Test 2 Review

Question 1

If the subject companies have been rated for at least ______, the price chart must depict when a firm _____________ or _____________ of a security.

Answer 1

1 year; assigned or changed PT; altered the rating

Question 2

The ownership disclosure must reflect the position the firm held through __________ immediately preceding the date of publication of the research report, unless the report is less than ________ after the end of the most recent month.

Answer 2

The last day of the month; 10 calendar days

Question 3

The head of a broker-dealer’s research department would like to distribute the article to clients. What can she do?

Answer 3

The article could only be sent if it was reviewed and approved in the same manner as internally prepared material and met the same standards as any other communication with the public.

Question 4

When may a research analyst comment on an M&A transaction, even if her firm was the investment banker that handled the investment banking transaction?

Answer 4

Information regarding the M&A has been released to the media, she regualy prepares research reports on the issuer; comments of the research analyst must be fair and balanced.

Question 5

FINRA members may submit sections of a draft to a subject company to for fact checking. The ___________ must be submitted to the Legal Department prior to submitting the sections to the subject company.

Answer 5

complete draft

Question 6

If a member firm or its affiliates own ___ or more of any class of common equity securities, disclosure is required within a subject company report.

Answer 6

1%

Question 7

The research department of Broker-Dealer X has received reliable information that a major international financier has begun to purchase large quantities of ABC Corporation common stock in overseas markets. ABC common is also listed on the NYSE. Which of the following is TRUE regarding comments on this situation in a research report?

A) X may publish this information only after reporting what it knows to the NYSE

B) There is no restriction on X’s ability to comment since the activity is taking place in overseas markets

C) X may comment on the situation as long as there is no direct or indirect consideration received for making the comments

D) X may not comment on this information under any circumstances

Answer 7

C) X may comment on the situation as long as there is no direct or indirect consideration received for making the comments

Question 8

Option advertising:

I. Must be approved by a ROP prior to use
II. May be approved by a ROP after use
III. Must be filed with the CBOE 10 days prior to use
IV. May be filed with the CBOE up to 10 days after use

Answer 8

I & III

Question 9

For a secondary offering, a quiet period of 10 days following the effective date only applies to the ____________ of the offering.

Answer 9

Manager or co-manager

Question 10

A research report issued by Broker-Dealer X recommends PDQ Corporation common stock. All of the following conditions would require a disclosure in conjunction with the recommendation, EXCEPT:

A) A mutual fund sold by X owns PDQ stock

B) X makes a market in PDQ stock

C) X just completed an offering of PDQ nonconvertible bonds as comanager

D) The analyst who prepared the recommendation owns call options on PDQ stock

Answer 10

A) A mutual fund sold by X owns PDQ stock

Question 11

Communications with the public must be approved in advance by a _____________. Research reports may only be approved by a _____________.

Answer 11

qualified principal; supervisory analyst