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Series 10 > Chapter 03 : Sales Supervision - New Issues > Flashcards

Chapter 03 : Sales Supervision - New Issues Flashcards

1
Q

Once Form 144 is filed, owners have __________ to sell their securities.

A

Once Form 144 is filed, owners have 90 days to sell their securities.

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2
Q

Which federal law governs the registration of new issues?

A

The Securities Act of 1933

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3
Q

True or False: Form 144 must be filed within 90 days of selling restricted or control stock.

A

False. Form 144 must be filed concurrent with the placement of a sell order.

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4
Q

Shelf Registration is valid for up to _____ years.

A

Shelf Registration is valid for up to 3 years.

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5
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.

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6
Q

What is another name for a preliminary prospectus?

A

The Red Herring. This document is distributed during the 20-day cooling-off period.

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7
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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8
Q

The maximum number of non-accredited investors in a Reg. D offering is _____.

A

The maximum number of non-accredited investors in a Reg. D offering is 35.

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9
Q

If a completed registration must be amended, when will it become effective?

A

Upon SEC declaration

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10
Q

True or False: If a BD is involved in an offering it may not publish research during the offering process.

A

False, Rules 138 and 139 allow BDs to publish research if involved in an underwriting in limited situations.

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11
Q

May an RR summarize a prospectus?

A

No. Any prospectus summary (profile) must be produced by the fund’s sponsor.

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12
Q

May a prospectus be delivered electronically?

A

Yes. A prospectus may be viewed electronically or downloaded.

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13
Q

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

A

The Offering Circular is the disclosure document concerning a Regulation A issue.

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14
Q

The holding period for unregistered (restricted) securities under Rule 144 is __________.

A

The holding period for unregistered (restricted) securities under Rule 144 is 6 months.

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15
Q

According to the Equity IPO Rule, firms must update the eligibility of purchasers ___________ .

A

According to the Equity IPO Rule, firms must update the eligibility of purchasers annually.

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16
Q

In a best-efforts underwriting, unsold securities are retained by ______________.

A

In a best-efforts underwriting, unsold securities are retained by the issuer.

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17
Q

What is the document that establishes the agreement between the issuer and the underwriter?

A

Underwriting Agreement

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18
Q

The New Issue Rule covers what new issues?

A

All equity IPOs

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19
Q

____________ is the only form of price manipulation allowed by the SEC.

A

____________ is the only form of price manipulation allowed by the SEC.

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20
Q

An investor’s eligibility to purchase an equity new issue must be confirmed _______________.

A

An investor’s eligibility to purchase an equity new issue must be confirmed annually (called the pre-condition of sale).

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21
Q

A BD must _________ verify whether an investor is eligible to purchase a new issue.

A

A BD must annually verify whether an investor is eligible to purchase a new issue.

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22
Q

Are immediate family members of member firm employees always restricted from purchasing equity IPOs?

A

Not if the individual receives no material support and is not purchasing from the firm employing their family member

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23
Q

True or False: An investor with a net worth of less than $1 million is prohibited from purchasing a private placement.

A

False. The investor may purchase the offering as a nonaccredited investor.

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24
Q

During the Regulation M Restricted Period, underwriters may not_______________________________________.

A

During the Regulation M Restricted Period, underwriters cannot purchase (bid) for the securities for their own account.

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25
Q

The final settlement of a syndicate account must occur within _________ of the syndicate closing.

A

The final settlement of a syndicate account must occur within 90 days of the syndicate closing.

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26
Q

True or False: Regulations A, D, and S represent exempt offerings.

A

True. Reg. A is for small issues, Reg. D is for private placements, and Reg. S is for offshore offerings.

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27
Q

What does Rule 145 of the Securities Act of 1933 cover?

A

Registration/prospectus requirements of any reclassification of securities (primarily from mergers or acquisitions).

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28
Q

A Regulation A+ Tier 1 exemption is permitted for issuers that raise no more than $__________ over 12 months.

A

A Regulation A+ Tier 1 exemption is permitted for issuers that raise no more than $20 million over 12 months.

