Unknowns 2

Question 1

Based on written request, what is the maximum period that a B/D may hold customer correspondence?

Answer 1

Three months. To exceed three months, the customer must provide the B/D with a valid reason for the request.

Question 2

The Hearing Panel must give a member firm ____ days prior notice before a hearing is held.

Answer 2

28 days prior notice before a hearing is held

Question 3

Three months ago, an insider acquired stock at $12. If she sells the shares today at $15, may she keep the profit?

Answer 3

No. Under the short-swing profit rule, an insider may not keep a profit earned on stock held less than six months.

Question 4

Insiders must return short-swing profits, which are profits earned on stock that has been held for less than ___ months.

Answer 4

Insiders must return short-swing profits, which are profits earned on stock that has been held for less than six months.

Question 5

If firm is acting as a dealer (not a manager or co-manager) on an IPO, what’s the quiet period on research?

Answer 5

Dealers cannot publish research until 10 calendar days after an IPO.

Question 6

What is the penalty if a CQS market maker (third market) has an unexcused withdrawal from publishing a quote?

Answer 6

One business day in that stock

Question 7

An underwriting manager must wait _____ calendar days before publishing research on the issuer’s secondary offering.

Answer 7

An underwriting manager must wait three calendar days before publishing research on the issuer’s secondary offering.

Question 8

How many days must a distribution ppt provide purchasers with a prospectus for a non-listed IPO?

Answer 8

90 Days

Question 9

How many days must a distribution ppt provide purchasers with a prospectus for a non-listed follow-on offering?

Answer 9

40 Days

Question 10

How many days must a distribution ppt provide purchasers with a prospectus for a listed IPO?

Answer 10

25 Days

Question 11

How many days must a distribution ppt provide purchasers with a prospectus for a listed follow-on offering?

Answer 11

0 days - no restriction

Question 12

Allows for multi-state offers, but sales can only be in-state residents

Answer 12

Rule 147A

Question 13

How long are resales prohibited to non-residents under Rule 147?

Answer 13

6 months

Question 14

What does Reg A permit?

Answer 14

Discussing the security before filing

Question 14

Max offering size for Tier 1? Tier 2?
Max amt sold by existing shareholders? Tier 1/Tier 2

Answer 14

Tier 1 is $20mm
Tier 2 is $75mm

30% of offering:
Tier 1 is $6mm
Tier 2 is $22.5mm

Question 15

Reg A limits what?

Answer 15

How much capital can be raised over 12 months by US or Canadian issuers. Must provide Offering Circulars

Question 16

Reg D allows how many non-accredited investors? and how many accredited?

Answer 16

35 non-accredited (require purchaser reps) and unlimited accredited

Question 17

How long is the holding period for restricted stock under Rule 144?

Answer 17

6 mos (can be sold before 6 mos by filing the stock)

Question 18

Under Rule 144, when is notifying the SEC by filing Form 144 to sell orders NOT required?

Answer 18

If selling no more than 5,000 shares AND $50k of securities

Question 19

Who can be sold restricted securities under Rule 144A?

Answer 19

QIBs

Question 20

What is the holding period for a Reg S security that is resold to a designated offshore/foreign market?

Answer 20

There isn’t one - resold IMMEDIATELY

Question 21

When can a Reg S non-convertible debt be resold?

Answer 21

After 40 days

Question 22

When can a Reg S equity of a reporting company/issuer be resold?

Answer 22

After six months

Question 23

When can a Reg S equity of a non-reporting company/issuer be resold?

Answer 23

After one year

Question 24

True or False: Control stock must be held for six months before it may be sold under Rule 144.

Answer 24

False: Control stock has no holding requirement. Restricted stock must be held for six months.

Question 25

What fees are NOT compensation to an UW?

Answer 25

-Registration fees (including Blue-Sky fees) -Accounting fees -FINRA filing fees -Prospectus printing costs

Question 26

When does the trading restricted period begin when the ADTV is at least $100k AND at least a $25mm mkt value public float?

Answer 26

Begins ONE business day prior to pricing

Question 27

When does the trading restricted period begin when the mkt value/public float aren't mentioned?

Answer 27

Begins FIVE business days prior to pricing

Question 28

During the restricted period, passive mkt making is permitted if there is at least one ______?

Answer 28

Independent market maker; PMM my not bid higher than the highest Independent bid

Question 29

Distribution ppts and illiquid stock (ADTV less than $100k) How long is the Reg M Restricted Period?

Answer 29

5 business days prior to pricing (passive)

Question 30

Distribution ppts and moderately liquid stock (ADTV of $100k) How long is the Reg M Restricted Period?

Answer 30

One business day prior to pricing (passive)

Question 31

Distribution ppts and actively traded stock (ADTV of $1mm) How long is the Reg M Restricted Period?

