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Series 24 Group Share > FC Chapter 1 > Flashcards

FC Chapter 1 Flashcards

1
Q

True or False: ADRs are priced in, and pay dividends in, the currency of the issuing foreign company.

A

False. ADRs are priced in, and pay dividends in, U.S. dollars.

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2
Q

True or False: Under Reg. S, investors may resell non-convertible debt in the U.S. even if held for less than one year.

A

True. Non convertible debt has a 40-day holding period.

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3
Q

As it relates to a Regulation A offering, explain how an issuer tests the waters.

A

Using general solicitations and advertising before filing an offering statement with the SEC to gauge investor interest

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4
Q

What information may be found in an issuer’s private placement offering memorandum?

A

The use of the proceeds, specific suitability standards, and the issuer’s financial statements

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5
Q

True or False: Rather than judging an investment’s merit, the SEC reviews completeness of registration documentation.

A

True

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6
Q

Related to the registration process, when does the cooling-off period begin?

A

Once the registration statement is filed with, and filing fee is paid to, the SEC

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7
Q

What is the main purpose of the final due diligence meeting?

A

To ensure that prospectus information is complete and accurate

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8
Q

For an individual to be considered accredited, she must have income of $_______ in each of the last two years.

A

For an individual to be considered accredited, she must have income of $200,000 in each of the last two years.

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9
Q

What is an ownership characteristic of a REIT?

A

Limited liability

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10
Q

An offering’s effective date is generally the _____ day after the filing of the last amendment.

A

An offering’s effective date is generally the 20th day after the filing of the last amendment.

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11
Q

True or False: A purchaser rep may not be an officer, director, or greater than 10% owner of the issuer.

A

True. Unless they’re related to the nonaccredited investor.

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12
Q

For how long must a prospectus be provided in the after-market for a non-exchange follow-on offering?

A

40 days

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13
Q

True or False: A REIT is considered an investment company.

A

False

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14
Q

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

A

Upon SEC declaration

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15
Q

95% of a REIT’s gross income may be based on various activities, and ____% must be solely from real estate.

A

95% of a REIT’s gross income may be based on various activities, and 75% must be solely from real estate.

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16
Q

Explain the details of Regulation D, Rule 504 offerings.

A

$5 million limit; no disclosure requirement; unlimited number of purchasers

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17
Q

What amount of capital may be raised by an issuer under Regulation D, Rule 506?

A

An unlimited amount

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18
Q

For dealers, other than managers or co-managers, the quiet period is _____ calendar days.

A

For dealers, other than managers or co-managers, the quiet period is 10 calendar days.

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19
Q

For a WKSI, a shelf registration becomes effective ______________.

A

For a WKSI, a shelf registration becomes effective immediately.

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20
Q

List some items that are required to be included in an issuer’s registration statement.

A

Nature of its business, total capitalization (equity and debt), financial statements, biographies of officers/directors

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21
Q

True or False: For a new issue, indications of interest are NOT shared with management.

A

False. Indications of interest are shared to assist in determining the offering price.

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22
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

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23
Q

Joan left a message on a BD’s voicemail requesting information about opening an account. May she be called at 9:01 p.m.?

A

Yes. Call time restrictions do not apply since Joan has made an unsolicited inquiry of the firm.

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24
Q

True or False: Covenants exist to restrict the change of a company’s control and to require insurance on certain assets.

A

True

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25
Q

True or False: Rule 504 Private Placements require purchaser representatives.

A

False. Purchaser representatives are required under Rule 506.

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26
Q

To be considered a WKSI, an issuer must be eligible for automatic shelf registration using what registration form?

A

Form S-3 (short form registration statement) or F-3 (for foreign private issuers)

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27
Q

Under the TCPA, on what days do the call time restrictions apply?

A

The call time restrictions apply on every day of the year.

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28
Q

According to Reg. S-X, who must prepare an attestation report?

A

A certified public accountant (CPA)

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29
Q

What does the Trust Indenture Act of 1939 regulate?

A

The issuance of corporate bonds

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30
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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31
Q

After the initial offering of a REIT, where will subsequent trading occur?

