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Series 79 - Class Summary Cards > Series 79 - Class Summary Cards > Flashcards

Series 79 - Class Summary Cards Flashcards

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Series 79 Top-Off Exam flashcards
1
Q

Preliminary proxy (PRE14A) must be filed with the SEC at least _______ prior to filing a definitive proxy (DEF14A).

A

At least 10 calendar days

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2
Q

Definitive proxy (DEF14A) must be filed with the SEC and sent to shareholders at least ______ prior to the shareholder meeting.

A

At least 20 days

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3
Q

The final syndicate settlement must occur within ______ following the syndicate settlement date

A

90 days

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4
Q

A currency transaction report (CTR) must be filed within ____ of a cash deposit in excess of $10,000.

A

15 days

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5
Q

A suspicious activity report (SAR) must be filed within ______ of learning of suspicious activity.

A

30 days

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6
Q

Under Regulation A for small issuers, issuers are allowed to raise up to ________ in a ___-month period.

A

$50mm in a 12-month period

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7
Q

Under Rule 147 for intrastate offering exemptions, shares can be resold to non-residents after:

A

6-month holding period

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8
Q

Under Regulation D (private placements), private placements of up to $____ can be sold to an unlimited number of accredited and non-accredited investors.

A

$5mm

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9
Q

How can a firm avoid liability of insider trading if a rep is accused of doing so?

A

By showing that (1) effective supervisory procedures were in place and (2) those procedures were willfully ignored

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10
Q

What is Regulation FD?

A

Red FD promotes the full and fair disclosure of material information to all investors at the same time.

  • Intentional Disclosure: must publicly disclose material information SIMULTANEOUSLY through 8K, press release, etc.
  • Unintentional Disclosure: must publicly disclose information immediately, no later than the later of 24 hours or the open of trading the next business day
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11
Q

How long does Statutory Disqualification last?

A

-SD lasts for 10 years. A criminal conviction that occurred more than 10 years ago is NOT grounds for an SD.

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12
Q

What are the consequences of Statutory Disqualification? (i.e., what can a person not do)

A
  • Person cannot associate with or be employed in any capacity (as a rep or in clerical position) by a member firm, UNLESS the firm applies for an receives a waiver from FINRA
  • A person banned, expelled, barred or suspended from membership by a foreign regulator is subject to a statutory disqualification in the US.
  • An arrest IS NOT GROUNDS for an SD. Compliance may be notified, but legal process would be allowed to run its course.
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13
Q

Form U4 requires that the individual disclose ____years of employment history and that the firm verifies the most recent ____ years.

A

10 years; 3 years

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14
Q

What does it mean to be CE Inactive?

A
  • One is CE inactive when they do not complete Regulatory Element continuing education within 120 days of their second anniversary and every 3 years after that.
  • CE inactive individuals can work in a clerical role but cannot act in any registered capacity ore receive compensation for activities that require registration.
  • If one is CE inactive for 2 years or longer, all licenses will be terminated and have to requalify by exam
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15
Q

When is no permission or notice required to borrow from/lend to customers?

A

-if the customers are family members (BROADLY DEFINED) or financial institutions (banks)

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16
Q

When is written pre-approval required to borrow from/lend to customers?

A

-if the loan is unrelated to the brokerage account and is based on an outside business or personal relationship

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17
Q

What is required for a joint [investment] account between a rep and a client?

A

-requires the firm’s permission and that the sharing be in proportion to each person’s financial contribution to the account (proportionality requirement does NOT apply for joint accounts between family members)

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18
Q

With an SAR (suspicious activity report), a firm is not allowed to:

A

-disclose to a client that an SAR was filed with regard to that client’s activities

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19
Q

With a CTR (currency transaction report), a firm is allowed to:

A

-tell customers that a CTR has been filed because they are not secret filings

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20
Q

Foreign Corrupt Practices Act (FCPA)

A

-if a broker-dealer learns that a client is paying kickbacks or bribes to government officials to win lucrative contracts, the firm must notify the justice department under the FCPA

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21
Q

What defines an emerging growth company?

