S-79 Practice Exam 3 Flashcards
When a customer requests access to FINRA’s rule manual, it is permissible for the firm to deliver it what way?
Provide access to the customer electronically if agreeable to the customer
If an issuer has unintentionally disclosed material nonpublic information regarding either itself or its securities, it must make public disclosure via what form?
form 8-K must be filed with the SEC within 24 hours or as soon as possible after it has become known that information was released. If the release is intentional, Regulation FD requires that the issuer make simultaneous public disclosure.
The contract between a business issuing public stock and its lead underwriter is the
Underwiter agreement
A firm’s request to delist its stock from the NYSE is effective only if
To delist its stock from the NYSE, a firm must notify the NYSE and file with the SEC. Delisting will take place if the SEC does not deny the request.
Leading economic indicators include:
Bond yields • building permits (new private housing) • industrial production rates • money supply • S&P 500 • average of weekly unemployment insurance claims • changes in business inventories
Rules against fraud, manipulation or omission in the sale of securities apply to
no securities are exempt from anti-fraud provisions, and rules against such fraudulent practices as manipulation or omission of material information apply to the sale of these securities.
At what point during an auction is the Final Bid Procedures Letter typically distributed to bidders?
During the second round after significant due diligence has been performed
The Suitability Rule applies to which types of recommended securities transactions?
The Suitability Rule applies to purchases, sales and exchanges. It is very broad in covering recommended transactions.
What is a a bond’s call schedule?
defined in a bond’s indenture lists each call date of an existing issue and the corresponding price at which the issue can be called.
Which of the following types of domestic issuers may use a free writing prospectus for offerings registered on Form S-3?
Well-known Seasoned Issuers & Seasoned Issuers
Under Regulation M, market maker activities in a security which is subject to a potential acquisition may be limited for a period of time
beginning the day proxy materials are sent to shareholders
Part (b) of the Suitability Rule requires reasonable effort to obtain customer information for all non-institutional customers, except when the investment is limited to
Money-market mutual funds
What is not a standard closing condition of an M&A deal?
Receipt of financing
What valuation methodology is not used to assess a buyer’s ability to pay in an M&A transaction
DCF
Company A enters into a definitive agreement to purchase Company B. Immediately after signing the Definitive Agreement, the two companies issue a joint press release announcing the transaction. Which of the following is true regarding this action?
The press release is a prospectus and must be filed with the SEC no later than the date of first use
How is arbitration initiated?
Filing a Submission Agreement with NAMC
What memorandum finalizes mediation proceedings
Memorandum of Understanding
What is systemic risk?
Market risk that affects most investments / can not be diversified away
When a registrant enters into a material definitive agreement, Form 8-K is required to contain which of the following information items?
1.) Terms and conditions 2.) parties involved
What type of indicator is housing starts?
Leading
In order to receive a dividend, a shareholder must own stock as of the
As of the record date
The market theory that claims that the next change in market activity has no correlation to the last change is
The random walk theory
In an M&A sale, how long does the buyer’s second round due diligence typically take until submission of a final bid?
Several weeks
A preliminary proxy kept confidential…
must be marked confidential and public communication must have been limited to a basic announcement
What transaction are not allowed to be kept confidential in a prelim proxy?
1.) going private 2.) rollup transactions
An S-4 must be signed by a company’s
CEO, CFO, Controller, BOD
What does the manager’s spread equal
Manager’s fee + the takedown
Manager receives manager fee for shares not sold but registered
What type of broker is exempt from SEC regulation?
A broker-dealer that transacts business only in commercial paper, bankers’ acceptances, and commercial bills.
When must an affiliate file notice on Form 144?
When must the sale take place?
1.) he/she wishes to sell 5,000 shares or $50,000 in aggregate in any three-month period
Sale must take place within 3 months.
What type of securities are sold on OTCBB?
OTCBB securities include foreign equity issues, warrants, ADRs, and DPPs.
Any branch office that supervises one or more branch locations must be inspected for compliance at least every
Annually
What form would a domestic public company normally use to register a merger, acquisition or consolidation?
S-4
What does higher discount rate in calculating pension obligations imply
By using a higher discount rate, Company W is assuming it will earn a stronger return for its funds and thus, would put up less money today
In an improving economic environment, where should trailing multiples trade vs. forward earnings?
multiples of trailing earnings should be higher than forward earnings.
Which events occur after signing the Definitive Agreement
Shareholder approval and the financing marketing period
Regulation M notification process
1.) must be in writing 2.) need not include the circular 3.) notification must be made 1 business day prior to pricing
What are the three components of Organization & Offering (O&O) expenses
1.) bona-fide issuer expenses 2.) due diligence expenses 3.) underwrite compensation
What are total O&O expenses for DPPs
15% of gross proceeds
What is a DPP?
