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Series 7 > Regulations - Securities Exchange Act of 1934 > Flashcards

Regulations - Securities Exchange Act of 1934 Flashcards

1
Q

MISS PERMS stands for

A

Manipulation
Insider trading
SEC created
Short sales rules

Proxy rules
Exchanges
Reports
Margin 
Stabilization
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2
Q

The 1934 act does _____ apply to exempt securities

A

DOES NOT

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3
Q

The one provision of the 1934 act that DOES apply to non-exempt and exempt securities are _____

A

fraud provisions

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4
Q

Prohibited Manipulation trading activities under the 1934 act are:

A
  • wash sales
  • trading pools (trading at successively higher prices)
  • trading by underwriters handling a primary offering before the effective date
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5
Q

For tender offers, the SEC requires it be held out to shareholders for a minimum of ____ business days. Each “sweetener” extends the offer for another ____ business days.

A

20 business days, then 10 business days for each sweetener

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6
Q

The maker of a tender offer can only buy shares through the _____ and not the market during the offering period

A

can only buy through the offer

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7
Q

For tender offers for bonds made by the issuer, the offer must be held open for ____ business days and sweeteners extend it for ____ business days

A

5 business days, 5 business days

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8
Q

It is prohibited to _____ tender (because you could end up with a _____ position that could never be covered)

A

short tender; short position that could never be covered if all the shares got bought up

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9
Q

Rule 10b-5 is nicknamed the “_______” fraud rule

A

catch all

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10
Q

An “insider” is defined as an officer, director, or ____ shareholder

A

10%

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11
Q

Insiders are required to report their trades within ____ days of the event to the SEC

A

2 days

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12
Q

Insiders are prohibited from trading based on:

A
  • insider material, non-public information
  • any short swing profits (within a 6 month period)
  • can’t short their own stock (except for short against the bock at year end - position against the box must be closed within 20 days)
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13
Q

The SEC DOES NOT regulate:

A
  • insurance products
  • commodities
  • futures contracts
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14
Q

The SEC wrote Regulation _____ to regulate short sales

A

SHO (covered in other section)

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15
Q

Shareholders must be given a fair opportunity to vote and must be provided _______

A

proxy materials

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16
Q

Proxy materials must be filed with the SEC _____ days prior to being sent to shareholders

A

10 days

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17
Q

Any one person who accumulates more than _____ ownership must file a _______ within _____ business days of that threshold being reached

A

5%, must file a Form 13D within 10 business days of that threshold being reached

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18
Q

If person with 5% ownership intends to be a passive owner, then must file a ______ within _____ days after year end

A

Form 13G within 45 days after calendar year end

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19
Q

Exchanges and member firms must ______ with the SEC

A

register

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20
Q

Under SEC rules, member firms must meet _____ requirements (min liquid capital)

A

minimum net capital requirements

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21
Q

SEC member firms must segregate fully paid ______

A

customer securities

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22
Q

If a customer sells a security and fails to deliver on settlement, the position must be bought-in no later than _____ business days after settlement date

A

10 business days

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23
Q

Excess margin securities (those in excess of _____ of debit balance) must be ______

A

140% of debit balance, must be segregated

24
Q

Customers that have uninvested cash balances (“free credit” balances) must be ______ by BDs

A

notified - must tell them amount, how much is available at request, how much is not segregated from other firm cash balances

25
Q

BDs must send ______ reports on their balance sheet and net capital computation - NO INCOME STATEMENT

A

semi-annual

26
Q

Rule 606 of Reg M permits BDs to pay _____ but they must disclose it to customers at least _____

A

pay for order flow; at least annually

27
Q

Rule 606 of Reg M also requires that BDs prepare _____ reports that detail order routing procedures and payments for order flow

A

quarterly

28
Q

Issuers are required to file quarterly and annual reports under forms

A

10K and 10Q, along with 8K for special events

29
Q

8Ks must be filed within _____ business days of the event

A

4 business days

30
Q

Margin rules are regulated under Reg __ for broker to customer margin and Reg __ for bank to broker

A

Reg T and Reg U

31
Q

Reg M provides regulations against _______ and allows underwriters to place ______ bids

A

market manipulation, allows underwriters to place stabilizing bids

32
Q

Rule 103 of Reg M states that any syndicate member who is a market maker in that security, during the 20 day cooling off period, must either _____ or act as a _____ market maker (NOTE: this rule only applies to add on offerings)

A

must either resign as a market maker or act as a passive market maker

33
Q

Rule 101 of Reg M sets limits on syndicate members who are NOT market makers, and covers the ____ day window just prior to the effective date.

