Issuers and Securities Regulations Flashcards
An issuers agent is exempt from registering if the agent:
- Sells exempt securities
- Sells securities in an exempt transaction, or
- Sells securities to existing directors, officers, or employees of the issuer and received no additional compensation for such sales.
List the securities that are exempt from registration 6.
- Government Bonds
- Municipal Bonds
- Commercial Paper
- Bankers Acceptances
- Bank Issues
- non-profit and small business issues
Though some securities are exempt from registration, nothing is exempt from the ____________ provisions of the Act.
Anti Fraud provisions of the act
True or False: An American Depositary Receipt (ADR) is a security.
True
True or False: Precious metals are not considered securities.
True.
Precious metals are NOT securities
Is a voting trust certificate a security?
Yes
What is a voting trust certificate?
Issued to a stockholder in exchange for her common stock, and represents all of the normal rights of a shareholder (receiving dividends) except the right to vote
Is a Keogh plan considered a security?
No, but Keogh plan participation is considered a security.
Q
Is an investment interest in livestock considered a security?
Yes
Is a certificate of interest in a mining lease a security?
Yes
Is a fixed annuity a security?
No, but variable contracts (e.g., variable annuities or variable life insurance) are considered securities.
Is an endowment life insurance policy a security?
No
Is a variable life insurance policy a security?
Yes, but a term or universal life insurance policy is not considered a security.
Is a universal life insurance policy considered a security?
No
Is Keogh plan participation considered a security?
Yes, but the Keogh plan itself is not a security.
Is a 401(k) plan considered a security?
No
Is treasury stock considered a security?
Yes.
Treasury stock is stock that was issued and subsequently repurchased by the company.
Is a debenture considered a security?
Yes. A debenture is an unsecured corporate bond.
Is a preemptive right considered a security?
Yes
Is a warrant a security?
Yes. Warrants are financial instruments that allow investors to acquire stock at a preset price.
Is a preorganization certificate considered a security?
Yes
The term “Security” means:
any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, preorganization certificate or subscription, warrant, right, voting-trust certificate, transferable share, investment contract, certificate of deposit, undivided interest in oil, gas or other mineral rights, a put, call, straddle, option.
Is an IRA account considered a security?
No
Is a futures contract considered a security?
No, but an option on a futures contract is a security.
Is a multi-level distributorship considered a security?
Yes - Pyramid sales plan
Is a limited partnership a security?
Yes
Is an interest in oil and gas drilling program considered a security?
Yes
Is a whiskey warehouse receipt considered a security?
Yes
True or False: Securities issued by provinces and municipalities of Canada are subject to state registration.
False. Securities issued by Canadian provinces or municipalities are exempt from state registration.
Are bonds issued by the City of New York exempt from state registration?
Yes - These are considered municipal bonds
True or False: Securities issued by the states and municipalities of Mexico are exempt from registration under the USA.
True. An exemption is provided to securities issued by foreign governments with whom the U.S. has diplomatic relations.
- exempt from state registration
Securities issued by any government with whom the U.S. has _____________ relations are exempt from state registration.
Diplomatic Relations
True or False: Securities issued by the U.S. Treasury and U.S. agencies are deemed exempt securities under the USA.
True
US Government securities are exempt from STATE registration
________ issued by insurance companies are exempt from state registration.
Bonds
True or False: Securities of a Canadian company, but listed on the NYSE, are exempt from state registration.
True
Are bonds issued by a charitable organization subject to state registration?
No. Securities issued by non-profit organizations are exempt from state registration.
What criteria must be met for commercial paper to be exempt from registration?
- A 270-day maximum life,
- minimum denomination of $50,000; and
- rated in one of the top-three categories according to an NRSRO
An executor of an estate sells a block of securities that are not registered. Is this a violation?
No. This is an example of an exempt transaction
True or False: Bankers’ Acceptances rated AAA, maturing in 6-months, and issued in $25,000 denominations are exempt.
False. Because the BAs were not issued in at least $50,000 denominations, registration is required.
Under the USA, private placements are state exempt if securities are offered to ____ or fewer retail clients over ____ months.
