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Series 7 > Chapter 1 pt 2 series 7 > Flashcards

Chapter 1 pt 2 series 7 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Securities act of 1933 requires

A

issuers of new securities to file registration statements with the SEC in order to provide investors with complete and accurate information in the form of a printed document. Think of this as the paper act.

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2
Q

The following securities are exempt from the securities act of 1933

A

commercial paper- MAT less than 270 days
Bankers acceptance- MAT less than 270 days
securities acquired in private placements- restricted stock

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3
Q

Blue sky laws require

A

registration of securities, broker/dealers and registered representatives

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4
Q

An issuer or investment banker may blue sky an issue by one of the following methods

A

qualification
coordination
notice filing

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5
Q

due diligence

A

preliminary studies, investigations, research, meetings, and compilation of information about a corporation and a proposed new issue that go on during underwriting.

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6
Q

The issuer knows a lot about

they don’t know a lot

they will do what to attract who

A

manufacturing or accounting or software or whatever it is they do

about what it takes to sell securities to the public

they will place a notice in order to attract an underwriter.

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7
Q

underwriter

A

is any party that evaluates and assumes another party’s risk for a fee.

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8
Q

underwriting manager or syndicate manager

A

the investment banker who negotiates with the issuer

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9
Q

investment bankers help

A

issuers raise money through the sales of securities

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10
Q

do investment bankers loan money

A

no

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11
Q

investment bankers are also called

A

underwriters

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12
Q

all underwriters of corporate securities must be

A

FINRA member firms

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13
Q

syndicate agreement/ letter

A

describes the participants responsibilities and allocation of syndicate profits

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14
Q

negotiated underwriting

A

the issuer and the investment banker negotiate the offering terms.

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15
Q

competitive bid underwriting arrangements are the standard for

A

underwriting most municipal securities and are often required by state law

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16
Q

syndicates are usually formed to

A

spread the risk among several underwriters instead of one underwriter taking all the risk of an offering

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17
Q

*Selling group members

A

act as agent with no commitment to buy securities

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18
Q

*Syndicate members take

A

on the financial liability and act in principal capacity

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19
Q

*Do selling group members take on financial liability

A

no

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20
Q

firm commitment

A

most commonly used type of underwriting contract.
under its terms the underwriter(investment bank) commits to buy the securities from the issuer and resell them to the public

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21
Q

*In a firm commitment underwriting who takes risk and why

A

the manager underwriter takes on the financial risk because he purchases the securities from the issuer. Because he purchases and resells the shares, he is acting in a principal(dealer) capacity.

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22
Q

*By engaging a standby underwriter

A

an issuer is assured of selling all the shares being offered.

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23
Q

Best efforts arrangement

A

underwriter acts as agent from the issuing corporation

the underwriter sells as much as possible without liability for what cannot be sold

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24
Q

all or none underwriting

A

The issuing corporation has determined that it wants an agreement outlining that the underwriter must either sell all of the shares or cancel the underwriting.

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25
Q

mini-max offering

A

a best efforts underwriting setting a floor or minimum, which is the least amount the issuer needs to raise in order to move forward with the underwriting, and a ceiling or max on the dollar amount of securities the issuer is willing to sell

26
Q

After an issuer files a registration statement with the SEC, a ________

A

20 day cooling off period begins.

27
Q

Red herring(preliminary prospectus) used for what

A

used to gauge investor reactions and gather indications of interest for corporate securities.

28
Q

*The term tombstone advertisement is derived

A

from the bare bones minimum information they provide.

29
Q

*Information found in a tombstone advertisement includes

A 
Name of issuer 
type of  security 
underwriter 
price
effective date of sale
30
Q
  • Stabilizing bids must
A

not be made at a price higher than the public offering price

31
Q

*stabilization is illegal or legal

however what can’t be done

A

legal

if the stabilization bid is made at a price higher than the public offering price, its called pegging or fixing which is prohibited

32
Q

*if public buying interest does not increase

A

the managing underwriter may have no choice but to abandon the Public offering price, pull the stabilizing bid, and let the stock find its own price level

33
Q

underwriting proceeds

A

the price the issuer receives

34
Q

underwriting spread

A

difference between the two prices

35
Q

underwriting spread consists of

A

managers fee
underwriting fee
selling concession

36
Q

managers fee

A

for negotiation the deal and managing the underwriting and distribution process

37
Q

underwriting fee

A

for assuming the risk of buying securities from the issuer without assurance that the securities can be resold

38
Q

selling concession is for

A

for placing the securities with investors

39
Q

*a member can grant discounts and other concessions

the only exception

A

only to other finra member firms

that a member firm can grant concessions to a foreign nonmember firm that is ineligible for finra membership

40
Q

Anything that says the SEC approved or disapproved an issue of securities is

A

wrong

41
Q

*The SEC does not approve or disapprove- T or F with explanation

A

T- it clears or releases issues of securities for sale. When the SEC has completed its review, the registration becomes effective

42
Q

*issuers and underwriters are responsible for the

A

information found in the prospectus and will conduct due diligence meetings to ensure that the prospectus is true and accurate

43
Q

*Trust indenture

A

a series of promises between the issuer and the trustee for the benefit of the bondholders.

44
Q

official statement

A

the full and fair disclosure document for municipal securities

45
Q

when a municipality wants to raise money through a bond offering _________ is published

A

an official notice of sale

46
Q

cooling off period is effective before or after the registration statement has been filed

A

after

47
Q

nonbinding indications of interest may be gathered with what

A

preliminary prospectus or tombstone ad

48
Q

a firm commitment underwriting can be ether a

A

negotiated underwriting contract or a competitive bid arrangement.

49
Q

In regulation A+ offering , the issuer

A

files an abbreviated notice of sale(offering circular) with the regional SEC office

50
Q

private placement stock is also called

A

legend stock and lettered stock

51
Q

All of the following are synonymous with private placement stock

A

restricted
unregistered
letter stock
legend stock

52
Q

*If an investor is accredited does it mean they automatically qualify them for investing in a private placement or any other investment for that matter.

A

NO

53
Q

*Suitability must be determined before or after recommendations

A

before(prior)

54
Q

*To quality under the rule 147 exemption(what is 147 rule)

A

offerings that take place entirely in one state are exempt from registration when

only one of the three 80% test notes must be met

those are the issuer has its principal office and receives at least 80% income in the state

at least 80% of the issuers assets are located within the state

at least 80% of the offering proceeds are used within the state

55
Q

rule 144 regulates

A

the sale of control and restricted securities

56
Q

control securities

A

those owned by directors, officers, or person who own or control more than 10% of the issuers voting stock

57
Q

how much % of interest held is required to be considered a control person

A

10% and if married combined amount must be 10%

58
Q

restricted securities

A

those acquired through some means other than a registered public offering

59
Q

when you encounter a rule 144 question always look for 2 things

A

what kind of stock is being sold(restricted or control)
who is selling it(insider or noninsider)
Only restricted stock has a holding period. Control stock, unless restricted can be sold immediately, but volume limits always apply.

60
Q

rule 144a

A

allows nonregistered foreign and domestic securities to be sold to certain institutional investors in the usa without holding period requirements.

61
Q

to qualify for the 144a

A

buyer must be qualified institutional buyer.

62
Q

spinning

A

the practice of allocating highly sought after ipo share to individuals who are in a position to direct securities business to the firm.

Series 7 (27 decks)

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