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Series 7 > Regulations - Securities Act of 1933 > Flashcards

Regulations - Securities Act of 1933 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

the 1933 Act covers ______

A

new issues

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2
Q

the 1934 act covers ______

A

secondary market

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3
Q

The Trust Indenture Act of 1939 safeguards investors in ______ by requiring a ______ to be appointed

A

investors in corporate bonds, appointing a trustee to oversee compliance with the trust indenture

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4
Q

Investment Company Act of 1940 regulates ______

A

investment companies (open/close/etc.)

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5
Q

Securities Investor Protection Act of 1970 was passed to protect investor funds when a ________

A

brokerage firm fails

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6
Q

Securities Act Amendments of 1975 and 1988 were used to make the 1970 act ______ and in 1988, to protect against ______

A

to make it more current, in 1988 to protect against insider trading abuse

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7
Q

Sarbanes Oxley Act of 2002 used to cover the wave of ________

A

corporate scandals

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8
Q

The 1933 act applies to _______ securities

A

non-exempt

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9
Q

If an issuer already has securities issued in the market, they must then deliver the prospectus to investors for _____ days instead of the usual 90 (applies to the OTCBB and Pink Sheets)

A

40 days

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10
Q

If an issuer will be listed on an exchange or the NASDAQ, even if it is the first offering, then the prospectus delivery period is ______

A

25 days

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11
Q

The quiet period is from the ______ to the time the prospectus window expires

A

registration with the SEC

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12
Q

If a registration is found to have omissions or misstatements of material facts, then it is fraud and all parties are accountable, including the

A
  • underwriters
  • accountants
  • lawyers
  • issuer
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13
Q

Regulation A is part of the EZ rules and streamlines registration rules for offerings up to _____

A

$50m

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14
Q

Rule 415 is part of the EZ rules and is established to ease registration for _______

A

seasoned issuers who have previously registered securities with the SEC

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15
Q

Regulation A has two tiers, Tier 1 is up to ______ within a _____ period, and Tier 2 is up to ______ within a _____ period; audited financials are required for ______

A

Tier 1: up to $20m, 12 months, no financials

Tier 2: up to $50m, 12 months, need audited financials

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16
Q

The simplified registration form for Reg A issues is the ______

A

S1-A

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17
Q

Reg A issues have a _____ cooling off period after which they become ______ (same as “effective”)

A

20 day period, then become qualified

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18
Q

Instead of a prospectus for Reg A, the issues use an __________

A

Offering Circular

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19
Q

During the cooling off period for Reg A issues, an prelim Offering Circular must be delivered within _____ to sale. After qualified, the Offering Circular must be delivered within _____ of sale.

A

48 hours, 48 hours

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20
Q

Reg A has a “test the waters” provision where issuers can distribute _______ before filing the registration statement and all through the 20 day cooling off period.

A

promotional materials

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21
Q

Non-accredited investors cannot invest more than ____ of their annual income or net worth in a Tier 2 offering.

A

10%

22
Q

To sell securities under Rule 415 (shelf registration), the issuer must give _____ notice to the SEC and there is no ______

A

2 days notice, no cooling off period

23
Q

The 1933 Act specifies 2 (tested) exempt transactions:

A
  • Section 4(2) - general rule that exempts private placements by institutions and wealthy investors
  • Section 4(6) - offers of no more than $5m made to accredited investors
24
Q

Securities that are exempt from the 1933 act are:

A
  • gov’t and muni issues (gov’t debt, agencies - fannie mae, ginnie mae, federal home loan, munis, foreign gov’t debt - including canada)
  • insurance company offerings (except for variable annuities)
  • bank issues
  • common carrier issues (railroads, trucking)
  • non-profit issues
  • bankers acceptances and commercial paper (under 270 days)
  • issues of small business investment companies
25
Q

Exempt transactions are:

A
  • intrastate offerings (Rule 147)
  • Private Placements (Reg D)
  • Rule 144 transactions (would otherwise need prospectus)
  • Rule 144A (tradable private placements)
26
Q

Rule 147 (intrastate exemption) states that:

A
  • 100% of the issue must be offered and sold to residents of that state (cannot be sold to a non-resident)
  • Residency means = issuer’s principal office is in state; 80% of issuer’s revenue, assets, and proceeds from issue must be in/used in that state
  • 9 month restricted period where issue can only be resold within that state
27
Q

