FINRA Series 79 Exam 240 Questions with Verified Answers,100% CORRECT, Exams of Business Economics

Download FINRA Series 79 Exam 240 Questions with Verified Answers,100% CORRECT and more Exams Business Economics in PDF only on Docsity! FINRA Series 79 Exam 240 Questions with Verified Answers Debt to capitalization ratio use _____________ - CORRECT ANSWER book value, including of equity Green shoe clause - CORRECT ANSWER agreement allowing the underwriters to sell additional shares if demand is high for an offering of securities; can be in part or in full at any price can allow underwriter to profit -doesn't need to be approved by underwriter once its disclosed in the prospectus A company that is not a commercial bank issues a 10-year bond. It is exempt from SEC registration, regardless how sold. The issuer must be what type of organization? - CORRECT ANSWER non-profit Frederick is the CEO of a public company that trades on the OTC Bulletin Board, and he owns 20,000 shares of stock in the company. He has asked you to calculate how many shares he can sell during the next three months. What data do you need to give him an answer? - CORRECT ANSWER -total number of shares outstanding A limit is imposed on the number of control shares an affiliate may sell during any three-month period. The sale can't exceed the greater of 1% of outstanding shares in the same class or the average reported weekly trading volume during the four weeks preceding the sale. However, trading volume is not considered for securities that trade on the OTC Bulletin Board or through OTC Pink. Only __________ are permitted to use free writing prospectuses during the pre- registration period. In the cooling off period (______________________) FWPs may be used by _________, _________, __________, and _________________ issuers. ______________ may never use FWP's. - CORRECT ANSWER 1.) WKSI's 2.) After the registration is filed 3.) WKSI's, seasoned, unseasoned, nonreporting 4.) Ineligible Limited partnership interests are typically regulated as _______________ - CORRECT ANSWER securities, under federal and state laws The Securities Exchange Act of 1934 defines insiders as - CORRECT ANSWER officers, directors, and owners of more than 10% of the outstanding stock of a corporation A syndicate is distributing securities of Worldwide Telecom Inc., a company with an average daily trading volume (ADTV) of $9 million and a public float of $60 million. For an underwriter, when does the Regulation M restricted period begin and end? - CORRECT ANSWER begins: day before pricing the offering; ends: when the distribution is complete ABC Securities is participating in an underwriting for Bright Leaf, Inc., a public company. ABC also serves as a market maker for Bright Leaf and owns a block of its stock. Does it have a conflict of interest? - CORRECT ANSWER Only if it owns at least 10% of the outstanding common stock Are crowdfunding issuers required to update any material changes in the information contained in their Form C disclosures filed with the SEC? If so, when? - CORRECT ANSWER Yes, at least twice over the course of an offering 1.) Within five business days of reaching 50% of the company's target raise 2.) within five business days of reaching 100% of the company's target raise FINRA Rule 5150 - CORRECT ANSWER Fairness Opinions When rendering fairness opinion, firm must disclose: -contingent fees -material relationship for compensation within past 2 years with any party involved in the transaction -independent verification for information that the opinion is reliant on -use of fairness committee -Current -YTM -YTC Bond trading at a discount, rank of yield - CORRECT ANSWER YcYCN -YTC -YTM -CY -NY Bond Equivalent Yield - CORRECT ANSWER allows bondholders to compare bonds with different quotations and payment schedules on an equivalent basis If a treasury quote has a +, this indicates - CORRECT ANSWER that 1/64 has been added to the price stapled financing - CORRECT ANSWER pre-arranged financing from sell-side advisors offered to potential buyers In an asset purchase, the acquirer receives tax benefits from a - CORRECT ANSWER stepped-up basis Section 338(h)(10) -only available for - CORRECT ANSWER equity purchase that the buyer elects to treat as an asset sale for tax purposes -Subchapter S, not subchapter C corporations Subchapter S Corporation - CORRECT ANSWER -able to avoid having income double taxed A type of corporation that is limited to 100 or fewer shareholders, has limited shareholder liability, and requires little financial reporting; taxed as a partnership; also known as an "S" corporation; must be US resident CANNOT: be listed on an exchange or have their shares publicly traded Master Limited Partnership - CORRECT ANSWER A partnership that looks much like a corporation, but