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29
Q

What is the primary purpose of the Securities Act of 1933?

A

Provide investors with full and fair disclosure regarding new issues (prospectus)

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30
Q

What are the requirements to qualify for a Tier 1 exemption under Regulation A+?

A

A maximum offering of $20 million over 12 months, with no more than $6 million being offered by selling shareholders

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31
Q

What type of underwriting is cancelled if the entire issue is not sold?

A

All-or-None

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32
Q

Underwriters that have made a firm commitment to an issuer are acting in a ________________ capacity.

A

Underwriters that have made a firm commitment to an issuer are acting in a ________________ capacity.

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33
Q

Who assists a nonaccredited investor in the purchase of securities offered through a private placement?

A

A purchaser’s representative

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34
Q

If a BD is going public with its own shares, may an RR buy the new issue?

A

Yes, since she is an employee of the issuer.

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35
Q

The Securities Act of 1933 regulates ____________.

A

The Securities Act of 1933 regulates new issues.

36
Q

Corporate syndicate settlement must occur within ____ days of settlement with the issuer.

A

Corporate syndicate settlement must occur within 90 days of settlement with the issuer.

37
Q

A Purchaser Representative for a non-accredited investor may be an officer of the issuer if ________________________.

A

A Purchaser Representative for a non-accredited investor may be an officer of the issuer if related to the purchaser.

38
Q

The private placement disclosure document is the _____________________.

A

The private placement disclosure document is the Offering Memorandum.

39
Q

May a preliminary prospectus (red herring) be sent during the cooling-off period?

A

Yes. The red herring is used to obtain indications of interest from potential purchasers.

40
Q

In a firm commitment underwriting, unsold securities are retained by ________________.

A

In a firm commitment underwriting, unsold securities are retained by the syndicate.

41
Q

During the registration cooling-off period, what should an agent do if a client sends a check to purchase securities?

A

Return the check to the customer

42
Q

How often must a BD verify an investor’s eligibility to purchase an equity IPO?

A

Annually

43
Q

Besides BDs and their employees, who else is restricted from purchasing equity IPOs?

A

An employee’s immediate family if materially supported by, or sharing household with, the employee

44
Q

What amount of time must elapse before equity securities issued under Regulation S may be resold into the U.S.?

A

One year

45
Q

Indications of interest are _______________ on both the customer and BD.

A

Indications of interest are non-binding on both the customer and BD.

46
Q

May an RR modify a prospectus?

A

No. The underlining, photocopying, or highlighting of a prospectus is prohibited.

47
Q

True or False: Aunts and uncles are not considered immediate family under the New Issue Rule.

A

True

48
Q

What must issuers have to qualify for the Rule 147 intrastate exemption?

A

The issuer must have its principal place of business in that state

49
Q

Is a UIT actively managed?

A

No. These products are supervised and have a fixed portfolio.

50
Q

Under Rule 144, what are the potential volume limitations placed on sales effected over 90 days?

A

1% of the issuer’s outstanding shares or the stock’s average weekly trading volume over the last four weeks

51
Q

A Regulation A+ Tier 2 exemption is permitted for issuers that raise no more than $__________ over 12 months.

A

A Regulation A+ Tier 2 exemption is permitted for issuers that raise no more than $50 million over 12 months.

52
Q

When should an investor receive a private placement memorandum?

A

Prior to purchase

53
Q

What are the requirements to qualify for a Tier 2 exemption under Regulation A+?

A

A maximum offering of $50 million over 12 months, with no more than $15 million being offered by selling shareholders

54
Q

True or False: Stabilization is designed to artificially raise the price of a new issue.

A

False. Stabilization is designed to support or keep a new issue’s price from falling.

55
Q

Does Rule 144 require a specific holding period for control stock?

A

No, but the SEC must be notified when a sell order is placed and volume limitations apply.

56
Q

What is the maximum sale allowed under Rule 144?

A

1% of the outstanding shares or average trading volume over the last 4 weeks - whichever is greater

57
Q

What type of underwriting is cancelled if a specified portion is not sold?