A

Either on an exchange or OTC

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32
Q

True or False: A covenant may not be included in a bond indenture to require a certain debt service coverage ratio.

A

False

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33
Q

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

A

True

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34
Q

In the after-market, a prospectus must be provided for ____ days following a non-exchange follow-on offering.

A

In the after-market, a prospectus must be provided for 40 days following a non-exchange follow-on offering.

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35
Q

In the after-market, a prospectus must be provided for ____ days following a non-exchange IPO.

A

In the after-market, a prospectus must be provided for 90 days following a non-exchange IPO.

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36
Q

The trading of REITs is most similar to what type of investment company?

A

Closed-end management companies, since both trade in the secondary market (exchange or OTC)

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37
Q

Regulation A requires an issuer to file ____ years of financial statements that may be __________.

A

Regulation A requires an issuer to file two years of financial statements that may be unaudited.

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38
Q

What investment benefit do REITs provide to investors?

A

Stable dividend payments

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39
Q

When does a BD have no restrictions on publishing research reports about a new issue?

A

When the BD is not acting as an underwriter of the offering

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40
Q

An offering of shares with the proceeds being directed to the issuing corporation is called a ________ offering.

A

An offering of shares with the proceeds being directed to the issuing corporation is called a primary offering.

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41
Q

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

A

QIBs are financial institutions that have at least $100 million invested in securities of non-affiliated issuers.

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42
Q

If ABC’s common stock is in registration, an underwriter of the deal may comment on the issuer’s __________________.

A

If ABC’s common stock is in registration, an underwriter of the deal may comment on the issuer’s non convertibles.

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43
Q

When is a BD, who is acting as an underwriter for a WKSI’s common stock, allowed to publish research about the stock?

A

When continuing its regular coverage of the issuer (It may not be initiating coverage.)

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44
Q

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

A

Regulation S

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45
Q

Generally, what happens to the stock’s price once the issuer announces a PIPE offering?

A

It declines since there will be an increase in the number of shares (potential dilution).

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46
Q

Where may sponsored ADRs trade?

A

On U.S. exchanges (Nasdaq or the NYSE)

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47
Q

True or False: Registration provisions apply when securities are offered through a private placement.

A

False. Private placements are exempt from registration.

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48
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.

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49
Q

Volume and holding period restrictions do not apply to the resale of private placements if the __________ is a QIB.

A

Volume and holding period restrictions do not apply to the resale of private placements if the purchaser is a QIB.

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50
Q

True or False: Covenants in a bond indenture may set the maximum debt-to-equity ratio to be maintained.

A

True

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51
Q

True or False: Regulation S-K requires the use of outside review.

A

False. Outside review is permitted, but NOT required.

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52
Q

What items must be included in a preliminary prospectus?

A

The number of shares or amount of bonds to be issued, as well as the use of the proceeds

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53
Q

What recommendation is made through a legend placed on a free writing prospectus?

A

That investors should read the statutory prospectus

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54
Q

One requirement for a WKSI is having a public float of equities totaling $____ million.

A

A WKSI must have a public float of equities totaling $700 million.

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55
Q

True or False: For a seasoned issuer, a shelf registration becomes effective immediately.

A

False. A seasoned issuer may use a shelf registration, but it will be subject to SEC staff review.

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56
Q

True or False: Regulation S limits the amount of capital that may be raised through overseas offerings.

A

False. There is no capital limit; however, all investors must be non-U.S. residents.

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57
Q

What is a statutory prospectus?

A

Any communication, whether written or broadcast, that offers a security for sale

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58
Q

True or False: The SEC recommends the delivery of an offering memorandum to all private placement purchasers.

A

True. However, delivery of the memorandum is required for nonaccredited investors only.

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59
Q

What type of information may be omitted when an issuer files a shelf registration?

A

Offering price, amount selling, selling shareholders’ names, offering type (primary or secondary), security description

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60
Q

True or False: The initial offering of a REIT is exempt from the Securities Act of 1933.

A

False. Registration is required under the Act.

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61
Q

True or False: During the pre-filing period, certain issuers may be prohibited from communicating with the public.

A

True

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62
Q

True or False: Prior to a PIPE offering, an RR may sell the stock short or buy put options on the stock.