is taxed like a partnership and thus avoids the corporate income tax. -is traded on an exchange Nasdaq requirements -initial -continued -not required - CORRECT ANSWER -$4 bid and 3 market makers -$1 bid, 2 market makers, 400 shareholders, minimum book value, minimum monthly trading volume -NOT: seasoning period, minimum daily trading volume Private Placement Memorandum - CORRECT ANSWER a specialized legal form of business plan crafted by lawyers for the purpose of soliciting formal investments Private Investment in Public Equity (PIPE) - CORRECT ANSWER public firm that needs capital quickly sells private equity to investors. Rule 144A - CORRECT ANSWER An exemption to the holding period and volume restrictions of Rule 144 for qualified institutional buyers (QIBs) QIB: insurance companies, investment cos, PBO, investment advisers and trust funds holding at least $100mm in securities -can participate in restricted and unregistered securities offerings. Calculating combined NI for Accretion/Dilution Calculating new shares - CORRECT ANSWER 1.) Acquirer NI + 2.) Target EBIT (1-T) + 3.) Synergies After-Tax - 4.) Tax effected interest expense = combined NI 1.) Acquirer diluted shares outstanding + new shares issued in the transaction HSR Act - CORRECT ANSWER aims to ensure compliance with anti-trust guidelines; the law requires the details of merger transactions to be filed by both parties with the DOJ and FTC gun jumping - CORRECT ANSWER assuming that buyer and seller will receive regulatory approval and beginning the process of combining during the waiting period During a merger, an 8-K must be filed within _ days of (3) - CORRECT ANSWER 4; -signing the DA -Terminating the merger -Closing the merger M14A - CORRECT ANSWER Merger proxy -provides shareholders with all the disclosures and information needed to make an informed vote regarding the deal DEFM14A - CORRECT ANSWER Final version of M14A. A proxy filing for a merger. Must be mailed 20 days before the shareholder meeting and posted online 40 days before. PREM14A - CORRECT ANSWER preliminary merger proxy, must be filed with the SEC at least 20 days prior to the shareholder meeting When a company files a M14A, it is also defined as a _____________ by the SEC - CORRECT ANSWER prospectus public float - CORRECT ANSWER outstanding shares - shares owned by insiders Form S-4 - CORRECT ANSWER registration statement used in a merger, acquisition, or exchange offer Form S-8 - CORRECT ANSWER registration statement filed in an offering of securities to company employees through an employee benefit plan Form S-11 - CORRECT ANSWER Registration statement filed in an offering of real estate investment companies, including REITs WKSI - CORRECT ANSWER Well-known seasoned issuer, allowed to use Form S-3 and meets one of the following requirements 1.) public float of 700mm 2.) has issued at least $1B of non-convertible securities in primary offerings for cash Who can never qualify as a WKSI - CORRECT ANSWER investment companies business development companies Seasoned issuer - CORRECT ANSWER An issuer eligible to use Form S-3 to register primary offerings of securities and have float of at least $75mm Unseasoned issuer - CORRECT ANSWER not allowed to use form S-3 What can cause a WKSI to lose its status - CORRECT ANSWER -not current in filing exchange act reports -has filed for bankruptcy in last 3 years -violated any federal securities law anti-fraud provisions in last 3 years -is a shell company (blank check company) JOBS Act - CORRECT ANSWER Act of 2012 eases federal regulations of initial public offerings to promote investment in startup companies; -EMERGING growth companies Emerging Growth Company (EGC) - CORRECT ANSWER An issuer with annual gross revenues of less than $1 billion -can communicate with QIBs before filing loses status when (earliest of): 1.) sales hit 1B 2.) IPO was 5 years ago 3.)company has issued more than 1B in non-convertible debt in past 3 years 4.)Company becomes a large accelerated filer offer to sell securities during pre-filing period is known as - CORRECT ANSWER gun-jumping Sticker - CORRECT ANSWER Post-effective date amendment to a prospectus IPO timeline - CORRECT ANSWER -bakeoff -mandate -file registration statement -bookbuilding and marketing -SEC effectiveness -allocation -distribution to investors Automatic Shelf Registration - CORRECT ANSWER A more flexible form of shelf registration only available to WKSIs that becomes automatically effective upon filing with the SEC; subject to refereshing requirements ASRs may be offered only if - CORRECT ANSWER -no more than 3 years have elapsed since the initial effective date of the registration Traditional shelf registrations may continued to be offered until a new registration becomes effective but not later than - CORRECT ANSWER 