likely registered as a _____________.
broker-dealer.
The Securities Act of 1933 regulates ____________.
new issues.
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
is the maximum penalty for criminal violations of the Investment Company Act of 1940?
Five years in prison and/or a $10,000 fine
What is Form 13F?
A report filed by investment managers with discretion over securities that exceed $100 million
Under Regulation D, securities distributed through a private placement may be sold to how many non-accredited investors?
No more than 35
What information will not be found in a preliminary prospectus?
The final public offering price and the effective date
If a mutual fund intends to advertise its performance figures, what must be deducted?
All management fees and expenses
The Securities Exchange Act of 1934 regulates the __________ _______.
Secondary Market.
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
List some items that may be found on an income statement of a corporation.
Revenues, expenses, net income, or net loss
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
Identify the acronym: FINRA
Financial Industry Regulatory Authority
A new issue being offered in one state only is _________ from federal registration under SEC Rule ______.
exempt from federal registration under SEC Rule 147.
Accredited investors have net worth of at least $_________ or pre-tax income in each of the last two years of $________.
$1,000,000 or pre-tax income in each of the last two years of $200,000.
What is the purpose of providing investors with a preliminary prospectus (red herring)?
To disclose information and obtain indications of interest
Name two prohibitions that relate to being an insider.
- No shorting of the stock and 2. No keeping of short-swing profits
The cooling-off period for a federal securities registration is a minimum of _____ days.
20 days.
The criminal penalty for insider trading by an individual is a maximum of $_________ and/or ___ years in prison.
$5 million and/or 20 years in prison.
If a client owns more than 5% of a publicly traded company, what form is required to be filed with the SEC?
Form 13D
Schedule _____ must be filed within _____ days if an investor acquires more than 5% of a publicly traded company.
13D must be filed within 10 days
What must issuers have to qualify for the Rule 147 intrastate exemption?
The issuer must have its principal place of business in that state
True or False: The SEC judges an offering’s investment merit and provides approval.
False
What is the purpose of a Tombstone Ad?
It calls attention to the new issuance of securities and members of the syndicate.
What are treble damages?
The civil penalty for insider trading, which is three times the profit made or loss avoided
How many 10-Q forms must a reporting issuer file per year?
Three. While 10-Q forms must be filed quarterly, a 10-K is filed at the end of the year in lieu of a fourth 10-Q.
A corporation’s financial reports are reported to the SEC each year on Form _____.
Form 10-K.
The SEC may suspend trading on an exchange for up to _____ days with notification to the ____________________.
90 days with notification to the President of the U.S.
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 Schedule 13D
Define omitting prospectus.
A written communication for mutual fund shares that contains limited information (less than a regular prospectus).
May an agent sell mutual fund shares to a client after giving the client an omitting prospectus?
Yes, as long as she offers to give the customer the standard prospectus.
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.
The SEC may suspend trading in any security for up to ____ business days.
10 business days.
Under Reg. D private placement, ___ is the maximum number of non-accredited investors allowed.
35
What is NOT required to be reported on an 8-K filing?
The location change of a subsidiary of a company
What percentage of investors must be residents of the state for a security to be exempt under Rule 147?
100%
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.
Insiders must return short-swing profits, which are profits earned on stock that has been held for less than ___ months.
six months.
What U.S. Government agency, created by the ‘34 Act, enforces securities laws?
The Securities and Exchange Commission (SEC)
If the SEC intends to suspend all trading, who must receive advance notification?
The President of the U.S., who must notify the SEC that he does not disapprove of the decision.
What is the primary purpose of the Securities Act of 1933?
Provide investors with full and fair disclosure regarding new issues (prospectus)
