Federal Regulations Flashcards
Which of the following is FALSE about Regulation A+ Offerings?
[A]It is limited to $75,000,000 in any 12-month period.
[B]The securities issued are restricted.
[C]Limited partnerships can use them.
[D]Filing with SEC is required.
[B]The securities issued are restricted.
All choices are true except that the securities issued under Regulation A+ are not restricted since Reg A+ is short form registration.
Ch6 Sec1
The SEC directly regulates all of the following EXCEPT:
[A]Trading on stock exchanges.
[B]A new issue of Treasury securities.
[C]A new issue of corporate bonds.
[D]Trading in the OTC market.
[B]A new issue of Treasury securities.
Treasury securities are exempt securities, meaning they are not required to register with the SEC.
Ch6 Sec1
Which of the following are required to be registered in a state when selling securities in the state?
I. Resident broker-dealers
II. Non-resident broker-dealers
III. Resident salesmen
IV. Non-resident salesmen
[A]I only
[B]I and III only
[C]I, III, and IV only
[D]All of the above
[D]All of the above
All salesmen and broker-dealers must be registered in a state to transact business.
Ch6 Sec3
Which of the following would be considered “insider” information when such information is related to a publically traded company under SEC Rules?
[A]A CEO makes comments at a luncheon that are then released to the public.
[B]Proxy information distributed to the company’s shareholders
[C]material information in an unreleased press report
[D]an offering circular distributed to potential investors
[C]material information in an unreleased press report
The key word here is “unreleased” - when information has not been released to the public and it is material information about a publicly traded company it would be considered to be “inside” information.
Ch6 Sec2
Which of the following issues is not exempt under the 1933 Act?
[A]State and federal government
[B]Industrial loan company
[C]Benevolent association
[D]Small business investment companies
[B]Industrial loan company
Non-exempt entities would have to file and all choices except B are exempt from SEC filing requirements.
Ch6 Sec1
Under the Securities Act of 1933, which of the following securities issued by an investment company would NOT be subject to the prospectus delivery requirements?
[A]Fund shares purchased in a secondary market transaction
[B]Variable annuities
[C]Mutual fund shares
[D]Face-amount certificates
[A]Fund shares purchased in a secondary market transaction
The sale of variable annuities, mutual fund shares, face-amount certificates (also contractual plan certificates) require a prospectus because open-end investment companies are continuously issuing new shares. The purchase of a fund in the secondary market indicates it is a closed-end fund, and once a new issued of closed-end fund shares is made (with a prospectus) it is not required that a prospectus be delivered to investors who purchase this fund in the secondary market.
Ch6 Sec1
It can correctly be stated concerning state laws related to intrastate offerings and sales of securities that they:
[A]Do require registration of all securities registered or exempt under the Securities Act of 1933.
[B]Generally contain either antifraud provisions or provisions that prohibit misrepresentations or misleading statements.
[C]Are completely uniform throughout the United States.
[D]Generally allow a registered representative registered in a particular state to make sales in any other state where registration is required.
[B]Generally contain either antifraud provisions or provisions that prohibit misrepresentations or misleading statements.
State laws, or “blue-sky” laws, usually contain anti-fraud or misrepresentation provisions. Registered Representatives must be registered in a state before they can do business there.
Ch6 Sec3
Full registration under the Securities Act of 1933 would be expected for which of the following securities?
[A]A primary offering of municipal securities by the State of California
[B]A distribution of Regulation A securities
[C]An initial public offering (IPO) of corporate common stock
[D]A primary auction sale of US Treasury Bills
[C]An initial public offering (IPO) of corporate common stock
Full registration under the Securities Act of 1933 with the Securities and Exchange Commission (SEC) would be expected for an initial public offering (IPO) of corporate common stock. Each of the other securities listed would be exempt from registration under the 1933 Act.
Ch6 Sec1
The Securities and Exchange Act of 1934 requires the registration of all of the following EXCEPT:
[A]National securities exchanges
[B]Corporations having listed securities
[C]New issues of securities sold to the public
[D]Brokers and dealers operating in interstate commerce
[C]New issues of securities sold to the public
The “33” Act is the act which regulates new issues sold to the public.
Ch6 Sec2
According to SEC Rule 147 on Intrastate Offerings, which of the following are true?
I. Purchasers of the offering must be full time residents of the state.
II. Purchasers must be residents 80% of each year to qualify.
III. Resales may be made without restriction to anyone.
IV. Resales may be made to non-residents only after six months from the date of the last sale by the issuer.
[A]I, III
[B]I, IV
[C]II, III
[D]II, IV
[B]I, IV
SEC Rule 147 for Intrastate Offerings requires all purchasers to be full time residents of the state and resales may only be made after six months (previously nine months) from the date of the last sale by the issuer.
Ch6 Sec3
The Securities Act of 1933 regulates
[A]the exchange markets.
[B]registration of securities before the securities are sold to the public.
[C]issuance of municipal bonds.
[D]the fees charged by mutual fund companies.
[B]registration of securities before the securities are sold to the public.
The Securities Act of 1933 requires registration of securities prior to public sale. “A” is the ‘34 Act, “C” does not require registration and so is not covered by the ‘33 Act, and “D” is covered by the Investment Company Act of 1940.
Ch6 Sec1
Which of the following records must be kept by a broker-dealer for a minimum of 6 years?
[A]Blotters of Original Entry
[B]Customer Confirmations
[C]Fingerprints of All Associated Persons
[D]Copies of Customer Order Tickets
[A]Blotters of Original Entry
Blotters of original entry must be kept for 6 years. Customer confirmations, fingerprints of all associated persons, and copies of customer order tickets must be kept for 3 years, the first two of which must be in a readily-accessible location.
Ch6 Sec4
SEC Rule 144A permits the resale of non-registered securities to all of the following EXCEPT
[A]insurance companies.
[B]banks.
[C]mutual funds.
[D]individuals.
[D]individuals.
SEC Rule 144A permits the sale of restricted securities to Qualified Institutional Buyers (QIBs) but not individual investors.
Ch6 Sec3
Copies of customer confirmations must be retained by the firm for
[A]1 year.
[B]2 years.
[C]3 years.
[D]5 years.
[C]3 years.
Copies of customer confirmations must be retained by the firm for 3 years.
Ch6 Sec4
Which of the following must be delivered to clients when an account is opened and a minimum of once per year following the time the account is opened?
[A]Account statements
[B]Customer confirmations
[C]Privacy Notices under Reg S-P
[D]Discretionary authorization
[C]Privacy Notices under Reg S-P
Regulation S-P requires that customers receive a copy of the firm’s privacy notice upon opening an account and a minimum of annually following the time the account is opened. Account statements must be sent at least quarterly. Customer confirmations are sent when a transaction is executed. Discretionary authorization in an account is voluntary on behalf of the customer (not a “must”), is given in writing by the customer, and is good until revoked in writing by the customer.
Ch6 Sec5
An investor owns 15% of the outstanding shares of ABC Corporation. The investor’s spouse owns 5% of the outstanding shares of the same corporation. The spouse wants to sell the holdings. Which statements are true?
I. The spouse is considered an affiliated person under Rule 144.
II. The spouse is not considered an affiliated person under Rule 144.
III. The spouse must file a Form 144 to sell the shares.
IV. The spouse does not have to file a Form 144 to sell the shares.
[A]I and III
[B]I and IV
[C]II and III
[D]II and IV
[A]I and III
The spouse is considered an affiliated person under Rule 144 because of the 15% holding by the investor, which makes them a Principal Stockholder. Affiliated persons must file a Form 144 with the SEC to sell the shares.
Ch6 Sec3
