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Series 7 > Chapter 6 > Flashcards

Chapter 6 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

True or False: The SEC judges an offering’s investment merit and provides approval.

A

False

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2
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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3
Q

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

A

anti-fraud

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4
Q

Regulation A exemption is allowed if issuers raise no more than $____________ over 12 months.

A

$5 million (capital, not share limit)

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5
Q

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

A

Offering Circular

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6
Q

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

A

True

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7
Q

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

A

9 months

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8
Q

What is the rule that issuers must follow to qualify for an intrastate exemption?

A

80% of assets located in-state, 80% of revenue produced in-state, and 80% of proceeds raised are used in-state.

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9
Q

____ is the maximum number of non-accredited investors allowed in a Private Placement.

A

35

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10
Q

The private placement disclosure document is the _____________________.

A

Offering Memorandum

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11
Q

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

A

yes

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12
Q

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

A

non-binding

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13
Q

What should an RR do if a client sends a check to purchase securities going through the cooling-off period?

A

return the check to the customer

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14
Q

True or False: If a registration statement has not been filed with the SEC, BDs may not discuss new issue information.

A

True

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15
Q

The ____________________ will not appear in a red herring.

A

Final Offering Price

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16
Q

What rules govern the registration of an issue in any state in which it will be offered?

A

Blue-Sky

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17
Q

True or False: Blue-Sky Laws apply to broker-dealers and agents operating within a state.

A

True

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18
Q

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

A

the syndicate

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19
Q

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

A

the issuer

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20
Q

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

A

All-or-None

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21
Q

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

A

Mini-Max

22
Q

A ___________ underwriting is used for shares not purchased through a rights offering.

A

Stand-By

23
Q

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

A

Stabilization

24
Q

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

A

False. Keep the price from falling

25
Q

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

A

yes. one, usually placed by syndicate manager

26
Q

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

A

public offering price

27
Q

The New Issue Rule covers what new issues?

A

all equity IPO’s

28
Q

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

A

False

29
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

30
Q

An offering of shares of the issuer and selling shareholders (e.g., officers) is a _____________________ offering.

A

combined primary/secondary offer

31
Q

The ___________ clause gives underwriters the ability to buy additional shares from the issuer to cover over-allotments.

A

Green Shoe

32
Q

The Green Shoe Clause allows the issuer to expand the offering by a maximum of ____%.

A

15%

33
Q

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

A

up to 3 years

34
Q

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

A

True

35
Q

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

A

6 months

36
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

37
Q

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

A

90 days

38
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.

39
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.

40
Q

QIB stands for ___________________________.

A

Qualified Institutional Buyer

41
Q

QIBs are financial institutions that have at least $_________________ invested in securities of non-affiliated issuers.

A

$100 million

42
Q

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

A

QIB

43
Q

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

A

Rule 145

44
Q

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

A

principal/dealer

45
Q

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

A

agency/broker

46
Q

What is the difference between a syndicate member and a firm in the selling group?

A

Syndicate members assume liability, while firms in the selling group do not.

47
Q

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

A

annually

48
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

49
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).

50
Q

Accredited investors have net worth of at least $_________ or pre-tax income in each of the last two years of $________.

A

$1,000,000

$200,000

Series 7 (25 decks)

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