exam 8

Question 1

a free writing prospectus is defined as

Answer 1

any written communication that constitutes an offer to sell or a solicitation to buy

Question 2

A Regulation M notice is required to be filed with

Answer 2

FINRA no later than the close of business the next business day following the pricing of the distribution

Question 3

Nonsecurities business office

Answer 3

This type of office would be considered a location primarily used for nonsecurities business and from which less than 25 securities transactions are effected annually. An alternative term for this location is a nonbranch office.

Question 4

A MOC or LOC order on the NYSE may be cancelled up to

Answer 4

According to NYSE Rule 123C, unless an exception is available, a MOC and LOC orders may be cancelled or reduced in size up to 3:45 p.m
may be cancelled or reduced in size to correct a legitimate error by 3:58 p.m.

Question 5

wksi

Answer 5

Within 60 days of the determination of eligibility must have either:
A worldwide market value of outstanding voting and nonvoting common equity held by nonaffiliates of $700 million or more, or
In the last three years issued at least $1 billion aggregate principal (not $500 million) amount of nonconvertible securities, other than common equity, in primary offerings for cash not an exchange of securities, registered under the Securities Act of 1933

May not be an ineligible issuer

Question 6

Rule 144 of the Securities Act of 1933 does not apply to

Answer 6

private placement

Question 7

Regulation S-X

Answer 7

sets forth the form and content for financial statements filed under the Securities Act of 1933

Question 8

Rule 101 of Regulation M

Answer 8

A broker-dealer is permitted to solicit an offer to buy the (new) securities being distributed. Odd-lot, not round-lot, transactions are exempt from Rule 101 of Regulation M.

Question 9

Reg D accredited investor income levels

Answer 9

To qualify as an accredited investor, an individual must have a $1,000,000 net worth or a $200,000 annual income ($300,000 for a married couple)

Question 10

Rule 3130

Answer 10

FINRA Rule 3130 requires each member firm to certify on an annual basis that it has in place written compliance policies and procedures to comply with all applicable SEC and SRO rules and regulations. The certification must be signed by the chief executive officer or equivalent. As part of this process, the final report must be submitted to the member’s board of directors and audit committee (or equivalent bodies) at the earlier of their next scheduled meetings or within 45 days of the date of execution of this certification. If a member firm does not have a board of directors or an audit committee, it would submit the report to an equivalent group such as a management committee, general partner, managing member, advisory board, or financial standards committee.

Question 11

Investigating if excessive trading is actually churning

Answer 11

the most important element in the process is to examine the investment objectives of the customer. Investment objectives are highly instrumental in guiding a registered representative and should always be considered prior to making any recommendations to a customer. Frequent trades might be acceptable in the account of a day trader but are inappropriate for many other investors. Profit or loss is never a consideration when trying to ascertain if excessive trading has occurred in a given account.

Question 12

Retail communication that is prepared by an investment company sponsor and used by a broker-dealer

Answer 12

All retail communications related to investment companies must be filed with an SRO within 10 business days of initial use. If a sponsor prepares the retail communication that is subsequently used by a broker-dealer, the sponsor (not the broker-dealer) is required to file the retail communication.

Question 13

Locked-in

Answer 13

locked-in, which means their terms have been agreed to by the parties, and the transaction is ready for clearance and settlement.
Transactions executed through the Nasdaq Market Center Execution System are locked-in

Question 14

If a Market Maker is notified that it’s clearing firm is terminating the relation ship the market maker must

Answer 14

Market Maker X may apply for an excused withdrawal and may apply to reregister as soon as it reestablishes a clearing relationship

Question 15

Buying broker fails to pay.

What is the time frame

Answer 15

sellout can be done immediately at settlement

Question 16

portfolio margin

Options approval

Answer 16

Be approved for uncovered writing

Question 17

Revolving subordinate loan

Answer 17

A revolving subordinated loan is one that does allow for prepayments to be made within the first year of the loan’s term, subject to certain specifications and limitations mandated by FINRA

Question 18

Names on Form BD

Answer 18

Each member firm is required to designate and specifically identify to FINRA on Schedule A of Form BD one or more principals to serve as a chief compliance officer. This is one of the requirements of FINRA Rule 3130, the annual certification of compliance and supervisory processes.

Question 19

Prospectus exemption

Answer 19

if the information only identifies the security, the price, the name of the underwriters, and from whom a prospectus may be obtained.

Question 20

p/e requirement for listing on NYSE

Answer 20

there is no pe requirement

Question 21

Highest possible stabalzing bid price

Answer 21

Under certain conditions, a stabilizing bid could be initiated at a price higher than the highest independent bid, but no higher than the public offering price (which is always the highest possible price at which stabilizing can occur). After the opening of quotations in the security’s principal market, stabilization may be initiated at a price no higher than the last independent transaction in the principal market if (i) the security has traded in its principal market on the day stabilizing is initiated or on the preceding day, and (ii) the current asked price in the principal market is equal to or greater than the last independent transaction price. If either condition (i) or (ii) is not satisfied, stabilizing may start after the opening of quotations at a price no higher than the last independent bid for the security in its principal market. There is no specific time limit on how long a syndicate may maintain a stabilizing bid. However, once the syndicate has completed the distribution, the rules regarding stabilization would no longer apply.
Since the purpose of a stabilizing bid is to prevent or retard a decline in the security’s price, once a stabilizing bid has been legally initiated, it can be maintained at that price, even if all the independent bids fall below that price. Only one syndicate member may stabilize at a time. (31901)

Question 22

margin and offering

Answer 22

Broker-dealers that are participating in a distribution of new securities may not extend credit on those securities until they have been held by the customer for at least 30 days.
They can extend margin if the shares are not part of the distribution.

Question 23

Market makers may agree to execute a block before the open

Answer 23

Often a seller with a large block will be willing to accept a negotiated price below the current market price since open market sales would likely drive the bid down anyway. Market makers are permitted to coordinate efforts when buying a big block of stock. This practice often occurs at times outside the normal business hours of 9:30 a.m. to 4:00 p.

Question 24

Name not on a trade ticket

Answer 24

Exceptions are granted if the order is from an outside investment adviser—person employed by the member firm providing investment advisory services who is acting as an investment adviser.

Question 25

order routing publicly available info

Answer 25

Under SEC Rule 606, a broker-dealer is required to make publicly available order-routing practices for non-directed customer orders on a quarterly basis