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Series 82 > Review > Flashcards

Review Flashcards

1
Q

What does a bond indenture protect the bondholder from?

A

When the issuer undergoes a merger.

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2
Q

What tests that parts of the BD system are functioning?

A

Supervisory Controls

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3
Q

When must the Preliminary Prospectus (Red Herring) be given to the investor?

A

Before sale confirmation

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4
Q

How do you know a company is real?

A

Articles of Incorporation

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5
Q

Non-registered finders must be what?

A

Non-US Citizens

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6
Q

What’s the difference between a customer and a consumer?

A

Consumers are not customers of the firm

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7
Q

What is the general tier of recordkeeping?

A

6 years

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8
Q

How long do you have to keep account information for customers?

A

6 years

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9
Q

Explain pricing during a Road Show

A

A price range is included, but the price can be any amount when finalized within, above, or below that price.

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10
Q

What is retail communication?

A

ANY communication available to more than 25 retail investors in 30 days.

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11
Q

What are the restrictions on institutional communication?

A

None, as long as the communication goes only to institutional investors.

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12
Q

When comparing funds or BDs in advertising, what must comparisons take into account?

A

All material differences

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13
Q

What is a control entity?

A

50%+ owner

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14
Q

When can an AWC letter be filed?

A

Before a formal complaint.

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15
Q

When do you have to file a PPM, term sheet, or other offering document with FINRA?

A

Within 15 days of first use

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16
Q

What is the difference between a Blotter, General Ledger, Customer Ledger, and Securities Record?

A

Blotters are daily records. General Ledgers cover assets, liabilities, income, and expenses. Customer Ledgers itemize cash and margin accounts, and credits and debits. Securities records have the beneficial owner, location of stock, and position.

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17
Q

What types of bond refunding correspond to which call dates?

A

90 days or less: Current Refunding.
> 90 days: Pre-refunding.
In Escrow: ETM refunding.
Both Pre-refunding and ETM are considered “Advance Refunding”.

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18
Q

For CF securities, when and to whom can you sell them?

A

Can’t sell crowdfunding securities within 1 year, except to: the issuer, family member, or Accredited Investor.

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19
Q

FAST Act securities can only be sold to:

A

Accredited Investors

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20
Q

Reg A can file what instead of a Registration Statement?

A

An Offering Statement

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21
Q

What does the PPM include, and who drafts it?

A

It is drafted by the issuer, and includes:
Business
Financial information
Terms of offering
Risks and expenses

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22
Q

What Arbitration awards are made public, if any?

A

All arbitration awards are made public.

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23
Q

When is a PIPE registration filed?

A

Shortly after closing

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24
Q

What securities count toward ownership for a BD?

A

Discretionary securities

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25
Q

What is the default stock method, FIFO. LIFO, or Specific?

A

FIFO

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26
Q

What would a corporate bond return have to be to equal Muni bond return of 6%, assuming a 25% tax rate?

A

8% = 6%/ (1-.25)

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27
Q

What happens to bonds with a non-dilutive covenant during splits or dividends?

A

Conversion price and ratio are adjusted for dividends - you get more shares.

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28
Q

What is the cost basis of gifted shares?

A

The owner’s cost basis

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29
Q

What is the cost basis of inherited shares?

A

Cost basis on the date of death

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30
Q

What happens if a company doesn’t register PIPE securities?

A

They pay damages to shareholders, typically 1-1.5% per month

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31
Q

What happens to control securities when they are sold?

A

They become restricted securities

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32
Q

Do private placements use a Preliminary Prospectus?

A

No, they use a Private Placement Memorandum (PPM)

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33
Q

What gives full trading authority?

A

POA

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34
Q

Are exempt securities subject to registration?

A

No

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35
Q

Outside issuers selling in the US must do what?

A

Register in the US

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36
Q

What is the Rule 144 volume limit?

A

Over a 90 day period: 1% of outstanding shares or average of the last 4 weeks’ trading volume

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37
Q

Under Rule 144, when do you have to file notice with the SEC to sell control shares?

A

5,000 shares or $50,000

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38
Q

Who are control securities held by?