A

False. These activities would violate insider trading rules.

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63
Q

Regulation D offerings under Rule 504 may not exceed $___ million.

A

Regulation D offerings under Rule 504 may not exceed $5 million.

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64
Q

What investment facilitates the trading of foreign securities in U.S. markets?

A

American Depositary Receipts (ADRs)

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65
Q

Does the owner of an ADR receive voting rights?

A

Yes

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66
Q

List some characteristics of American Depositary Receipts (ADRs).

A

Priced in U.S. dollars, pay dividends in U.S. dollars, carry voting rights, are sponsored or unsponsored

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67
Q

What provision in securities law restricts certain types of communication during the offering?

A

Gun Jumping

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68
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.

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69
Q

Explain the details of Regulation D, Rule 506 offerings.

A

No dollar limit, disclosure required, unlimited accredited investors, with 35 nonaccredited limit (need purchaser rep)

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70
Q

In a Regulation A offering, what disclosure document is provided to investors?

A

An offering circular

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71
Q

Which regulation requires that a registrant maintain effective internal controls regarding its financial reporting?

A

Regulation S-X

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72
Q

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

A

One year

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73
Q

What is the name of the offering of additional shares after a company has conducted its initial public offering (IPO)?

A

A follow-on offering or additional issuance

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74
Q

What is the maximum amount of proceeds selling shareholders may receive through a Regulation A offering?

A

$1,500,000

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75
Q

Name some Self-Regulatory Organizations (SROs).

A

FINRA, MSRB, CBOE, and other exchanges

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76
Q

When may Regulation S securities be resold through a designated offshore securities market?

A

Immediately

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77
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.

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78
Q

True or False: For a Rule 147 exemption, the issuer’s home must be in the state in which the securities will be sold.

A

True

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79
Q

What is the after-market prospectus requirement for the follow-on offering of an exchange-listed stock?

A

No requirement exists for the follow-on offering of an exchange-listed stock.

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80
Q

Under the TCPA, if requested, a client must be placed on the Do Not Call List within ____ days of request.

A

Under the TCPA, if requested, a client must be placed on the Do Not Call List within 30 days of request.

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81
Q

Where do ADRs trade?

A

On an exchange or through the Pink Sheets or OTCBB

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82
Q

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

A

Up to 3 years

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83
Q

True or False: A free writing prospectus may be published only after a registration statement has been filed.

A

False

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84
Q

What information is NOT included in an issuer’s registration statement?

A

Earnings projections, comparison of profitability to its competitors, or results of its due diligence meeting

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85
Q

What does Regulation S provide to U.S. companies?

A

An exemption from registration if its securities are issued outside the U.S.

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86
Q

Describe a cross default clause.

A

A statement that default may occur on one loan due to an issuer defaulting on another loan.

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87
Q

Once the final offering price is set, the issuer files a _________________ with the SEC.

A

Once the final offering price is set, the issuer files a final prospectus with the SEC.

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88
Q

True or False: A WKSI is offered a streamlined registration process and more freedom when communicating with investors.

A

True

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89
Q

List some items that may be omitted from a preliminary prospectus.

A

Final offering price, underwriting and dealer discounts, and proceeds to be received by the issuer

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90
Q

A statutory preliminary prospectus is also referred to as a _____________.

A

A statutory preliminary prospectus is also referred to as a red herring.

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91
Q

In what does a real estate investment trust (REIT) invest?

A

A diversified portfolio of properties and/or mortgages

92
Q

Is a BD allowed to initiate coverage of a reporting company and begin to act as its underwriter simultaneously?

A

No. A BD may only continue its regular coverage of a reporting company (not initiate).

93
Q

True or False: Generally, shareholders bear the burden of paying tax on income generated by a REIT.

A

True. Most REITs distribute a significant amount of their income to shareholders.

94
Q

According to the Trust Indenture Act of 1939, a trustee is appointed to represent the _____________ best interests.

A

According to the Trust Indenture Act of 1939, a trustee is appointed to represent the bondholder’s best interests.

95
Q

According to Reg. S-K, documents filed more than _____ years ago may not be incorporated.

