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Series 6 > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

Who can a FINRA member firm give certain selling concessions?

A

Other member firms

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2
Q

What securities are exempt from the registration provisions of the Securities Act of 1933?

A
  • government securities
  • debt offerings with a maturity not exceeding 270 days
  • intrastate offerings
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3
Q

When is the SEC disclaimer not required?

A
  • in public communication

- must be included in the prospectus

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4
Q

In a mutual fund, where can the amount of increases and decreases in the NAV over past years can be reviewed?

A

Prospectus

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5
Q

Who prepares the prospectus?

A

Issuer

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6
Q

Public appearance

A
  • considered a form of communication with the public
  • involves the personal presence of or the possibility of interacting electronically with an officer or other spokesperson of a firm
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7
Q

Under SEC Rule 498, when can a summary prospectus be used in a mutual fund sales presentation resulting in a sale?

A

Only when the investor is able to access a statutory prospectus online

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8
Q

Generic advertisement

A

Must include the name of the BD placing the advertisement

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9
Q

Tombstone

A

Announcement of a new issue that includes the name of the issuer, the price of the security, and the name of the underwriter from whom it can be purchased

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10
Q

Under the intrastate offering rule (Rule 147), when may a resident purchased of securities resell them to a nonresident?

A

At least 6 months after the date of purchase

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11
Q

What issuers and securities are exempt from registration with the act of 1933?

A
  • US gov
  • US municipalities & territories
  • nonprofit religious, educational, and charitable organizations
  • commercial paper (maturity of 270 days or less)
  • BAs (maturity of 270 days or less)
  • securities acquired in a private placement (restricted stock)
  • public utilities & common carriers whose activities are regulated as to rates and other items by a state or federal regulatory body
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12
Q

What does Regulation A+ exemption cover?

A

An offering of $50 million or less in 12 months

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13
Q

Rule 3160

A

Regulates when a BD is in a networking association with a financial institution like a bank

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14
Q

An investment banker is a(n) ________.

A

Underwriter

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15
Q

What are the functions of an investment banker?

A

•advising corporations on the best ways to raise long-term capital
•raising capital for issuers by distributing new securities
•buying securities from issuers and reselling them to the public
•distributing large blocks of stock to the public and to institutions
•helping issuers comply with securities laws
**they do NOT loan money

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16
Q

How is an underwriter acting in a firm commitment?

A

As a principal or dealer

17
Q

Firm commitment

A
  • most commonly used type of underwriting contract
  • underwriter commits to buying the securities from the issuer and reselling them to the public
  • the underwriter assumes the financial risk of incurring losses if they’re unable to distribute all the shares to the public
  • the underwriter is acting as a principal
18
Q

What are the 2 types of firm commitments?

A
  • negotiated underwriting contract

* competitive bid arrangement

19
Q

Negotiated underwriting contract

A
  • used in most corporate issues

* issuer selects an underwriter and they negotiate the conditions of the underwriting contract

20
Q

Competitive bid arrangement

A
  • standard for new issue offerings in the municipal securities market
  • the underwriting contract is awarded to the underwriter who presents the most competitive bid (or lowest net interest cost) to the issuer
  • sales begin on the effective date of the offering
21
Q

How can a managing underwriter share the risk of a firm commitment with other BDs?

A

By forming a syndicate, in which each member is an underwriter of the issue

22
Q

Syndicate

A

•this is a way that a managing underwriter can share the risk of a firm commitment with other BDs
•each syndicate member is an underwriter of the issue
•syndicate members can employ selling groups, but the selling groups are NOT part of the syndicate and do NOT take on any liability for the underwriting
-the selling groups are “helper firms” that act as agents and are paid a selling concession for helping to place the securities

23
Q

Best efforts

A

•underwriter acts as an agent for the issuing corporation
•deal is contingent on the underwriter’s ability to sell shares to the public
•underwriter sells as much as possible WITHOUT financial liability for what remains unsold
•underwriter collects customer money into escrow
-if sufficient funds are collected, escrow is broken and the issuer delivers shares in return for the escrowed funds

24
Q

How is the underwriter acting in a best efforts arrangement?

A

As an agent

25
Q

Regulation D

A

The SEC does not require registration of an offering if it is privately placed with,
•accredited investors that do not need SEC protection
•a maximum of 35 individual (nonaccredited) investors

26
Q

What are some synonyms of “private placement stock”?

A
  • restricted (because it must be held for a 6-month period)
  • unregistered (no registration statement on file with the SEC)
  • lettered stock (investor agreed to terms by signing an investment letter)
  • legend stock (a special inscription on the stock certificate indicates restricted transfer)
27
Q

What is the filing requirement for retail communications that include a ranking or comparison that is generally not published or is the creation of an investment company or member firm?

A

10 business days before first use

28
Q

Agreement among underwriters

A

•addresses the compensation for the underwriters

-how much they’ll get paid, when they’ll get paid, etc.

29
Q

Underwriting agreement

A

the contract between the issuer and the underwriter/syndicate

30
Q

If a Regulation D private placement sells to any nonaccredited investors,

A

No advertising or general solicitation is allowed

31
Q

In a Regulation D private placement, if the sale is exclusively to accredited investors,

A

The private placement may advertise

32
Q

In which underwriting contract does the underwriter act as a dealer?

A

Firm commitment

33
Q

What would be found in a final prospectus?

A
  • date and offering price
  • business plan
  • statement that the SEC neither approves nor disapproves of the issue
34
Q

What is something that would NOT be found in a final prospectus?

A

Agreement among underwriters (this is a separate document that is between the members of the underwriting syndicate)

35
Q

Notice of sale

A

Notice that is used to obtain an underwriter for municipal bonds

Series 6 (8 decks)

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