A

-Firms with less than $1 billion in revenue

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22
Q

What are the Code of Procedure penalties?

A

-Penalties under this code include censure (a warning), fines, and suspension, but FINRA may not imprison or terminate a registered rep

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23
Q

What are the limits to SEC power?

A

-SEC has the power to freeze assets but does not have the power to incarcerate (i.e., imprison)

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24
Q

Arbitration between firms and reps…

A
  • Is mandatory; can result in monetary reward; CANNOT result in imprisonment
  • payment must be made within 30 days of decision date
  • arbitration awards are binding; there is no appeal
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25
Q

Are investments in currency and commodities considered securities?

A

NO!!!!!!!!!!!!!!! NEVER!

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26
Q

Subscription Rights (Pre-Emptive Rights)

A
  • Securities allow shareholders to maintain their proportionate ownership in a company if the company issues additional equity
  • investor avoids dilution by maintaining its proportionate ownership stake
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27
Q

The most common benchmark rate that issuers use to determine the interest they will pay on a bond is based on:

A

US Treasury Securities

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28
Q

If the yield is greater than the coupon, the bond was bought…

A

-at a discount

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29
Q

If an issuer is disappointed with the amount raised in a debt offering, it could…

A

increase the interest rate to try to attract more interest

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30
Q

An investor can mitigate interest rate risk by…

A

investing in a floating rate bond, as the return of this bond would increase as interest rates increase

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31
Q

The higher a bond’s duration, the ____ sensitive the bond will be to changes in interest rates.

A

MORE SENSITIVE

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32
Q

The three types of yield curves are:

A

(1) Normal Yield Curve
(2) Inverted Yield Curve
(3) Humped Yield Curve

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33
Q

Underlying assets in an ABS are:

A

Financial instruments (i.e., loans), NOT hard corporate assets, such as corporate equipment

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34
Q

OTC Pink and OTCBB are defined as…

A

“non-exchange, equity quotation facilities”; they can quote unlisted or delisted equity securities

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35
Q

Who is exempt from “customer specific” suitability and how?

A

-Institutional investors are exempt IF the rep determines that the institutional investor can effectively assess risk on its own and that the investor is exercising independent judgment

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36
Q

What is generic advertising?

A

Can be used by firms to provide basic information about their mutual funds, such as the fund’s objective (growth, income, balance, leverage, and no load)

37
Q

Liability under Section 11 under the 1933 act (misstatements in a registration statement) can be avoided by:

A

offering a due diligence defense, which establishes that after a reasonable investigation, any untrue statements in the registration statement were believed to be true at the time of the registration statement going effective

38
Q

Due Diligence Defense is available to all parties except:

A

(1) the issuer and (2) non-consenting accountants

39
Q

Key items in a Form S-1 include:

A

audited financial statements, capitalization table, additional details of offering

40
Q

What are Free Writing Prospectuses used for?

A

Used to provide additional or supplemental information to that found in preliminary prospectus

  • FWPs must be filed on their day of first use
  • ex: CEO gives an interview to a local paper about his company’s upcoming IPO
41
Q

When filing the preliminary prospectus…

A

five copies of each version of preliminary prospectus must be filed with the SEC no later than when each copy is first distributed to potential investors

42
Q

When the SEC declares the registration statement effective…

A
  • the underwriter can confirm indications of interest and sales
  • issuer files TEN COPIES of the final prospectus, which includes the final offering price, with the SEC and delivers prospectus to all purchasers
43
Q

An amended prospectus or prospectus supplement must be filed if:

A
  • the prospectus is nine months old, AND

- the financials in that prospectus are more than 16 months old

44
Q

Prospectus Supplement:

A
  • used to update financials

- DOES NOT supersede the original prospectus, which will remain in effect and still need to be delivered to investors