A

According to Reg. S-K, documents filed more than five years ago may not be incorporated.

96
Q

Explain the importance of Regulation S-K.

A

It sets rules for: 1) the format used to present projections and 2) the non financial components of a firm’s filings.

97
Q

QIB stands for ___________________________.

A

QIB stands for Qualified Institutional Buyer (QIB).

98
Q

True or False: In a Regulation A offering, securities may NOT be offered publicly.

A

False. Public offerings are permitted.

99
Q

True or False: An FWP constitutes an offer to sell, or solicitation to buy, a registered offering.

A

True

100
Q

Explain the details of Regulation D, Rule 504 offerings.

A

$5 million limit; disclosure required; unlimited accredited, with limit of 35 nonaccredited (no rule on sophistication)

101
Q

True or False: A well-known seasoned issuer (WKSI) may NOT be an ineligible issuer.

A

True

102
Q

True or False: A BD may publish research reports about a stock when not acting as the issuer’s underwriter.

A

True

103
Q

For a new issue, are indications of interest binding or non-binding?

A

They are non-binding.

104
Q

True or False: Only individuals may purchase securities issued under a Rule 147 exemption.

A

False. Potential purchasers include individuals, corporations, partnerships, and trusts.

105
Q

True or False: Rule 144A securities may be offered by both domestic and foreign issuers.

A

True

106
Q

What form is filed to register securities issued in transactions subject to Rule 145 provisions?

A

Form S-4

107
Q

Instead of an equities test, a WKSI may have $___ billion in aggregate debt issuances in the previous three years.

A

Instead of an equities test, a WKSI may have $1 billion in aggregate debt issuances in the previous three years.

108
Q

To be considered a WKSI, the issuer must have been a reporting company for the previous ____ months.

A

To be considered a WKSI, the issuer must have been a reporting company for the previous 12 months.

109
Q

According to Rule 145, what are some examples of reclassifications that trigger registration requirements?

A

Substitutions of one security for another, mergers involving an exchange, spinoffs, or transfers of corporate assets

110
Q

True or False: A shelf registration filing must include identification of the type or class of securities being sold.

A

True. However, a detailed description of the securities may be omitted.

111
Q

Under Rule 147, what percentage of issuer assets must be located, revenues generated, and proceeds used in the state?

A

80%

112
Q

According to the Trust Indenture Act of 1939, for what reasons may default occur?

A

The issuer misses interest or principal payments, or fails to comply with a covenant

113
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.

114
Q

Under the TCPA, an existing relationship exists if a client has engaged in transactions with a firm within ___ months.

A

Under the TCPA, an existing relationship exists if a client has engaged in transactions with a firm within 18 months.

115
Q

Is a high net worth individual who meets the accredited investor definition under Regulation D considered a QIB?

A

No. A QIB is an institution, not an individual.

116
Q

What document may a Well-Known Seasoned Issuer (WKSI) use to communicate with potential investors?

A

Free writing prospectus

117
Q

For how long must a prospectus be provided in the after-market for the IPO of a stock to be listed on an exchange?

A

25 days

118
Q

What conditions must be met to qualify for an exemption under Regulation S?

A

The offer may NOT be directed to a U.S. resident and the trade must be effected through an overseas securities market.

119
Q

What is a combined offering?

A

One in which the proceeds will be split between the issuing company and selling shareholders

120
Q

Define free writing prospectus (FWP).

A

Written/electronic communication, used as a disclosure document, that does not meet statutory prospectus standards

121
Q

For tender purposes, is being long an ABC call option equivalent to a long ABC stock position?

A

No. Investors must exercise a long call to participate in a tender offer.

122
Q

Define blank-check (or shell) company.

A

A company early in the development stage with no specific business purpose

123
Q

As it applies to Regulation D offerings, who would be considered an accredited investor?

A

An institution, an officer/director of the issuer, or an individual who meets a financial test

124
Q

What instructions must be issued to ensure that no illegal sale occurs for securities acquired privately?

A

Stop transfer instructions

125
Q

To indicate that private placement securities are unregistered/restricted, a _______ is placed on the certificates.

A

To indicate that private placement securities are unregistered/restricted, a legend is placed on the certificates.