To use a Rule 147 offering, Form ____ must be filed with the SEC at least ____ prior to the proposed sale

A

Form 147 at least 10 days prior to proposed sale

28
Q

Rule 147 issues must still comply with ______ laws

A

blue sky - aka state

29
Q

Reg D private placements have the following requirements:

A
  • max of 35 non-accredited investors; unlimited accredited investors
  • accredited investor = net worth of $1m (excluding residence); annual income $200k for past 2 years, join income $300k; officer or director of the issuer; financial institutions (banks, insurance cos, mutual funds) with assets over $5m; non profit institutional investors with over $5m in assets
30
Q

There is _____ limit on dollar amount sold or in what _____ the issue can be offered under Reg D

A

no dollar limit and no restriction on which states can be sold in

31
Q

If a Reg D offering has no non-accredited investors, it may be _______

A

advertised

32
Q

Reg D issues do not need a prospectus but do need a _______

A

offering circular (called the Private Placement Memorandum PPM)

33
Q

Tiers for Reg D are under rules 504, 505, and 506:

A
  • 504: offerings do not exceed $1m (no specific information requirement for disclosure)
  • 505: offerings do not exceed $5m (specific information requirements, including certified financial statements)
  • 506: unlimited dollar amounts (specific information, certified financial statements, and more detailed financial disclosures)
34
Q

The issuer of a Reg D issue must determine that non-accredited investors are ______

A

sophisticated

35
Q

The ______ letter is sent to non-accredited investors to make sure they are ______; if they cannot sign, a ________ signs in their stead

A

investment letter to make sure they are sophisticated; a purchaser representative can sign instead (lawyer, accountant, etc.)

36
Q

Registered reps are _____ from acting as a purchase representative for Reg D

A

PROHIBITED, except if related by blood

37
Q

Reg D issues (unless covered under Rule 144) cannot be _______ in the secondary market

A

resold - they can only be sold in private transactions

38
Q

To claim a Reg D issue, a form ____ must be filed with the SEC ______ days after first sale of the securities

A

Form D 15 days AFTER first sale

39
Q

Rule 144 allows the holder of “restricted” securities (ie Reg D securities) to sell them publicly if:

A
  • the issuer has registered shares outstanding with the SEC and is current on filings
  • seller files a form 144 prior to sale date
  • has held the securities for 6 months
  • seller files 144 forms no more than 4 times per year
  • max sale is greater of 1% of shares outstanding, or weekly average (over last 4 weeks) trading volume
40
Q

For control stock (owned by a director or office of the company) that is to be sold under Rule 144, there is no _____ holding period required

A

6 month holding period

41
Q

A 144 form is not required for sales up to _____ shares and not worth more than ____ every 90 days

A

up to 5,000 shares and worth no more than $50,000

42
Q

As a firm handling 144 sales, you are only allowed to act as the ______

A

agent - never the dealer

43
Q

You cannot _____ 144 transactions, however is someone approaches you, you can reach back out within _____ business days without it being prohibited

A

cannot solicit them, can reach out within 10 business days

44
Q

Exceptions to the volume limitation for Rule 144 sales are if the holder ____ or if they are no longer _____ with the company for ____ months and have held the shares for _____

A

if the holder dies, or if the person is no longer affiliated with the company for 3 months and has held the shares for at least 6 months

45
Q

The following documentation that must be kept after a 144 sale:

A
  • copy of form 144
  • issuer’s representation letter
  • broker’s representation letter
46
Q

Rule 144A allows ______ to purchase unregistered securities from BDs

A

QIBs

47
Q

QIBs must own and invest on a discretionary basis at least ________

A

$100m

48
Q

QIB transactions happen over the ______ and are usually traded in minimum block sizes of _____

A

PORTAL, typical block sizes of $500,000

49
Q

Rule 145 requires some corporate reorganizations to file a registration statement, those are:

A
  • substitution of one security for another
  • merger or consolidation in which holders will exchange old securities for new ones
  • transfer of assets from one person to another in consideration for the issuance of new securities
50
Q

A ______ shareholder vote is required for Rule 145 reorganizations, and Rule 153 A requires that they get a copy of the ______

A

a majority vote, Rule 153 A requires they get a prospectus

Series 7 (34 decks)

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