A

5 day window

34
Q

Rule 101 of Reg M (non-market maker syndicate members) has three tiers of restrictions:

A
  • Tier 1 (Actively traded, no restriction): at least $1m daily trading volume and $150m market cap
  • Tier 2 (limited, restricted for 1 day): $100k trading volume and market cap of at least $25m
  • Tier 3 (inactive, 5 day restricted period): less than $100k volume and under $25m market cap
35
Q

Rule 101 of Reg M applies ONLY to common stock. T/F

A

True - only places restrictions on non-market maker syndicate members for common stock issues

36
Q

Rule 105 of Reg M impedes _____ from pushing down the price of a security prior to the effective date

A

short selling

37
Q

Under Rule 105 of Reg M, a BD cannot buy shares from the underwriters to cover short positions established within _____ days of the effective date

A

5 days

38
Q

Rule 104 of Reg M allows for stabilizing bids by the underwriter, and a ______ must appear on the prospectus

A

Notice of Stabilization

39
Q

Only ____ stabilizing bid is permitted per ______, and the syndicate agreement will state that the ______ is the sole firm that can do so.

A

only 1 per market/market maker; syndicate agreement will name the manager as the only firm that can do so

40
Q

Stabilizing bids must be placed ____ or ____ the POP

A

at or below the POP

41
Q

Penalties for insider trading can be up to ______ the profits received/losses avoided and criminal penalty up to ______ for each inside trade and up to _____ years in jail for each violation

A

3 times gain/loss avoided; crim penalty up to $5m; up to 20 years in jail for each violation

42
Q

Fines for a “controlled person” (ie employed by a BD and should have had procedures in place to avoid), can be fined up to _____

A

$25m

43
Q

Any penalties paid are paid to the _____, not the SEC

A

department of the treasury

44
Q

Informants can be paid between ____ and ____ of the civil penalties above $1m

A

10-30%

45
Q

Anyone who traded in a security that was traded by an insider can sue that person for _____ years

A

5 years

46
Q

Reg FD concerns _______

A

fair disclosure of information

47
Q

Under Reg FD, when an issuer discloses information to a member of the financial community, they must also disclose it _____

A

publicly

48
Q

To remedy disclosing information to financial professionals, an issuer, under Reg FD, can disclose the information over ______ or by filing a ____ for non-intentional disclosures

A

broad public distribution (ie news wire) or by filing an 8K for non-intentional disclosures (can also use broad public disclosure)

49
Q

The 10b5-1 rule allows statutory insiders (officers, directors, 10% share holders) to create a ______ for selling their shares

A

trading plan

50
Q

Rule 10b5-2 states that to be considered an “inside” trader, you can’t just _____ upon the information and trade on it. You have to have intentionally misused the information

A

stumbled upon it

51
Q

Rule 10b-1 states that Section 10 (anti-manipulation) apples to both ___ and ____ securities

A

exempt and non-exempt

52
Q

Rule 10b-3 states that it is unlawful for BDs, including muni BDs, to use or employ any ____ or _____ device

A

deceptive or manipulative

53
Q

Rule 10b-18 is an anti-manipulation rule that sets ground rules for ____ to buy and sell their own stock

A

issuer (and affiliated persons)

54
Q

To avoid breaching Rule 10b-18, issuer transactions in their own stock must be:

A
  • effected through 1 BD
  • not the opening transaction
  • cannot be executed within 10 minutes of market close if actively traded, otherwise can be within 30 minutes of market close
  • must be effected at prices no higher than current market
  • cannot exceed 25% of trading volume in the security for that day
55
Q

Suits against people who manipulated the market must be bought within ____ but no later than ____ after the violation occurred

A

2 years of discovery; 5 years since violation occurred

56
Q

Under rule 15a-6, foreign BDs who are NOT registered with the SEC are permitted to:

A
  • effect trades for US persons that are unsolicited
  • solicit business from and provide research to major institutional investors and institutional investors
  • conduct business with foreign nationals temporarily in the US

Series 7 (34 decks)

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