Direct Participation Program - structured as a Limited Partnership (pass-thru) for real estate and oil and gas ventures
As a closing condition, to what extent must a given party’s reps and warranties typically be accurate?
True in all material respects
How do you qualify for an S-3
- ) must be a seasoned issuer 2.) have made all required SEC filings in last 12 months 3.) not have sold more than 1/3 of public float over last 12 mo.
- ) be listed on a national exchange
What is a prospectus?
Any notice, circular, advertisement, or written or radio/TV communication offering sale of security or confirming sale of security
What are prospectus exceptions?
1.) Oral communication by phone or in person 2.) communication sent after registration is effective if sent simultaneously or after with a valid written perspective 3.) Tombstone Ad
Written account statements must be provided to customers no less than
quarterly
To begin quoting a security on the OTCBB, market maker must register a firm with…
FINRA
What is the issue threshold for the Trust Indenture Act of 1939?
applies to corporate issues of $5 million
When a customer provides an indication of interest in an offering, and the underwriter allocates these shares to the customer’s account, the shares are said to be
Circled
A principal who supervises salespersons is required to complete which of the following to satisfy FINRA continuing education requirements?
1.) Firm element 2.) S201
What are reps and warranties? Where do they appear?
- Refer to the statements of facts, opinions, and estimates investors ask companies and managements to put into writing as a condition of funding. 2.) Usually appear in the financing agreement
“Layering” prevents the issuer from performing which of the following actions?
Issuing additional senior subordinated notes
Which multiple of EV/EBIT or EV/EBITDA is higher
EV/EBIT
What price can an underwriter stabilize?
No higher than the most recent transaction price or the best independent bid, whichever is greater.
If an equity holder in a Chapter 11 bankruptcy filing wishes to be treated as a creditor and participate in the vote on a restructuring plan they can go to the bankruptcy court and file a
Proof of interest
If a registrant amends an employment agreement with a named executive or director, the registrant must…
file form on 8-K
What is the normal waiting period for HSR approval
30 days
What can Series 11 Assistant rep only do?
They may accept unsolicited orders in corporate securities from clients of the firm
Which category of filers must file their Form 10-K within 75 calendar days of fiscal year end
Accelerated filers
Why might a seller prefer a stock sale vs. an asset sale
Provides a cleaner exit
What type of indicator is the prime rate?
Lagging
Sophisticated investor meets what two criteria?
1.) accredited or non-accredited 2.) capable of evaluating the merits and risks of a transaction
Who is included as “insiders” from a fairness opinion standpoint
Directors, officers or employees
Short swing profits apply to what period
Any
What is misappropriation?
Persons steal information from their employer and trade on that information in any stock, not just their employer’s stock.
What is a 424B
SEC filing for a prospectus
Which of the following are “fiduciaries” covered under FINRA Rule 2060’s restrictions on using information about the ownership of an issuer’s securities to solicit transactions
Transfer agents and trustees
Which merger type is fastest from signing to closing?
Two-step merger process because if requisite number of shares are tendered transaction is “complete” (Note: squeeze-out)
How often are The Pink Sheets compiled by the National Quotations Bureau?
Daily
What do you need from SEC to begin as a Broker/Dealer
Registered with SEC..NOT approval
Firms are required to report to FINRA arbitration settlements against the firm when the amount exceeds
25,000
What are standard instructions for filing Forms under Federal Securities laws?
Regulation S-K
What is a call to capture any changes since the last due diligence meeting?
Bring down due-diligence meeting
What type of rating is BB+ and B1
sub-investment grade
What is the SIFMA model form known as?
Standard Master Agreement Among Underwriters
A former affiliate of an issuer may sell their shares under Rule 144 after meeting which of the following conditions
1.) not been an affiliate of the issuer for the past 3 months 2.) Held the securities for at least 1 year
At what stage in the M&A process is an HSR filing typically made?
Immediately following execution of a definitive agreement
In order to receive a cash dividend payment based on regular way settlement process, an investor must purchase stock no later than
Business day before the ex-dividend date
An investment banking firm is preparing a fairness opinion for a client involved in proposed transaction. Under FINRA Rule 5150, the fairness opinion must meet disclosure requirements if the firm has reason to believe
The opinion will be provided to public shareholders
A trade confirmation is required for transactions in all of the following securities EXCEPT
Series EE bonds
Who provides indemnity to who?
Seller to buyer