126
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.

127
Q

To blue sky an issue means to register the offering at the ______ level.

A

To blue sky an issue means to register the offering at the state level.

128
Q

When must the board of directors of the company, subject to a tender offer, advise its shareholders regarding the offer?

A

Within 10 days from the date the tender is made

129
Q

What is the purpose of Rule 145?

A

To be sure that securities acquired through reclassification are subject to registration and prospectus requirements.

130
Q

What business structure features double taxation at both the corporate rate and the owner’s personal rate?

A

C Corporation

131
Q

True or False: To be a WKSI, the issuer must be a reporting company and have a certain public float of debt or equity.

A

True

132
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.

133
Q

True or False: The person making a tender offer may purchase the subject company’s nonconvertible bonds.

A

True. During a tender period, nonconvertible bonds of the subject company may be purchased, but not convertible bonds.

134
Q

An ADR issued without the involvement of the issuing foreign company is an ____________ ADR.

A

An ADR issued without the involvement of the issuing foreign company is an unsponsored ADR.

135
Q

True or False: Registration provisions apply when securities are offered publicly.

A

True

136
Q

Where must issuers be located to qualify for a Reg. A exemption available for raising a limited amount of capital?

A

The issuers must be located in the U.S. or Canada.

137
Q

For a private placement, what must purchasers sign to acknowledge the restricted nature of the securities?

A

An investment letter

138
Q

What is a benefit to achieving WKSI status?

A

The company is permitted to offer securities without SEC review.

139
Q

Who attends the final due diligence meeting held prior to the effective date?

A

The issuer, underwriter, and other interested parties

140
Q

On what must 95% of a REIT’s gross income be derived?

A

Real estate-related activities, interest received on mortgages, or dividends and interest

141
Q

True or False: ADRs can be quoted on the NYSE, Nasdaq, the OTCBB, or the Pink Sheets.

A

True

142
Q

True or False: A business entity formed in Mexico may use the Regulation A exemption.

A

False. Only U.S. and Canadian issuers may utilize the Regulation A exemption.

143
Q

`What is one disadvantage to offering securities through a private placement?

A

The offering is limited to only certain types of investors.

144
Q

Partnerships distribute ____% of income to owners, while REITs generally distribute ___% of income to shareholders.

A

Partnerships distribute 100% of income to owners, while REITs generally distribute 95% of income to shareholders.

145
Q

An issuer with $75 million outstanding voting shares would be placed in what category?

A

Seasoned Issuer

146
Q

True or False: Regulation A limits the amount of capital that may be raised, but not number of shares that may be sold.

A

True

147
Q

For an Iowa Rule 147 offering, to whom may an Iowa resident sell without complying with the nine-month holding period?

A

Another resident of Iowa

148
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.

149
Q

Under Regulation S-K, what are the requirements for presenting projections?

A

They must be clear and not misleading, and an appropriate time frame must be used.

150
Q

True or False: C Corporations and limited liability companies (LLCs) allow for an unlimited number of shareholders.

A

True

151
Q

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

A

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

152
Q

If ABC’s nonconvertibles are in registration, an underwriter of the deal may comment on the issuer’s _______________.

A

If ABC’s nonconvertibles are in registration, an underwriter of the deal may comment on the issuer’s common stock.

153
Q

True or False: A red herring may be filed as a part of a registration statement and used before the effective date.

A

True

154
Q

Regulation D offerings under Rule 504 may not exceed $___ million.

A

Regulation D offerings under Rule 504 may not exceed $5 million.

155
Q

An issuer with $700 million outstanding voting shares would be placed in what category?

A

Well-Known Seasoned Issuer (WKSI)

156
Q

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

A

True

157
Q

True or False: The TCPA requires the caller to disclose her BD’s CRD number.

A

False

158
Q

Which type of annuity is considered a security, fixed or variable?

A

Variable

159
Q

A REIT will not be taxed on its income if it distributes ____% of it to shareholders.

A

a REIT will not be taxed on its income if it distributes 90% of it to shareholders.

160
Q

Where would a customer find information about the disciplinary history of a member firm and its RRs?

