Exempt Transactions and securities Flashcards
Question #2 (AICPA.911141REG-BL)
Taso Limited Partnership intends to offer $400,000 of its limited partnership interests under Rule 504 of Regulation D of the Securities Act of 1933.
Which of the following statements is correct?
A. The exemption under Rule 504 is not available to an issuer of limited-partnership interests. B. The limited-partnership interest may be sold only to accredited investors. C. The total number of non-accredited investors who purchase the limited-partnership interests may not exceed 35. D. The resale of the limited partnership interests by a purchaser will generally be restricted.
D. The resale of the limited partnership interests by a purchaser will generally be restricted.
The relevant rules have changed back and forth over the years, but currently resale is restricted in Rule 504 offerings, unless either (a) the securities are registered under a state law requiring public filing and delivery of a substantive disclosure document to investors, or (b) the securities are issued under a state-law exemption that permits general solicitation, so long as sales are made only to accredited investors.
Wrong
A. The exemption under Rule 504 is not available to an issuer of limited-partnership interests.
This exemption is available to any non-investment company. The only restriction under this Rule is that the issuing company must be a non-investment company that issues less than $1mn in securities per year.
Which of the following securities would be regulated by the provisions of the Securities Act of 1933?
A. Securities issued by not-for-profit, charitable organizations.
B. Securities guaranteed by domestic governmental organizations.
C. Securities issued by savings and loan associations.
D. Securities issued by insurance companies.
D. Securities issued by insurance companies.
The 1933 Act makes several types of securities exempt from its registration requirements. Among them are securities of charities, government entities, banks, savings and loans, and farmers’ co-operatives. Some issues by insurance companies are exempt, but only if the issuing company is a state-regulated company. Otherwise, an insurance company’s issues must be registered.
Wrong Answer
A. Securities issued by not-for-profit, charitable organizations.
The 1933 Act makes several types of securities exempt from its registration requirements. Among them are securities of charities, government entities, banks, savings and loans, and farmers’ co-operatives. Some issues by insurance companies are exempt, but only if the issuing company is a state-regulated company. Otherwise, an insurance company’s issues must be registered.
Question #6 (AICPA.930533REG-BL)
The Securities Act of 1933 provides an exemption from registration for
I Bonds issued by a municipality for governmental purposes II Securities issued by a not-for-profit charitable organization
I II
Yes Yes
The 1933 Act allows many exemptions to the registration requirement. The exemptions are often based on the type of issuing entity, and bonds issued by governments, charities, banks, savings and loans, and farmers’ co-operatives are usually exempt.
Yes No
No Yes
Refer to the correct answer for the complete explanation.
No No
Yes Yes
The 1933 Act allows many exemptions to the registration requirement. The exemptions are often based on the type of issuing entity, and bonds issued by governments, charities, banks, savings and loans, and farmers’ co-operatives are usually exempt.
Wrong answer
No Yes
Refer to the correct answer for the complete explanation.
Under the Securities Act of 1933, which of the following securities must be registered?
A. Bonds of a railroad corporation. B. Common stock of an insurance corporation. C. Preferred stock of a domestic bank corporation. D. Long-term notes of a charitable corporation.
B. Common stock of an insurance corporation.
Many types of issues are exempt under the 1933 Act. Among them are notes of charities, issues used to fund railroad equipment, and issues by banks and savings and loans. Insurance company stock issues are not exempt.
Wrong Answer
D. Long-term notes of a charitable corporation.
Many types of issues are exempt under the 1933 Act. Among them are notes of charities, issues used to fund railroad equipment, and issues by banks and savings and loans. Insurance-company stock issues are not exem
Question #10 (AICPA.082102REG-II.D.I)
Which of the following transactions is subject to registration requirements of the Securities Act of 1933?
A. The public sale by a corporation of its negotiable ten-year notes. B. The public sale by a charitable organization of 10-year bearer bonds. C. The sale across state lines of municipal bonds issued by a city. D. Issuance of stock by a publicly traded corporation to its shareholders, because of a stock split.
