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Series 66 > Unit 4 (2) > Flashcards

Unit 4 (2) Flashcards

1
Q

The USA permits amendments to a registration statement after its effective date for what?

A

The number of shares to be offered, as long as the public offering price and underwriters discounts stay the same.

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2
Q

When registering a security under the USA, you must include all of the following except:

  1. Amount to be offered in the state
  2. Adverse court or SEC rulings with respect to the offering
  3. All other states it is offered in
  4. Effective date of the offering
A

The effective date. The effective date of the offering is determined by the administrator or the SEC, not you. You must include the other states the security is offered in but not those amounts. You must include the amount in the registration state and any adverse rulings

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3
Q

If the common stock is a federal covered security, what is also included in that?

A

Any security with a senior claim like preferred stock or bonds

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4
Q

If a security is exempt from state registration, the administrator may still require what?

A

Notice filing including consent to service of process and payment of fees

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5
Q

Federal covered securities also includes

A

Those exempt from registration like government and muni bonds

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6
Q

If the common stock is a federal covered security, what is also included in that?

A

Any security with a senior claim like preferred stock or bonds

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7
Q

If a security is exempt from state registration, the administrator may still require what?

A

Notice filing including consent to service of process and payment of fees

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8
Q

Most common exempt transactions

A
  1. Isolated nonissuer transactions
  2. Unsolicited orders
  3. Transactions with institutions
  4. Transactions between the issuer and the underwriter
  5. Transactions by fiduciaries
  6. Private placement (10 or fewer offers to non institutional clients within 12 months)
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9
Q

Which of the following is a security under the USA?

  1. Guaranteed lump sum payment to a beneficiary under a modified endowment policy
  2. Fixed, guaranteed payments made for life under an annuity
  3. Commodity future contracts
  4. Investment contract
A
  1. Investment contract - investment contracts are defined as a security under the USA and the term is a synonym for security.
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10
Q

In what situation is there not considered to be an Issuer

A

With respect to certificates of interest, participation in oil, gas, or mining leases, or payments out of production under such titles or leases, there is not considered to be any issuer

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11
Q

Issuer transaction

A

The proceeds go to the issuer

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12
Q

When must a security be registered in the state?

A

If it is not a federally covered security, or if it is non-exempt, it must be registered in the state or it cannot be legally sold in the state

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13
Q

What act defined Federal covered security

A

National securities markets improvements act NSMIA

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14
Q

Categories of federal covered securities

A
  1. Issued by open end or closed end invest co, unit invest trust, or face amount cert. that is registered under the Invest Co act of 1940
  2. Listed on the NYSE, NASDAQ etc.
  3. Rule 506b or 506c of Reg D private placement
  4. Federally exempt like muni bonds
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15
Q

A muni issuer is not considered federally exempt if the issuer is located where

A

If the issuer is located in the state where the securities are being offered, that security is not considered federal covered

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16
Q

A bond issued by the city of Columbus, Ohio is federally exempt everywhere but

A

The state of Ohio. The effect is that no state regulator can enforce their rules against the bond. But the Ohio administrator could request that the city furnish details about the issue. The bond is still exempt from registration under state and federal law, but it’s not known as federally covered in Ohio

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17
Q

For how long does an exempt security retain its exemption?

A

When initially issued and in subsequent trading

18
Q

When must justification be established for an exempt transaction?

A

Before the transaction. It must be established with each transaction

19
Q

Nonexempt securities must register except

A

Except when sold in an exempt transaction

20
Q

The administrator can deny, suspend, or revoke any securities transaction exemption other than

A

A federal covered security

21
Q

When can the administrator revoke a transaction exemption?

A

With or without prior notice. Without prior notice is called summarily

22
Q

A security is exempt because of the nature of whom

A

The issuer, not the purchaser

23
Q

An exempt transaction

A

Is exempt from the regulatory control of the state administrator because of the manner in which a sale is made or because of the person to whom the sale is made

24
Q

You can sell a nonexempt, unregistered security to whom

A

A bank or institution. Because the sale to certain financial institutions is an exempt transaction. That means the securities don’t have to be registered in the state

25
Q

Securities exempt from state registration are also exempt from filing what with the state?

A

Sales literature

26
Q

State exempt securities

A
  1. US and Canadian gov and muni securities
  2. Foreign gov securities
  3. Depository institution Securities
  4. Insurance co
  5. Public Ute and common carrier
  6. Federal covered
  7. Nonprofit
  8. Employee benefit plan
  9. Money mkt instruments
27
Q

Can a security or transaction qualify for more than 1 exemption?

A

Yes.

28
Q

How many subscribers can a preorganization subscription have?

A

No more than 10 subscribers and no commissions are paid either directly or indirectly. If that happens then it’s exempt

29
Q

Can a preorganization subscription have commissions paid?

A

No, no commissions either directly or indirectly. Also no more than 10 subscribers

30
Q

When do the subscribers pay in a preorganization subscription?

A

No payments until they purchase the underlying security

31
Q

Three securities are exempt under the USA but not under the Securities act of 1933

A
  • stocks and bonds issued by insurance companies
  • securities issued by foreign governments
  • securities listed on certain exchanges are not exempt under the act of 1933
32
Q

Is there an issuer for certificates of interest or participation in oil, gas, or mining title leases.

A

No, this is the one where there is no issuer

33
Q

As referred to in the NSMIA, “covered security” would apply to

  1. Preferred stock in XYZ Corp whose common is listed on the NYSE
  2. Common in ABCD inc that trades on the OTC link
  3. Springfield, Illinois muni sold to a resident of Springfield, Ill
  4. Springfield, Illinois muni sold to a resident of Springfield, MO
A

1 and 4. Any security equal to or senior like preferred, any debt security. Rights and warrants are considered equal. Muni bonds are federal covered everywhere but their own state.

34
Q

Muni bonds are federal covered everywhere but

A

Their home state.

35
Q

Registration statement contains

A
  1. Identity of owners of > 10% of issuers stock
  2. Estimate and description of how proceeds will be used
  3. Identity of the underwriter
  4. Identify the issuers officers and directors, their holdings of the issuers securities, and their salaries
36
Q

Would the personnel manager of a company need to be listed on the registration statement?

A

No, only if it had “Officer” or “Director” in the title or description

37
Q

Which of the following don’t qualify for an exemption under the USA

  1. A bond issued by a corporation
  2. A bond issued by the city of Athens, Greece
  3. A bond issued by the province of Manitoba
  4. A security issued by a credit union authorized to do business in the state
A

Corporate bond and bond issued by Athens, Greece are not exempt. Securities issued by political subdivisions of countries with diplomatic relations with the US are not exempt. The corporate bond would only be exempt if it was issued by a company who’s common stock is federally covered

38
Q

When could a corporate bond issue be exempt under the USA?

A

If the common stock from the Corp is federally covered, otherwise it would have to be registered.

39
Q

Is a bond issued by the province of Manitoba, Canada exempt under the USA?

A

Yes. Securities issued by Canadian political subdivisions are exempt under the USA

40
Q

Which of the following are exempt transactions?

  1. Isolated nonissuer transaction
  2. Sale to a financial institution
  3. Transaction by an executor of an estate
  4. Transaction between issuer and underwriter
A

All of these are exempt transactions

Series 66 (22 decks)

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