Answer 31

No restriction

Question 32

Issuers and selling shareholders and illiquid stock (ADTV less than $100k) How long is the Reg M Restricted Period?

Answer 32

Five business days prior to pricing (no activity)

Question 33

Issuers and selling shareholders and moderately liquid stock (ADTV of $100k) How long is the Reg M Restricted Period?

Answer 33

One business day prior to pricing (no activity)

Question 34

Issuers and selling shareholders actively traded stock (ADTV of $1mm) How long is the Reg M Restricted Period?

Answer 34

One business day prior to pricing (no activity)

Question 35

When must the final settlement of a syndicate occur?

Answer 35

Within 90 days of closing

Question 36

What happens if a short sale is effected within 5 business days prior to pricing a new issue?

Answer 36

New issue shares may not be purchased by the short seller to cover the short position

Question 37

Bona fide purchase of a short sale (no idea of the offering or changed mind) in a connection with an offering allows a person to what?

Answer 37

Close out the short sale at least one business day prior to pricing and still purchased the offered security

Question 38

BD to BD Buy-In for Fail to Deliver

Answer 38

Buy-in is a Non-Delivery Give notice 2 bdays before buy-in S+3 bdays or T+4 bdays

Question 39

BD to Customer Buy-In for Fail to Deliver

Answer 39

Buy-in is a Non-Delivery Customer doesn't deliver to B/D S+10 bdays or T+11

Question 40

BD to BD Sell-Out for Fail to Deliver

Answer 40

Dealer didn't Pay On the settlement date or T+1 Immediate sell-out

Question 41

BD to Customer Sell-Out for Fail to Deliver

Answer 41

Customer didn't Pay S+3 or T+4 Could freeze acct for 90 days

Question 42

How long of a wait could there be for securities in transit by the transfer agent for a buy-in?

Answer 42

Seven days

Question 43

When in a straddle state, only the side within the price band is _____.

Answer 43

Executable

Question 44

During a 5 min trading pause b/c of a limit state what is still Ok?

Answer 44

Quotes ONLY NO EXECUTIONS

Question 45

NBB is below the lower band and NBO is above the upper band is what?

Answer 45

Straddle state

Question 46

When is a straddle state happening?

Answer 46

NBB is BELOW the lower band OR NBO is ABOVE the upper band

Question 47

When is a limit state happening?

Answer 47

NBB is equal to or above upper band OR NBO is equal to or below lower band

Question 48

When in a straddle state, only ____ within the price band is executable.

Answer 48

When in a straddle state, only the side within the price band is executable.

Question 49

What Retail Communications need FINRA approval 10 days PRIOR to first use?

Answer 49

-1st Year/New Firm -Invest Co (MFs) ads with rankings -Options/Futures ads -UNDER ORDER

Question 50

Reg NMS/Rule 605 How often are exchanges reporting to SEC on market center efficiencies?

Answer 50

Monthly

Question 51

Reg NMS/Rule 606 How often are order routing of non-directed trades reported?

Answer 51

Monthly

Question 52

How long is a new issue in the cooling off period and not able to be solicited?

Answer 52

20 days

Question 53

What is a WKSI?

Answer 53

Well-know Seasoned Issuer -has at least $700mm public float OR -has at least $1b in non-covertable bonds -Been a reporting company for 12 mo -Not failed to pay a dividend or bond payment -Can use shelf registration and form S-3 for IPO

Question 54

When must a receiver respond to a complaint from FINRA's Department of Enforcement?

Answer 54

A response must be filed within 25 days. If this response is not filed, a second notice will be sent, to which the respondent now has 14 days to answer. Failure to respond to the second notice may be treated as the respondent's admission to the allegations in the complaint.

Question 55

Broker-dealers are required to report third-market transactions to the TRF within ____ after executing a trade. The other side of the transaction must report the transaction for clearing purposes within ______.

Answer 55

Report transactions within 10 seconds Report the clearing transaction within 20 minutse

Question 56

Suspicious Activity Report (SAR) should be filed:

Answer 56

for most suspicious transactions, depending on the facts and circumstances surrounding the transaction -Transaction or group of transactions equals $5000 -File within 30 calendar days -Reported to Principal -Bank Secrecy Act/FinCEN/US Treasury -20 yrs prison AND greater of $500k per trans or 2 amt funds involved

Question 57

Bank Sececry Act Currency Transaction Report (B(s a)CTR or CTR)

Answer 57

-Filed for CASH withdrawals OR deposits in a signal day of $10k -File within 15 calendar days -Bank Secrecy Act/FinCEN/US Treasury -20 yrs prison AND greater of $500k per trans or 2 amt funds involved

Question 58

What is an insider?

Answer 58

Officer, Director of the issuer or greater than 10% owner of the equity