A. The public sale by a corporation of its negotiable ten-year notes.
Ten-year notes are securities and their public sale requires registration, absent the existence of an applicable exemption (such as under Regulation D).
Wrong Answer
B. The public sale by a charitable organization of 10-year bearer bonds.
Securities issued by charitable organizations are exempt securities under the 1933 Act’s registration requirements.
Pix, Corp. is making a $6mn stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933.
With which of the following requirements would Pix have to comply when selling the securities?
A. No more than 35 investors. B. No more than 35 non-accredited investors. C. Accredited investors only. D. Non-accredited investors only.
B. No more than 35 non-accredited investors.
To be exempt from registration, Pix will have to comply with Rule 506. This Rule allows the exemption, because most investors will be accredited. Accredited investors, such as banks, are sophisticated and need less protection from the SEC. So long as there are no more than 35 non-accredited investors, an issue may qualify for an exemption from registration under Rule 506.
Wrong Answer
A. No more than 35 investors.
To be exempt from registration, Pix will have to comply with Rule 506. This Rule allows the exemption, because most investors will be accredited. Accredited investors, such as banks, are sophisticated and need less protection from the SEC. So long as there are no more than 35 non-accredited investors, an issue may qualify for an exemption to registration under Rule 506.
Question #18 (AICPA.911137REG-BL)
Under the Securities Act of 1933, an initial offering of securities must be registered with the SEC, unless
A. The offering is made through a broker-dealer licensed in the states in which the securities are to be sold.
B. The offering prospectus makes a fair and full disclosure of all risks associated with purchasing the securities.
C. The issuer’s financial condition meets certain standards established by the SEC.
D. The type of security or the offering involved is exempt from registration.
D. The type of security or the offering involved is exempt from registration.
All non-exempt securities must be registered. Only exempt securities, such as those issued by banks and charities and those that are part of a small issue, can avoid the registration requirement.
Wrong
A. The offering is made through a broker-dealer licensed in the states in which the securities are to be sold.
The fact that an issue is made through a licensed broker does not make the securities exempt. All non-exempt securities must be registered. Only exempt securities, such as those issued by banks and charities and those that are part of a small issue, can avoid the registration requirement.
Question #19 (AICPA.910546REG-BL)
Winslow, Inc. intends to make a $450,000 common-stock offering under Rule 504 of Regulation D of the Securities Act of 1933. Winslow
A. Must make the offering through a general advertising. B. Must provide all investors with a prospectus. C. May sell the stock to an unlimited number of investors. D. Must offer the stock for a period of 24 months.
C. May sell the stock to an unlimited number of investors.
Rule 504 does not set a limit on the overall number of investors. So long as a company’s total offerings for a year are under $1mn, and the company is not an investment company, Rule 504 may be used.
Wrong Answer
B. Must provide all investors with a prospectus.
Rule 504 does not set this requirement. So long as a company’s total offerings for a year are under $1mn, and the company is not an investment company, Rule 504 may be used to receive a broad exemption from registration requirements.
Question #21 (AICPA.920544REG-BL)
Data, Inc., intends to make a $375,000 common-stock offering under Rule 504 of Regulation D of the Securities Act of 1933. Data
A. May sell the stock to an unlimited number of investors.
B. May make the offering through a general advertising.
C. Must offer the stock for a period longer than 12 months.
D. Must provide all investors with a prospectus.
A. May sell the stock to an unlimited number of investors.
Rule 504 of Regulation D applies to small issues. If a company will issue $1mn or less in a one-year period, it qualifies for this exemption. So long as Data is not an investment company, there are no further restrictions on offerings this small, except that they cannot be offered through general advertising, unless certain requirements are met. Data may make the offering to any number of any kind of investors.
Wrong Answer
D. Must provide all investors with a prospectus.
Rule 504 of Regulation D applies to small issues. If a company will issue $1mn or less in a one-year period, it qualifies for this exemption to filing a registration statement and a prospectus. So long as Data is not an investment company, there are no further restrictions on offerings this small, except that they cannot be offered through general advertising, unless certain requirements are met.
