Ch2 Deck 17

Question 1

FINRA rule 5121 states that when a member firm participates in a public offering of its own securities, all of the offering proceeds

Answer 1

must be placed in an escrow account until the member firm has complied with net capital requirements

Question 2

FINRA rule 5121 requires member firms participating in public offerings of their own securities they must disclose

Answer 2

1. a date by which the offering is reasonably expected to be completed
2. terms upon which proceeds will be released from escrow

Question 3

FINRA rule 5121 prohibits a member firm with a conflict of interest from participating in a public offering unless

Answer 3

One of the following is true:

1. QIU participates in offering
2. Member firm primarily responsible does not have a conflict or affiliation with conflicted firm
3. offered securities are exchange-listed
4. offered securities are investment grade rated

Question 4

Under FINRA rule 5121, if a member firm with a conflict of interest is using the exemption to participate by having a QIU participate, then

Answer 4

1. name and role of QIU must be disclosed
2. QIU must prepare registration, prospectus
3. QIU assists in distribution

Question 5

When unseasoned issuers file a registration statement their financial statements are considered outdated if they are more than

Answer 5

135 days old at time of filing

Question 6

When accelerated filers and large accelerated filers file registration statements, their financial statements are considered outdated if they are more than

Answer 6

130 days old at time of filing

Question 7

Sale of securities in a private offering of a member’s own securities

Answer 7

member private offering

Question 8

Conditions for making a member private offering

Answer 8

1. Provide PPM or term sheet to each investor with disclosures
2. file PPM with FINRA prior to giving to investors

Question 9

With any private offering (D) proceeds must be used for

Answer 9

at least 85% of offering proceeds must be used for business purposes

Question 10

Member private offerings require disclosure in PPM or term sheet of

Answer 10

intended use of proceeds
offering expenses
selling compensation for syndicate members

Question 11

In a member private placement, amendments to PPM or term sheet must be filed

Answer 11

with FINRA within 10 days of providing to investors

Question 12

Member private offerings are exempt from special restrictions on PPM disclosures and distribution if they are sold to

Answer 12

institutional accounts
qualified purchasers
QIB's
investment companies
banks
exempted securities
restricted securities
offshore regulation S offerings

Question 13

Generic advertisements are those that

Answer 13

do not directly reference individual securities

Question 14

Section 4(2) of the securities act covers

Answer 14

exempt private transactions

Question 15

A section 4(2) exempt private transaction can only be made by a buyer with

Answer 15

knowledge and experience (sophisticated investor)

Question 16

A section 4(2) exempt private transaction requires that the investor be given

Answer 16

information normally provided in a prospectus (rather than a prospectus itself necessarily)

Question 17

A section 4(2) exempt private transaction requires that the investor agree to not

Answer 17

resell or distribute the securities to the public

Question 18

When must the lead underwriter of an IPO notify NASDAQ of the issuer’s public offering price?

Answer 18

by 6:45 PM the day before trading in the IPO stock will begin

Question 19

Records used to verify the identity of a customer must be kept for

Answer 19

5 years

Question 20

Suspicious activity reports must be kept for

Answer 20

5 years

Question 21

monetary instrument logs must be kept for

Answer 21

5 years

Question 22

OATS records need to be kept for

Answer 22

3 years

Question 23

Customer complaints need to be kept for

Answer 23

4 years

Question 24

Customer complaints to municipal securities dealers must be kept for

Answer 24

6 years

Question 25

New account forms must be kept for

Answer 25

6 years after the closing of a contract

Question 26

The third market is a negotiated OTC market that trades

Answer 26

listed securities

Question 27

A broker-dealer sale of exchange listed securities over the counter is called

Answer 27

the third market

Question 28

The trading of exchange-listed securities between institutions on a private over-the-counter computer network

Answer 28

the fourth market (allows institutions to avoid brokerage fees)

Question 29

Securities act 1934 section 12 requires registration of a security on an exchange before trading. Which security is exempt?

Answer 29

futures