Test 1 Review Flashcards
An analyst has a 58-cent EPS estimate for Hallmark for the quarter. If the estimate is communicated to the CFO and is affirmed, who has violated Regulation FD?
A) The analyst
B) The CFO
C) Both the analyst and the CFO
D) The issuer
D) The issuer;
Although the disclosure was made by the CFO, the best answer is the issuer who has violated Regulation FD. The following is an SEC commentary on this issue.
A U.S. firm creates a nonmember affiliate in Singapore that will employ two research analysts. One analyst will write on Asian companies and the other will prepare reports on U.S. companies. The research will be marketed under one name. Do the analysts need to be registered?
The analysts do not need to be registered. This is an example of globally branded research. There must be a disclosure that the analysts are not registered.
According to SRO rules, when and to whom must a letter of attestation concerning research reports be submitted?
It must be flied with the member firm’s DEA by April 1
Whittman brokerage is managing the IPO of El Seguendo Mining. When can Whittman publish a research report on the subject company?
40 days after the effective date
Which disclosure is required for research reports, but is not required during personal appearances by an analyst?
The percentage of recommendations falling into the categories of buy, sell, and hold
Define Retail Communication
Any written or electronic communication that is distributed or made available to more than 25 retail investors within a 30-calendar-day period.
Which of the following items is compulsory in a research report?
A)The analyst certification
B) A price chart
C) A rating for the issue
D) The analyst’s name and contact information
A)The analyst certification
Scrimshaw Manufacturing is refusing to speak about its business to an analyst that covers its stock. What action should the research analyst should take?
The research analyst should comment through a note or report based on any publicly available information.
A registered representative has posted comments on an online interactive social media Web site. What form of communication would this be classified as?
This is considered a retail communication and would not require principal approval. This type of communication is not subject to principal preapproval and is not required to be filed with FINRA. However, a firm is required to monitor and supervise this type of activity in the same manner it handles correspondence.
An analyst for Albacore Securities is preparing a research report recommending ABC common stock. All the following situations must be disclosed in the report, EXCEPT:
A) ABC Corp is an investment banking client of Albacore
B) Albacore Securities owns a 1% or greater beneficial ownership in ABC common stock
C) Albacore Securities owns a 1% or greater beneficial ownership in ABC nonconvertible debt
D) Albacore Securities makes a market in ABC common stock
C) Albacore Securities owns a 1% or greater beneficial ownership in ABC nonconvertible debt
Since nonconvertible debt is not considered common equity, disclosure is not required.
Recommendations made by a member firm must disclose which of the following?
I: The price at the time the recommendation is made
II: Ownership by the firm of any options or warrants for the same stock
III: Any gains or losses from trading the security for its own account within the last year
IV: The size of any position it holds in the security
I & II
In which of the following meetings may a research analyst participate?
A) An internal meeting between the investment banking and legal departments of his member firm regarding fact checking of a new issue
B) A meeting between prospective high net worth clients and the issuer concerning a potential IPO
C) A meeting between the investment banking department and two current clients regarding a merger
D) A meeting with the head of research, the investment banking department, and prospective investment banking clients
A) An internal meeting between the investment banking and legal departments of his member firm regarding fact checking of a new issue
Research analysts may participate in due diligence meetings and the screening of potential investment banking clients; however, they may not participate or attend meetings for the purpose of soliciting investment banking business (pitches).
What qualifies a firm for the small firm exception?
The small firm exception permits the direct communication between investment banking personnel and research analysts. It is applied to firms that have received, on average, revenue from investment banking fees for common stock and corporate bond offerings of $5,000,000 or less over the previous three years.
Hodges Brokerage uses seven ratings categories in its research reports. In a ratings summary, it must show the percentage of securities:
In three categories
If a research report contains a rating or recommendation, the firm must show the percentage of all securities that the member recommends as “buy,” “sell,” or “hold.” Within those three categories, the member must disclose the percentage of subject companies that are, or have been, investment banking services clients within the preceding 12-month period.
Bloom & Berger Investments has 17 research analysts who prepare 70 to 80 research reports each year. For how many years must the research reports be kept in the firm’s records after being published?
The firm must keep copies of drafts and the final version of a research report for three years after publication.
