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Series 24 Group Share > FC Chapter 4 > Flashcards

FC Chapter 4 Flashcards

1
Q

If an analyst’s spouse owns options on a stock covered by the analyst, is disclosure required?

A

Yes. Disclosure is required if the analyst (or member of his household) has a financial interest in a subject company.

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2
Q

When must a research report be approved?

A

Prior to first use by a Supervisory Analyst

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3
Q

If nonpublic information is unintentionally disclosed to an analyst, when must it be disclosed to the public?

A

Within 24 hours of its disclosure

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4
Q

In what format should a firm’s research reports be written?

A

Plain English

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5
Q

What exception allows an underwriting manager to immediately publish research on a company due to a significant event?

A

The Hot News exception

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6
Q

When would a gathering of investors be considered a public appearance?

A

When there are 15 or more separate investors in attendance

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7
Q

If nonpublic information is intentionally disclosed to an analyst, when must it be disclosed to the public?

A

Simultaneously

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8
Q

A member firm’s research reports should be written in a ______________ format.

A

A member firm’s research reports should be written in a plain English format.

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9
Q

The _______ and ___________ of an underwriting may not immediately issue research reports on investment banking clients.

A

The manager and comanager of an underwriting may not immediately issue research reports on investment banking clients.

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10
Q

What is the primary purpose of Regulation FD?

A

To prevent the selective disclosure of material inside information to securities professionals.

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11
Q

A firm preparing research must disclose whether it received underwriting compensation within the last ____ months.

A

A firm preparing research must disclose whether it received underwriting compensation within the last 12 months.

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12
Q

How often must anti-money laundering (AML) programs be tested?

A

Annually, by an independent source

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13
Q

A gathering of fewer than ____ separate investors is not considered a public appearance.

A

A gathering of fewer than 15 separate investors is not considered a public appearance.

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14
Q

True or False: If an analyst issues a buy recommendation on a stock, his spouse may short the subject company’s stock.

A

False. The analyst and his household members may not trade against his recommendation.

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15
Q

True or False: Plain and consistent meanings of ratings must be used in research reports.

A

True

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16
Q

According to industry rules, what is a research analyst prohibited from attending?

A

A road show in connection with an investment banking transaction

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17
Q

An analyst covering the oil industry is not permitted to receive pre-IPO shares in a company in the ______________.

A

An analyst covering the oil industry is not permitted to receive pre-IPO shares in a company in the same sector.

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18
Q

As it relates to research reports, define subject company.

A

The company on which a research report is created

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19
Q

As it relates to investment banking activities, communication between research and investment banking is ____________.

A

As it relates to investment banking activities, communication between research and investment banking is prohibited.

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20
Q

An underwriting manager must wait ____ calendar days before publishing research on the issuer’s IPO.

A

An underwriting manager must wait 10 calendar days before publishing research on the issuer’s IPO.

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21
Q

How long must an underwriting manager wait before publishing research on the issuer’s IPO?

A

10 calendar days

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22
Q

When may telemarketers place calls to prospective clients?

A

From 8:00 a.m. to 9:00 p.m. on any day of the year

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23
Q

What is the purpose of an information barrier between trading and research departments?

A

To prevent the trading department from learning of an impending report about a stock in which the firm has a position

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24
Q

A trader who is aware of a research report’s contents may execute ____________ client orders.

A

A trader who is aware of a research report’s contents may execute unsolicited client orders.

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25
Q

When is an analyst considered to be making a public appearance?

A

When making a recommendation for an equity security in a public or electronic forum, or on radio or TV

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26
Q

Can an analyst that works at the lead underwriter for an IPO, release a research report one month after the IPO date?

A

Yes. Research analysts are only restricted from releasing research for 10 days after an IPO.

27
Q

True or False: If a BD is involved in an offering it may not publish research during the offering process.

A

False, Rules 138 and 139 allow BDs to publish research if involved in an underwriting in limited situations.

28
Q

If a firm owns ___% or more of a subject company, a disclosure must be made in a research report.

A

If a firm owns 1% or more of a subject company, a disclosure must be made in a research report.

29
Q

A BD is ready to issue a favorable research report. What must exist for the BD to continue regular trading operations?

A

Effective information barriers must be in place.

30
Q

True or False: The name and certifications of the analyst preparing a research report is not required to be disclosed.

A

False. These details must be disclosed.

31
Q

A BD is ready to issue a favorable research report. Information barriers must exist between what two departments?

A

Trading and research

32
Q

Communication between a research department and investment banking department must be routed through ______________.

A

Communication between a research department and investment banking department must be routed through Legal/ Compliance.

