Regulations

Question 1

Commercial Paper

Answer 1

Money market instrument issued by corporations. Exempt Security under Securities Act of 1933 as long as maturity does not exceed 270 days. Can be sold without a prospectus

Question 2

Regulation A

Answer 2

Small dollar offerings, Tier 1 max of $20 million, Tier 2 (known as A+) max of $75 million.

Tier 2 offerings subject to purchase limitations for non-accredited investors.

Question 3

Regulation D

Answer 3

Private placements not offered to the general public are exempt from registration

Question 4

Rule 506

Answer 4

Under Regulation D, Exempt IF offering is made to max of 35 non-accredited investors, unlimited amount of accredited investors

Question 5

Regulation S

Answer 5

Exempt if US issuer sets up non-US subsidiary and offers securities to only non-US residents

Question 6

Rule 144A

Answer 6

Allows large institutional purchasers to trade private placement securities in the US without registration.

Issues traded QIB to QIB on PORTAL market.

Question 7

QIB

Answer 7

Qualified Institutional Buyer

Question 8

Cooling Off Period

Answer 8

20 day period after registration.

Selling, advertising, recommending and soliciting are prohibited.

Preliminary prospectus is permitted

Question 9

Rule 147

Answer 9

Resale of of securities sold under intrastate exemption are restricted to intrastate for 6 months following initial offering.

Can be resold intrastate after 6 months. Cannot be publicly traded.

Question 10

Securities Exchange Act of 1934

Answer 10

Covers abuses in secondary market. MISS PERMS

Manipulation, Insiders, SEC created, Short Sale Rules.

Proxy, Exchanges, Reports, Margin, Stabilization.

Question 11

Anti Fraud Provisions in 1934

Answer 11

Apply to trading of exempt and non-exempt securities.

Both individuals and firms subject to rules.

Question 12

Listed Securities

Answer 12

NOT traded in the Second Market.

Must register and register with and report to SEC.

Marginable under Reg T.

Subject to SHO.

Question 13

Insiders

Answer 13

Officer, director, 10% shareholder or “affiliated person” (including lawyers and accountants)

Question 14

Sarbanes-Oxley Act of 2002

Answer 14

Prevents fraud by corporate officers.

CEO and CFO must certify financial statements and disclosures.

Issuers must file audited financial statements with SEC.

Auditors cannot be affiliated with firm and vice versa.

Issuers must report special events within 4 business days

Insiders must report trades within 2 business days.

Question 15

Valuation Date

Answer 15

Coverage purposes in SIPC liquidation during bankruptcy.

Date that SIPC files in court to be the trustee in the bankruptcy of the failed broker dealer.

Question 16

“Spinning” of IPO shares

Answer 16

“Quid pro quo” where member firm gives officers IPO allocations in return for receiving underwriting business.

Cannot receive if company is investment banking client of member; if member has received compensation in past 12 months, if providing service in next three months.

Question 17

Marketing Private Placements

Answer 17

Member firm must conduct reasonable investigation concerning the security and the issuers representations about it.

Question 18

Regulation AC

Answer 18

Analysis Certification

Requires 3rd party researchers to certify each written research report.

If no analyst provides report, FINRA notified and reports must include disclosure for the next 120 days.

Question 19

EMMA

Answer 19

Electronic and Municipal Market Access

MSRB website for public use

Question 20

Registered rep in customer account

Answer 20

Sharing in a customer account is prohibited unless RR receives approval from principal.

Prohibited unless RR shares only in proportion to the capital contributed

Prohibited unless RR shares in both gain and loss

Question 21

MSRB

Answer 21

Regulates municipal bank dealers and municipal brokers.

Question 22

Options Disclosure Document

Answer 22

Explains basic risks, uses and important rules of options investing.

Must be accompanied or precede Options Advertising, Options Correspondence, and Options Sales Literature.

Question 23

Designated registered options principal

Answer 23

Responsible for approval of options advertising, sales literature, and independently prepared reprints.

Question 24

Regulation NMS

Answer 24

Requires execution within 1 second of order

Only applies to NASDAQ stocks

Question 25

Bond counsel

Answer 25

Examines tax and legal aspects of proposed bond issue and renders opinion on whether the issue is valid

Question 26

Tender Offer

Answer 26

Minimum life of initial offer is 5 days

Each “sweetening” is extended 5 business days

Question 27

Regulation M Rule 105

Answer 27

Prevents market manipulation and “shorting” stock during 20-day cooling off period

Any short sales of issue during cooling off period that occur 5 days prior to effective date cannot be covered by purchasing the issue from the syndicate.

Question 28

SRO

Answer 28

Self regulatory organizations are membership organizations

FINRA is an SRO. Writes and enforces rules for its members, audits members and collects dues

Question 29

Rule 10b-5-1

Answer 29

Allows pre-arranged trades by insiders

Question 30

Department of Treasury

Answer 30

Fines assessed for convictions involving insider trading laws are paid here

Question 31

Research Report

Answer 31

Client communications that analyzes individual securities or companies that’s sent to at least 15 people

This includes presentations

Question 32

MSRB Rule G-37

Answer 32

Municipal Finance Professional can give up to $250 to\ an elected official’s campaign in which the MFP is entitled to vote.