A

An Affiliate

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39
Q

What are the three types of Reg D exemptions?

A

504: $10M limit, non-reporting, can advertise.
506(b): No limit, NA’s limited to 35 or less, use PPM, No advertising.
506(c): No limit, all investors must accredited, can advertise.

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40
Q

What are the tiers of Reg A?

A

Tier 1: $20M
Tier 2: $75M + audited financials, event reports, limits on NAI investment size, need an offering statement, then an offering circular.

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41
Q

What is required for a Rule 147 exemption?

A

One of the following in-state:
80% of revenue
80% of assets
80% of proceeds used in state
Majority of employees in state

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42
Q

What is a JTIC account and who gets assets when someone passes?

A

Joint Tenants in Common. When one passes, their assets are passed to their estate.

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43
Q

When is suitability fulfilled for an institutional account?

A

BD has reasonable basis to believe an institutional customer is capable of independently evaluating risk
and
customer positively affirms they are acting independently.

44
Q

What can an Escrow Agent invest funds in?

A

Bank accounts
Bank money-market accounts
Short term CDs issued by the bank
Short-term Government securities

45
Q

What must FINRA release public information on?

A

Suspensions, Cancellations, Expulsion, Finds over a certain threshold.

46
Q

What is the difference between Quantitative, Reasonable-basis, and Customer-specific suitability?

A

Quantitative suitability: excessive transactions
Reasonable-basis suitability: risk
Customer-specific suitability: reasonable recommendation for the customer

47
Q

What are the rules around a 3a4-1 exemption for employees?

A

Their fundraising actions must be limited to the transaction, they must be a conventional employee, not an employee of a BD within the last 12 months, perform duties unconnected to fundraising, and have limited activities, meaning no verbal solicitation.

48
Q

Dealer transactions are also referred to as:

A

Principal transactions

49
Q

Who can be an escrow agent?

A

A US Commercial bank unaffiliated with the issuer or underwriter

50
Q

What act applies to BDs?

A

Securities Act of 1934

51
Q

What does Reg FD require?

A

Public disclosure

52
Q

What is a Blotter?

A

Daily ledger

53
Q

What does a General Ledger contain?

A

General Ledgers cover assets, liabilities, income, and expenses.

54
Q

What does a Customer Ledger contain?

A

Customer Ledgers itemize cash and margin accounts, and credits and debits.

55
Q

What do Securities Records contain?

A

Securities records have the beneficial owner, location of stock, and position.

56
Q

What employees of a BD are “restricted persons”?

A

All of them

57
Q

What is a specified adult?

A

Age 65+ or 18+ with an impairment

58
Q

How long must a prospectus be given after an IPO?

A

25 days

59
Q

To what securities do wash sales apply?

A

Any ‘substantially similar’ securities: stocks, bonds, options, etc.

60
Q

What are the Reg S categories?

A

Cat 1: Low risk - no substantial US interest
Cat 2: Mid risk - notification, legending, prohibition on sales to US persons for distribution compliance period of 40 days.
Cat 3: High risk - adds onerous requirements and extends compliance period to 6 months for reporting issuers or 12 months for non-reporting issuers.

61
Q

What is correspondence?

A

Communication sent to 25 or fewer retail investors.

62
Q

Where must it be disclosed that a broker is not covered by SIPC?

A

Customer’s trade confirmation sheet.

63
Q

What is defeasement?

A

Often the result of Advance Refunding: escrow is funded to pay for the bond’s issue, interest, and premiums.

64
Q

What does the SEC approve?

A

Nothing, ever. They grant BD licenses and let registrations become effective.

65
Q

What are the QIB requirements?

A

QIB: $100M
QIB Bank: $25M
QIB BD: $10M

66
Q

Acronym for Stock Settlement?

A

DERP: Declaration, Ex-date, Record Date, Payment Date

67
Q

When do long-term gains end?

A

On the trade date.

68
Q

How many days before a trade is long-term?

A

366 days

69
Q

What type of risk does diversification help with?

A

Unsystematic risk

70
Q

How do correlations work?

A

Low = 0
High = 1
Opposite = -1

71
Q

What does a bond selling at “104” cost?