33
Q

If an analyst’s firm just published research on a company, how long must he wait before trading the stock?

A

Although there is no restriction, a research analyst must follow his firm’s procedures.

34
Q

Who must approve a research report?

A

Supervisory analyst

35
Q

If a member firm makes a recommendation to a client, what types of conflicts must be disclosed?

A

Whether the member firm owns the security, makes a market in the security, or acted as an underwriter for that company

36
Q

What must be implemented to limit the flow of communication between research and investment banking departments?

A

Information barriers

37
Q

Under Regulation FD, an acceptable method of public disclosure would be the filing of Form ____ with the SEC.

A

Under Regulation FD, an acceptable method of public disclosure would be the filing of Form 8-K with the SEC.

38
Q

What is a firm prohibited from doing if it has material, nonpublic knowledge of a research report’s contents?

A

It may not establish, increase, decrease, or liquidate an inventory position in a security or its derivative.

39
Q

Define research reports.

A

Written or electronic communication about equities, including information for a client to make an investment decision.

40
Q

True or False: Analysts must disclose when serving as officer, director, or advisory board member of a subject company.

A

True. The same disclosure is required for a member of the analyst’s household.

41
Q

True or False: Firms writing research reports must disclose potential conflicts of interest.

A

True (e.g., firm makes a market in the stock or has had or will have an investment banking relationship with the issuer)

42
Q

An underwriting manager must wait _____ calendar days before publishing research on the issuer’s secondary offering.

A

An underwriting manager must wait three calendar days before publishing research on the issuer’s secondary offering.

43
Q

What does it mean for an analyst (or household members) to have a financial interest in a subject company?

A

The analyst (or household members) own shares, warrants, or options of the company being followed.

44
Q

True or False: Three-way communication between research, investment banking, and a client is allowed.

A

False. Three-way communication would be prohibited since legal/compliance is not involved.

45
Q

What does Regulation AC require of research analysts?

A

Analysts must certify the truthfulness of their views expressed in research reports and public appearances.

46
Q

What must be stated in an analyst’s certification?

A

The research accurately reflects the analyst’s views and states whether compensation is tied to the views expressed.

47
Q

May issuers selectively release insider information if the person receiving the information promises not to act on it?

A

No. The selective release of insider information is prohibited.

48
Q

How long must a syndicate member wait before publishing research on the issuer’s IPO?

A

10 calendar days

49
Q

May a firm with knowledge of a research report’s contents execute proprietary orders?

A

No. Executing proprietary orders is prohibited until the information is made public.

50
Q

May firms allow for the free flow of information between their research department and investment banking department?

A

No, these two departments must be separated to avoid conflicts of interest.

51
Q

What regulation prohibits an issuer from disclosing material non-public information to securities professionals?

A

Regulation FD (Fair Disclosure)

52
Q

True or False: A research analyst may compensate a newspaper writer for placing his recommendations in his column.

A

False. This type of compensation is strictly prohibited by the regulators.

53
Q

In a public appearance, what is offered by an analyst?

A

Recommendations and opinions concerning equity securities

54
Q

What is the purpose of Regulation FD?

A

To prohibit the selective release of insider information to securities professionals (FD stands for Fair Disclosure.)

55
Q

May an RR in the research area be supervised by the investment banking department?

A

No

56
Q

True or False: A BD with knowledge of a research report’s contents may adjust its inventory if the report is negative.

A

False. Inventory adjustments are prohibited regardless of whether the report is positive or negative.

57
Q

True or False: A research analyst may attend a road show if accompanied by a member of the Compliance Department.

A

False. A research analyst is prohibited from attending a road show.

58
Q

A syndicate member must wait ____ calendar days before publishing research on the issuer’s IPO.

A

A syndicate member must wait 10 calendar days before publishing research on the issuer’s IPO.

59
Q

True or False: A firm preparing research need not disclose underwriting compensation it receives in the future.

A

False. The firm preparing research must disclose underwriting compensation it receives within the next three months.

60
Q

What does AC stand for in Regulation AC?

A

Analyst Certification

61
Q

True or False: If a BD is not involved in an underwriting, it may publish research during the cooling-off period.

A

True, Rule 137 allows BDs to publish research if not involved in the underwriting.

62
Q

Why are control rules established relating to interaction between research and investment banking departments?

A

To ensure that investment banking does not influence its research department’s recommendations

63
Q

What are the approval rules regarding research reports published by a member firm?

A

The reports must be approved prior to use by a Supervisory Analyst (Series 16) of the member firm.

Series 24 Group Share (42 decks)

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