A

Mini-max

58
Q

What amount of time that must elapse before debt securities issued under Regulation S may be resold into the U.S.?

A

40 days. The securities would remain exempt from registration.

59
Q

Who typically buys hedge funds?

A

Accredited (sophisticated) investors through Regulation D offerings

60
Q

True or False: 100% of investors must be state residents to qualify for the Rule 147 intrastate exemption.

A

True

61
Q

The highest price at which a stabilizing bid may be placed is the ________________________.

A

The highest price at which a stabilizing bid may be placed is the public offering price (POP).

62
Q

Is there a maximum number of stabilizing bids that may be placed?

A

Yes, one. It is usually placed by the syndicate manager.

63
Q

If a firm is acting as an underwriter of an issuer’s equity, on what may it provide research?

A

Non-convertible debt securities of the same issuer

64
Q

Under Reg. D private placement, ___ is the maximum number of non-accredited investors allowed.

A

Under Reg. D private placement, 35 is the maximum number of non-accredited investors allowed.

65
Q

True or False: Form 144 must be filed for any sale of restricted or control stock, regardless of the size.

A

False. If a sale is for 5,000 shares or fewer, and has a market value of $50,000 or less, no notification is required.

66
Q

U.S. companies may issue securities abroad and claim an exemption from registration under what provision?

A

Regulation S

67
Q

May a firm advertise a hedge fund being offered through a Reg. D private placement to the general public?

A

Yes. Under Rule 506(c), general advertising is permitted; however, sales are limited to accredited investors.

68
Q

Rule 144A exempts sellers from the holding period and volume limitations of Rule 144 if trading is done with a _____.

A

Rule 144A exempts sellers from the holding period and volume limitations of Rule 144 if trading is done with a QIB.

69
Q

True or False: BDs and their employees may buy shares of equity IPOs from the syndicate.

A

False. They are considered restricted.

70
Q

Reclassifications, merger or consolidation activities, and transfers of assets are regulated under what provision?

A

Rule 145

71
Q

True or False: Shelf Registration gives flexibility to the issuer by allowing delayed or continuous sales.

A

True

72
Q

What regulation restricts activities that could be deemed manipulative during an offering?

A

Regulation M

73
Q

A financial commitment is made in which type of underwriting?

A

A firm-commitment offering. In a firm-commitment, the BD is acting as a principal.

74
Q

For how long may a new issue be sold under a shelf registration?

A

Up to 3 years

75
Q

Restricted stock has a ____ month holding period.

A

Restricted stock has a six month holding period.

76
Q

True or False: Canadian companies are not eligible to use the Regulation A+ exemption.

A

False. Both U.S. and Canadian companies are eligible to use the Regulation A+ exemption.

77
Q

True or False: If a BD is not involved in an underwriting, it may publish research during the cooling-off period.

A

True, Rule 137 allows BDs to publish research if not involved in the underwriting.

78
Q

Funds received from clients in an all-or-none underwriting are placed in an _______ account.

A

Funds received from clients in an all-or-none underwriting are placed in an escrow account.

79
Q

Identify the acronym: IPO

A

Initial Public Offering

80
Q

True or False: All customer account-related information must be delivered physically.

A

False. On request, BDs are permitted to deliver both confirmations and statements electronically.

81
Q

What is the purpose of a Tombstone Ad?

A

It calls attention to the new issuance of securities and members of the syndicate.

82
Q

Underwriters operating under a best-efforts agreement with an issuer are acting in a ________________ capacity.

A

Underwriters operating under a best-efforts agreement with an issuer are acting in a agency/broker capacity.

83
Q

Rule 147 offerings may not be sold to an out-of-state investor for ____ months following the last sale of a new issue.

A

Rule 147 offerings may not be sold to an out-of-state investor for six months following the last sale of a new issue.

84
Q

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

A

Though some securities are exempt from registration, nothing is exempt from the anti-fraud provisions of the Act.

85
Q

Securities issued under the intrastate exemption may not be sold outside the state until ____________ have passed.

A

Securities issued under the intrastate exemption may not be sold outside the state until 6 months have passed.

Series 10 (7 decks)

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