45
Q

Post Effective Date Research Restrictions

A
  • following the effective date, underwriters are prohibited from publishing research for certain number of days
  • FOR IPOS: 10 DAYS FOR SYNDICATE MANAGER AND MEMBERS
  • FOR FOLLOW ON OFFERINGS: 3 DAYS FOR SYNDICATE MANAGER; no blackout period for members
46
Q

A shelf registration allows an issuer to sell shares…

A

on a delayed or continuous basis at various times and prices

47
Q

WKSI benefits include:

A
  • automatic shelf registration (registration statements are effective immediately upon submission to SEC
  • free writing prospectuses (FWPs) may be used at any time (before or after filing registration statement)
  • SEASONED ISSUERS CAN ONLY USE AN FWP AFTER A REGISTRATION STATEMENT HAS BEEN FILED
48
Q

Two differences between the 10K and 10Q are that:

A

-the financial statements in a 10Q are unaudited and the 10Q does NOT include a list of major shareholders

49
Q

Proxy Statement

A
  • FORM 14A
  • distributed to shareholders prior to a shareholder meeting to elect directors, approve a merger, and address other corporate actions
50
Q

What does a proxy statement NOT include?

A
  • proxies do not include minutes from previous board meetings, voting record of each director, or voting results from board meetings
  • proxy does list the officers, directors and greater than 5% shareholders
51
Q

Sarbanes-Oxley Audit Committee Requirements

A

-does not require that a financial expert serves on the audit committee; does require disclosure of whether there is one

52
Q

Reporting Requirements for Corporate Insiders include:

A

Form 3: filed when a person becomes a corporate insider (officer, director, or more than 10% shareholder)
Form 4: when corporate insider trades stock in the open market
Form 5: reports any change in ownership outside the open market trade (i.e., receipt of stock as compensation)

53
Q

Form 13G vs Form 13D

A

Form 13G: filed by investors who own more than 5% with a passive intent; must be filed within 45 days of calendar year end
Form 13D: filed by investors who acquire more than 5% with active intent;

54
Q

Joint 13D (acting in concert)

A

active investors who agree to vote their shares together and own more than 5% in aggregate are required to file a 13D

55
Q

Form 13F

A

institutional investment managers manage a discretionary securities portfolio of $100 million or more (i.e., hedge funds, mutual funds)

56
Q

If a company wants to learn who its large (>5%) active shareholders are and what other stocks those investors own…

A

-it should first review its own shareholders’ 13Ds and then review those investors’ Form 13Fs

57
Q

In order to minimize underwriting fees, an issuer would likely pursue a…

A

best efforts underwriting rather than firm commitment

58
Q

Sequence of IPO deal process is:

A

(1) Bake Off
(2) Win Mandate
(3) Sign Engagement Letter
(4) File Registration Statement with SEC
(5) Book-building/Marketing
(6) Go effective (shares registered under ‘33)
(7) Confirm allocations, distribute securities and settle transactions to all investors

59
Q

Selling Group IOIs

A

-selling group members can accept indications of interest in connection with an IPO, but they do not purchase shares, take risk for unsold shares, or offer shares at a discount to investors

60
Q

Execution Risk via a Block Trade

A

-an underwriter executing a follow-on offering for a company with a substantial number of shares owned by a few large investors would view a block trade by an investor as an execution risk

61
Q

Fixed-Price Offering

A
  • in a fixed price offering, all shares must be sold at the public offering price (POP)
  • they cannot be sold at a discount to any investor, such as retail or institutional investors (syndicate and selling group will buy shares at a discount - POP minus the underwriting fee or selling concessions)
62
Q

If stock price falls post-IPO…

A

-the underwriter can purchase the excess 3 million shares in the open market, effectively creating demand for the shares and supporting the price