A

Public Disclosure Program (PDP), also known as BrokerCheck

161
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.

162
Q

True or False: The person making a tender offer may NOT engage in open market purchases of the subject company’s stock.

A

True

163
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.

164
Q

`Complete the following statement: The SEC requires a securities offering to register unless it is _______.

A

Complete the following statement: The SEC requires a securities offering to register unless it is exempt.

165
Q

What is a QIB?

A

Qualified Institutional Buyer (institutions defined under Rule 144A)

166
Q

Rule 415 establishes the requirements for _______ registration.

A

Rule 415 establishes the requirements for shelf registration.

167
Q

The SEC will issue a ____________________ to indicate that a registration statement is inadequate.

A

The SEC will issue a deficiency letter to indicate that a registration statement is inadequate.

168
Q

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

A

False

169
Q

What are some examples of a free writing prospectus?

A

Offering term sheets, e-mail, press releases, and marketing materials

170
Q

What requirement is established by Regulation S-X?

A

The requirement that a registrant maintain effective internal controls in connection with its financial reporting

171
Q

To satisfy WKSI status, within 60 days of determination, an issuer must have how much public float in debt or equity?

A

A public float of $700 million in equities or $1 billion in aggregate debt issuances in the previous three years

172
Q

A well-known seasoned issuer (WKSI) is able to file an ASR. What does ASR mean?

A

Automatic Shelf Registration

173
Q

What types of events are exempt from Rule 145?

A

Stock splits, reverse splits, or adjustments in par value

174
Q

True or False: Using a private placement to offer securities is a faster, less expensive method than a public offering.

A

True

175
Q

Public offerings of securities require the delivery of a ___________.

A

Public offerings of securities require the delivery of a prospectus.

176
Q

Under the TCPA, time-of-day restrictions are applied based on the ____________ of the call.

A

Under the TCPA, time-of-day restrictions are applied based on the destination of the call.

177
Q

True or False: An offering memorandum is required to be delivered to purchasers in a private placement.

A

False. An offering memorandum is required to be provided to nonaccredited investors only.

178
Q

In the after-market, for how long must a prospectus be provided following an IPO of a stock to be listed on an exchange?

A

25 days

179
Q

True or False: S Corporations may be foreign corporations with multiple classes of stock.

A

False. S Corporations must be domestic corporations with only one class of stock.

180
Q

True or False: An incentive for buying securities through a private placement is the liquidity of the investment.

A

False. Securities acquired through a private placement are illiquid since their sale is restricted.

181
Q

The number of investors who may purchase stock under a Regulation A offering is __________.

A

The number of investors who may purchase stock under a Regulation A offering is unlimited.

182
Q

For what offerings is there no after-market prospectus requirement?

A

For follow-on offerings of exchange-listed stocks

183
Q

Regarding a new issue, when is the final due diligence meeting held?

A

Prior to the anticipated effective date

184
Q

Who evaluates the risks and merits of a private placement for a nonaccredited investor?

A

The purchaser representative

185
Q

True or False: A covenant in a bond indenture may restrict the sale of an asset being used as collateral.

A

True

186
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.

187
Q

What is FINRA?

A

The Financial Industry Regulatory Authority; created by the merger of the NASD and NYSE regulatory authorities

188
Q

True or False: Rule 144A securities are only equities.

A

False. Rule 144A securities may be equity or debt.

189
Q

True or False: The preliminary prospectus (red herring) will include the final offering price.

A

False. The red herring may give a price range, but will not include the final price.

190
Q

Prior to a PIPE offering, what is an RR permitted to do?

A

Solicit and accept indications of interest

191
Q

What is a Private Investment in Public Equity (PIPE)?

A

When a BD acts as a placement agent for restricted securities of an issuer whose securities are already publicly traded.

192
Q

For how long must a prospectus be made available in the secondary market for an exchange-listed IPO?

A

25 days

193
Q

True or False: During the cooling-off period, sales may be effected and money may be accepted.

A

False. These would be prohibited practices during the cooling-off period.

194
Q

How are C Corporation profits taxed?

A

At both the corporate and shareholder level (double taxation)

195
Q

The Securities Act of 1933 regulates ____________.

