UNIT 01.02-002 Flashcards
Which of the following statements regarding the differences between Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933 are true?
Rule 506(c) offerings can be advertised, while Rule 506(b) offerings cannot.
Rule 506(c) offerings are limited exclusively to accredited investors, while nonaccredited investors can participate in Rule 506(b) offerings.
As long as the offering is limited exclusively to accredited investors, Rule 506(c) offerings may be publicly advertised. Rule 506(b) offerings can never be advertised. The limit of 35 nonaccredited investors applies to Rule 506(b). There is no limit on the number of accredited investors for either rule. This is an example of a question that draws on your knowledge from the Securities Industry Essentials Exam. There are few such questions on the Series 6 exam, but they do exist.
Which of the following are not considered public communications of a broker-dealer and therefore not filed by the broker-dealer with FINRA?
Prospectuses
Prospectuses are not prepared by the broker-dealer, they are prepared by issuers—not broker-dealers.
FILED
Market letters
Telephone directory advertisements
Research reports
Which of the following is not an exempt issuer?
A federal agency
A municipality
A publically traded corporation
A church
A publically traded corporation
Corporations are never exempt issuers. The federal government (and agencies), municipalities, and religious organizations are exempt issuers.
EXEMPT
A federal agency
A municipality
A church
Which of the following statements may be made by an issuer selling securities to the public that are registered under the Securities Act of 1933?
The SEC has cleared this issue for sale to the public.
The SEC does not approve or disapprove of securities. Rather, the SEC reviews registrations for omission of material facts and clarity of information and makes certain that all supporting documentation is included. If these requirements are met, the SEC clears or releases the security for sale to the public.
STATE securities laws allow for the SALE OF SECURITIES under all of the following METHODS except
qualification
coordination
notice filing
protestation
protestation.
The three methods of legally selling a security in a given state are qualification, coordination, and a notice filing. No amount of protestation will change this fact.
Which of the following is not found in the final prospectus?
The issuers future earnings
You can’t provide future earnings because they are in the future. The other items listed are all requirements of both the preliminary and the final prospectus.
Green Thumb Nurseries, Inc., is headquartered in Nevada and has stores throughout the state. Green Thumb wants to issue $100 million in secured bonds with the assistance of Washoe Securities acting as an underwriter. Washoe is a broker dealer registered in Reno, Nevada. Green Thumb intends to sell the security exclusively to investors from the same state. Green Thumb may receive an exemption from registering the offering with the SEC under which of these?
Rule ____
Rule 147
If an issuer of a private placement foregoes any general solicitation, then they may sell to how many non-accredited investors?
Not more than __
Not more than 35
The limit is 35 non-accredited investors if no advertising takes place. If the offer is made with a GENERAL SOLICIATION then ALL investors must be accredited.
A preliminary prospectus (red herring) may be used to gather indications of ________.
may be used to gather indications of interest.
The preliminary prospectus (red herring) can be used as a prospecting tool, allowing issuers and underwriters to gather nonbinding indications of interest. It must be made available and is intended to be distributed to any customer who expresses interest in the securities during the cooling-off period. There is no final price shown in a preliminary prospectus.
Which of the following is true regarding a preliminary prospectus?
It is made available between the ______ date and the ______ date.
It is made available between the registration date and the effective date.
The preliminary prospectus (red herring) is a prospecting tool used to gauge indications of interest. It is made available to those who request it between the registration date and the effective date (cooling-off period). Receiving it is not a commitment to purchase shares and making it available is not a commitment to sell shares to the recipient. No final price would be found on a preliminary prospectus.