A

$1040

72
Q

When do you have to report accused securities fraud to FINRA and U4?

A

FINRA: 30 days
U4: 10 days

73
Q

When do you have to report if you are a defendant in litigation?

A

If over $15,000

74
Q

What is the dollar threshold for an institutional investor?

A

$50M

75
Q

Who maintains a list of SDNs?

A

OFAC

76
Q

PATRIOT Act record keeping requirement?

A

5 years

77
Q

What is a Debenture?

A

An unsecured bond

78
Q

What information do you need from the customer to execute a trade?

A

Asset, Action, Amount

79
Q

When opening a new account, when does the form have to be sent to the customer?

A

Within 30 days, then every 3 years.

80
Q

Can generic ads include the name of the fund?

A

No

81
Q

What are Blotters?

A

Blotters are daily records

82
Q

What are General Ledgers?

A

General Ledgers cover assets, liabilities, income, and expenses.

83
Q

What is in the Customer Ledger?

A

Customer Ledgers itemize cash and margin accounts, and credits and debits.

84
Q

What is in Securities Records?

A

Securities records have the beneficial owner, location of stock, and position.

85
Q

For how long after an RR switches firms must they provide previous existing customers the educational document about the costs and complications of transferring assets?

A

3 months

86
Q

What is the maximum civil penalty that may be imposed on a person who controls another person that commits insider trading?

A

The greater of $1,000,000 and three times the profit gained or loss avoided.

87
Q

What is the maximum criminal penalty associated with insider trading for an individual?

A

$5M per violation and 20 years in prison

88
Q

Lucky Brokerage Firm has created an advertisement which includes Lucky’s performance rankings and Lucky’s performance compared with other investment companies. Such comparisons are the result of research done by Lucky Brokerage. When do they have to file with FINRA?

A

10 business days prior to first use

89
Q

How long does an underwriter have to wait before reselling shares purchased from an IPO?

A

Three months

90
Q

Does the Preliminary Prospectus typically include a price?

A

No

91
Q

The price for a new securities issue is usually set when?

A

It is typically set right before the offering is held (either the night before or the morning of the offering).

92
Q

To whom does Reg BI apply?

A

Natural persons and their representatives

93
Q

A member firm must preserve records of customer complaints for at least _____ years from the date of the complaint.

A

4

94
Q

How long must General Ledgers be kept?

A

6 years

95
Q

How long must stock certificate books be kept?

A

Lifetime of the firm

96
Q

What is a Standby Equity Distribution Agreement (SEDA)?

A

private placement in which a publicly traded company issues new stock without making a public offering. In a SEDA, a financial firm agrees to privately purchase the stock at a discount to the market price of the issuing company’s outstanding shares, and the issuer chooses whether to sell all of the shares, part of the shares or none of the shares.

97
Q

What is a Standby Equity Distribution Agreement (SEDA)?

A

It is a private placement in which a publicly traded company issues new stock without making a public offering. In a SEDA, a financial firm agrees to privately purchase the stock at a discount to the market price of the issuing company’s outstanding shares, and the issuer chooses whether to sell all of the shares, part of the shares or none of the shares.

98
Q

How often must non-supervisory branch offices be inspected?

A

Every 3 years

99
Q

How long must someone hold securities before donating them to charity if they want to deduct the market value?

A

12 months

100
Q

The specifics of compensation for selling group members in a private placement offering are detailed in the:

A

Selling Group Agreement

101
Q

After leaving the industry, information about a registered rep with no disclosure events is available on BrokerCheck for how many years?

A

10 years

102
Q

If a retirement plan is subject to ERISA requirements, participants must receive a statement of the plan’s benefits and the status of their account at least:

A

Annually

103
Q

A firm must keep retail communications, institutional communications, and correspondence for not less than ________ from last use.

A

3 years

104
Q

When a PIPE transaction occurs, Nasdaq requires the issuing company to file a notification form:

A

Within 10 days if the transaction increases the outstanding shares by 5% or more.

105
Q

Application for employment must be kept for

A

3 years

106
Q

Is a conversion to common stock a taxable event?

A

No

Series 82 (1 decks)

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