10 or fewer retail clients over 12 months.
What does the USA consider a security issued by an investment company that is registered under the Inv. Co. Act of 1940?
The securities are considered federal covered
True or False: Agents selling unregistered, non-exempt securities to banks and trust companies are violating the USA.
False. Transactions with banks and trust companies are considered exempt transactions.
If a Nasdaq stock trades in the secondary market, does the USA consider it an exempt security or exempt transaction?
Exempt security
True or False: Bonds issued by a railroad are exempt from state registration.
True. Securities issued by a railroad, common carrier, or public utility are exempt at the state level.
True or False: According to the USA, debt issued by a fraternal organization would NOT be considered exempt.
False. Securities issued by non-profit organizations are exempt from state registration
Non-issuer trading of securities subject to reporting requirements of the Act of 1934 are _________ transactions.
Non issuer transaction
What is a non-issuer transaction?
A transaction involving a security that is not directly or indirectly executed for the benefit of the issuing company.
- occur on the secondary market, (Secondary offerings) in the over the counter market
- share buy backs
- exempting it from state registration
If joe sells 100 shares of XYZ stock to his brother, what type of transaction is this?
This is a non-issuer transaction, this transaction is exempt from registration requirements.
True or False: An Administrator may not require a sales report from the issuer of an OTC security.
False
Transactions between the issuer and its underwriter are considered ________ transactions.
Exempt transactions - does not have to register with the state
True or False: The anti-fraud provisions of the USA apply to fixed annuities?
False. Since fixed annuities aren’t securities, they are not subject to any provision of the USA.
Regarding federal covered securities, may an Administrator prohibit the sale of the security in his state?
No, federal convered securities may be sold in any state without registration in the state
Under the USA, is stock issued by an electric company an exempt security or an exempt transaction?
Securities issued by public utilities are considered exempt securities and not subject to state registration.
The only form of state registration that has its effective date set by the Administrator is _______________.
Qualification
State registration remains in effect for ___ year(s).
One year
What is an issuer transaction?
A transaction in which the issuer receives the proceeds.
Regarding federal covered securities, may an Administrator cancel a registration?
No, state administrators do not have jurisdiction over federal covered securities
Is an isolated, non-recurring, non-issuer transaction in OTCBB or OTC Pink Market stock subject to registration?
No. Non issuer transactions in the OTC market are EXEMPT TRANSACTIONS and not subject to state registration
Give some examples of insurance company offerings that are exempt from the antifraud provisions of the USA.
Life insurance policies and fixed annuities are exempt from the provisions since they are not securities.
Is an option on a commodity futures contract a security?
Yes. Options are securities, but futures contracts alone are not. Options may be tied to an equity, index, or currency.
Are options securities?
YES
Is a private placement considered an exempt transaction or an exempt security under the USA?
Exempt transaction
Identify the three forms of state securities registration.
- Notification (filing)
- Coordination
- Qualification
True or False: Soliciting orders for unregistered, non-exempt securities is prohibited.
True. Non exempt securities must be registered before solicitation can occur
True or False: A transaction by an executor is exempt. (from state registration)
True. Any transaction by an executor, administrator, trustee in bankruptcy, or conservator is considered exempt.
True or False: A state Administrator may require notice filing by an issuer of an NYSE security.
False. Notice filing is required for mutual funds and Reg D (Rule 506) offerings, but not exchange listed securities.
True or False: The sale of securities to a pension plan is considered an exempt transaction under the USA.
True
Are securities issued by a software company exempt from state registration?
No
According to NSMIA, when is an investment pool considered a federal covered security?
When it registers as an investment company under the Investment Company Act of 1940
List some of the different types of institutional clients.
IAs, BDs, investment, insurance, or trust companies, banks, savings and loan associations, and pension plans
Accepting orders for unregistered, non-exempt securities is allowed if clients attest that the trade was _____________.
Unsolicited
True or False: Under the Uniform Securities Act, municipal bonds are federal covered securities.
False. Municipal bonds are exempt securities. Federal covered securities include listed stocks and mutual funds shares.