A

The Securities Act of 1933 regulates new issues.

196
Q

A REIT must have a minimum of ____ shareholders, with no more than ____% of the trust owned by _____ or fewer persons.

A

A REIT must have a minimum of 100 shareholders, with no more than 50% of the trust owned by five or fewer persons.

197
Q

For how long must a prospectus be provided in the after-market for a non-exchange IPO?

A

90 days

198
Q

True or False: A Private Investment in Public Equity (PIPE) is a form of private placement.

A

True

199
Q

What are the requirements for a WKSI to file a shelf registration that will be effective for three years?

A

The offering must begin immediately and the issuer must be eligible to file Form F-3 or S-3.

200
Q

A BD acting as an underwriter for an issuer’s debt may publish research reports on that issuer’s ______________.

A

A BD acting as an underwriter for an issuer’s debt may publish research reports on that issuer’s common stock.

201
Q

When is the registration of a well-known seasoned issuer (WKSI) effective?

A

Immediately at the time of filing with the SEC

202
Q

Who frequently purchases securities through PIPE offerings?

A

Hedge funds

203
Q

Define initial public offering (IPO).

A

A company’s first public offering of securities

204
Q

True or False: A significant goal of the Securities Act of 1933 is to prevent fraud in the sale of new issues.

A

True

205
Q

What is the name of the disclosure document used for a private placement?

A

An offering memorandum, also called a private placement memorandum (PPM)

206
Q

What are the details related to the Section 4(6) exemption?

A

An exemption is provided if securities are sold to accredited investors and no more than $5 million of capital is sold.

207
Q

True or False: Purchaser representatives must pass a specific exam or be certified to act in this capacity.

A

False. There is no specific qualification required to be appointed as a purchaser representative.

208
Q

`For spouses to be considered accredited, they must have income of $_______ in each of the last two years.

A

For spouses to be considered accredited, they must have income of $300,000 in each of the last two years.

209
Q

How many classes of stock may be issued by C Corporations and limited liability companies (LLCs)?

A

Both may issue multiple classes of stock.

210
Q

Under Reg. S-X, what must the CPA’s attestation report include?

A

The CPA’s opinion of the firm’s internal controls

211
Q

On what is the length of time a prospectus must be sent in the after-market based?

A

The amount of information available to the potential purchaser

212
Q

True or False: Flexible management structure is a characteristic of a limited liability company (LLC).

A

True

213
Q

What may take place during the post-registration period?

A

Sales may be confirmed, money may be accepted, and the final prospectus may be delivered.

214
Q

Where do unsponsored ADRs generally trade?

A

In the OTC market (OTCBB or Pink Sheets)

215
Q

True or False: Shelf registration may be used by issuers other than WKSIs and seasoned issuers.

A

True. Other eligible issuers may use a shelf registration, but it is effective for two years.

216
Q

True or False: After-market prospectus requirements do NOT apply to dealers not involved in the original distribution.

A

False. After-market prospectus requirements apply to dealers who are, or are not, involved in the original distribution.

217
Q

The SEC ____________ clause must be included in the prospectus for a new issue.

A

The SEC No Approval Clause must be included in the prospectus for a new issue.

218
Q

True or False: The person making a tender offer may purchase the subject company’s convertible bonds.

A

False. During the tender period, the subject company’s nonconvertible bonds may be purchased, but not its convertibles.

219
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

220
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.

221
Q

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

A

True

222
Q

If WKSI status is lost after the filing of the automatic shelf registration, how long may the offering continue?

A

Until the filing of the next Form 10-K

223
Q

Under Reg. S-K, if outside review is conducted, what disclosures must be made?

A

Extent of review, reviewer’s qualifications, material facts of how the review was sought/obtained

224
Q

When are securities ineligible for the Rule 144A exemption?

A

When the issuer has the same class of securities listed on an exchange.

225
Q

An ADR issued in cooperation with the issuing foreign company is a __________ ADR.

A

An ADR issued in cooperation with the issuing foreign company is a sponsored ADR.

226
Q

Shelf Registration is valid for up to _____ years.

A

Shelf Registration is valid for up to 3 years.

Series 24 Group Share (42 decks)

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