63
Q

If the stock price rises post-IPO…

A

the underwriter can exercise a greenshoe clause and purchase the necessary shares from the issuer, instead of buying them in the open market. doing so increases the share count as well as the proceeds raised by the issuer

64
Q

Fair and Reasonable Underwriter Fees

A

-all fees must be fair and reasonable as determined by FINRA’s Corporate Finance Department (CFD) - maximum spread FINRA will generally be comfortable with is 7% of the gross offer price

65
Q

The three defined components of the gross spread are:

A

(1) management fee
(2) underwriting fee
(3) selling concession

66
Q

Conflict of interest within underwriting occurs when…

A
  • the issuer is a broker-dealer

- the issuer intends to become a broker dealer

67
Q

Rules regarding conflicted securities

A
  • when underwriting and soliciting conflicted securities, the conflict must be prominently disclosed in writing
  • if selling conflicted securities into a discretionary account, the customer must provide WRITTEN AUTHORIZATION
68
Q

Issuer Directed Shares

A

-shares specifically directed by the issuer to a restricted person

69
Q

Regulation M (market manipulation)

A

-designed to prevent market manipulation by issuers and underwriters with an interest in the outcome of an offering by prohibiting activities and conduct that could artificially influence the market for an offered security during a restricted period

70
Q

Sections 4(a)(2) and 4(a)(5) of the 1933 Act

A
  • allow an issuer to sell unregistered securities privately through private placements
  • a company raising equity through a private placement would not file a registration statement
71
Q

Who is considered to be accredited under Reg D?

A
  • officers and directors of the issuer
  • institutional investors with more than $5million in assets (if an institution is organized with the purpose of investing in private placement, it will not be accredited)
  • individuals with over $200k in income each of the past 2 years
  • individuals with over $1 million in net worth, excluding value of real estate
72
Q

Regulation S

A
  • allows an issuer to sell securities exclusively to non-US residents and avoid SEC registration
  • can be immediately sold on an offshore securities exchange
  • residency is important for the test, NOT citizenship
73
Q

Rule 144 Control Stock:

A
  • control stock is any security owned by a corporate insider or affiliate
  • affiliates can sell the greater of: 1% of outstanding shares or the average reported weekly trading volume during preceding four weeks
  • must file a Form 144 for control stock
74
Q

Rule 144A Market

A

-allows qualified institutional buyers (QIBs) to freely trade unregistered securities between each other

75
Q

Sale Leasebacks and EBITDA

A
  • example of a transaction that will negatively impact EBITDA
  • Company A sells an asset to Company B, then leases it back
76
Q

Earnings Yield=

A

EPS/Stock Price

77
Q

Dividend Yield=

A

Annual Dividend/Stock Price

78
Q

Current Yield (Bond)=

A

Annual Interest/Current Market Value

79
Q

To use dividend yield to determine stock price…

A

Dividend/Dividend Yield

80
Q

P/E Multiple Calculation (on a per share basis and overall company basis)

A

Per Share Basis: Stock Price/EPS

Overall Company Basis: Equity Value/Net Income

81
Q

When is it best to use the P/E multiple?

A

P/E is useful multiple for established companies with consistent profitability. Not useful for companies with negative net income or significant earnings volatility.

82
Q

Goodwill=

A

Purchase Price - Market Value of Net Assets of Target

83
Q

Enterprise Value Calculation from FCF

A

=FCF/(WACC-Growth Rate)

84
Q

Economic Value Added Calc (EVA)

A

EBIAT - (Investment Amount * WACC)

85
Q

Debt/Tangible Net Worth =

A

Total Debt/(Shareholder’s Equity - Goodwill and Intangible Assets)

86
Q

Total Capitalization

A

Total Debt + Shareholder’s Equity

87
Q

Debt/Total Capitalization

A

Total Debt/(Total Debt + Shareholder’s Equity)

88
Q

Levered Beta=

A

(Unlevered Beta)(1+(1-tax rate)D/E)

Series 79 - Class Summary Cards (1 decks)

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