If an Administrator was aware of facts before a registration became effective, a stop order may be issued if done within __ days.
30 days
True or False: Securities issued by provinces and municipalities of Canada are subject to state registration.
false
Registration by Filing (Notification) requires issuers to be in business at least _____ months preceding registration.
Registration by Filing (Notification) requires issuers to be in business at least 36 months preceding registration.
List some securities that are considered federal covered and exempt from registration.
Those listed on national exchanges (e.g. NYSE, NASDAQ) and investment company securities (e.g., mutual fund shares)
Define an investment contract
An investment of money, in a common enterprise, with expectation of a profit due to efforts of third-party management.
The solicitation of buyers for unregistered, non-exempt securities is _____________.
The solicitation of buyers for unregistered, non-exempt securities is prohibited.
True or False: A state may require a registration fee from the issuer of a Nasdaq security.
False. Nasdaq securities are federal covered securities.
True or False: Occasional, secondary market transactions in an OTCBB stock are considered exempt transactions.
False. Only non-recurring secondary market transactions are considered exempt transactions.
Registration by Filing (Notification) requires that the underwriting commission be no more than _____%.
Registration by Filing (Notification) requires that the underwriting commission be no more than 10%.
What method of state securities registration requires issuers to wait to hear from the Administrator before selling?
Qualification
List the securities that are exempt from state registration.
Government/municipal bonds, commercial paper, bankers’ acceptances, bank issues, non-profit and small business issues
True or False: Bankers’ Acceptances rated AAA, maturing in 6-months, and issued in $25,000 denominations are exempt.
False. Because the BAs were not issued in at least $50,000 denominations, registration is required.
Are securities that are traded on the OTCBB or the OTC Pink Market exempt?
No. Non-exempt securities. subject to state regulations
What is the minimum cooling-off period for registration by notification?
Five days
If an IPO is being registered, an issuer is most likely using what form of state registration?
Coordination
Do the anti-fraud provisions of the USA apply to exempt securities?
Yes. Nothing is exempt from fraud.
Non-issuer trading of securities subject to reporting requirements of the Act of 1934 are _________ transactions.
Non-issuer trading of securities subject to reporting requirements of the Act of 1934 are exempt transactions
An intrastate offering may use which method of state securities registration?
Qualification
True or False: Paperwork related to coordination is filed with the Administrator at the same time as the SEC filing.
False. Registration will become effective simultaneously with SEC registration, but need not be filed at the same time
Is an interest in a real estate condominium development considered a security?
yes
What form of state registration is not available in all states?
Notification filing
To use Filing (Notification) to register stock, the offering price must be at least $______ per share
$5/share
As it applies to persons and securities, what does the term “exemption” mean in the USA?
Exemption signifies that a person or security is not subject to registration under the USA.
Is an unsolicited, non-issuer transaction in an OTC stock exempt from state registration?
Yes, because it is unsolicited.
A car dealer gives 100 shares of stock to all new car buyers. Is this considered a sale of securities?
Yes. Since the gift is contingent on a purchase being made, it is considered a sale of the security.
Registration by Coordination has a minimum cooling-off period of _____ days
10 days
Describe what it means for a security to be registered.
The security may be legally offered or sold in the state.
Registration by Coordination requires issuers to meet requirements of the USA as well as what other Act?
The Securities Act of 1933
True or False: Exchange-listed futures contracts are securities.
False. Futures and forward contracts are not securities.
True or False: A trade of unregistered, non-exempt securities between two BDs is a violation of the USA.
False. This is an exempt transaction.
How would a well-established corporation register a subsequent (additional) offering to be sold in multiple states?
Notification (filing)
An executor of an estate sells a block of securities that are not registered. Is this a violation?
No. This is an example of an exempt transaction.
/which filing method is most appropriate for federal covered securities?
Coordination
Under the USA, a nonexempt transaction may take place in the state only if
the security is registered, exempt or federally covered
Under the USA, a nonexempt transaction may take place in the state only if
the security is registered, exempt or federally covered