180 days after the 3rd anniversary of the prior effective date Rule 405 - CORRECT ANSWER establishes FWPs, lets an issuer distribute written communications to prospective investors in addition to the red herring. Rules for Free Writing Prospectuses - CORRECT ANSWER WKSI: Any time Normal: permitted only after a registration is filed Ineligible: NEVER WKSI's are the only issuers that can use FWP's ________ - CORRECT ANSWER pre- registration -everyone eligible can in cooling-off or post-effective Rule 430B - CORRECT ANSWER issuers must provide information only when it is known or reasonably available to them SEC Rule 164A - CORRECT ANSWER provides exemption for specific communications made by issuers more than 30 days before a registration statement is filed if the securities offering is not referenced Rule 168 - CORRECT ANSWER exemption for communications made by issuer if -issuer has met all reporting requirements AND -all info is either factual or forward looking Rule 139 - CORRECT ANSWER If issuer is a reporting company or WKSI, BD may publish reports when acting as an underwriter for the underlying security, provided it is continuing regular coverage rule 137 - CORRECT ANSWER BD may publish research reports when not acting as an underwriter Who is liable for untrue or omitted info in registration statements - CORRECT ANSWER 1.) registration signers 2.) directors and partners of the issuer 3.) professionals preparing or certifying reports 4.) Every underwriter sales of up to $50 million are permitted within a 12 month period. of that, no more than $15 million may be sold on behalf of selling shareholders. subject to SEC but not blue sky rules regulation A - CORRECT ANSWER an SEC regulation that exempts public issues of less than $5 million from most registration requirements Tier 2 Regulation A required disclosures - CORRECT ANSWER Tier 2 issuers are required to include audited financial statements in their offering documents and to file annual, semiannual, and current reports with the SEC. Also, if a Tier 2 issue is not listed on a national securities exchange, purchasers in Tier 2 offerings must either be accredited investors or be subject to certain limitations on their investment. Under Rule 147, securities cannot be sold out of state for - CORRECT ANSWER 6 months What is the maximum size of a Rule 147 offering in terms of dollars raised and investors who participate? - CORRECT ANSWER No limit on either 424B - CORRECT ANSWER prospectus containing a description of the securities, key offering terms, use of proceeds and the description of notes The 424B is simply a prospectus for securities that are offered to the public and does not include a fairness opinion. Schedule 14D-9 - CORRECT ANSWER filed in response to a tender offer within 10 business days of commencement -contains a recommendation from the target's board of directors to the targets shareholders on how to respond to the tender offer, typically including a fairness opinion ABC Corp. is acquiring 100% of NCE Corp., paying $100,000. NCE Corp.'s balance sheet on the date of acquisition includes $50,000 of assets and $21,000 of liabilities. NCE's assets and liabilities on the balance sheet are fairly valued except for the real estate which is worth $40,000 more than what is listed on the balance sheet. How much goodwill should be placed on the acquirer's balance sheet? - CORRECT ANSWER SE = 29,000 + Additional Value in Real Estate: 40,000 Total: 69,000 Goodwill = 100k-69k = 31k Harold is the M&A advisor who is responsible for advising Gridlock Seed Co. in a merger deal. Which key documents would you expect to find in his deal file post- closing? - CORRECT ANSWER comfort letter and definitive agreement Gun Jumping - CORRECT ANSWER When communications are made during a period that is off limits. Prohibited Oral or Written communication during the cooling off period, for example. A forward-looking earnings projection during this 30-day period would be considered to be a gun-jumping violation. Which SEC filing is also known as a Current Report? - CORRECT ANSWER 8-K ABC Corp., a public company, is raising capital through a private placement the private sale of its stock to an institution. Must this transaction be reported on a Form 8-K filing? - CORRECT ANSWER Only if the sale increases the number of outstanding shares by 1% or more. If an officer or director acquires additional shares after filing Form 3, those changes must be reported on - CORRECT ANSWER Form 3 is for the "initial" statement of beneficial ownership of any officer or director. Changes to Form 3 are reported on Form 4. To identify the most recent information possible about large activist institutional investors of the ABC Corporation, the best document to examine would be: - CORRECT ANSWER The most recent 13-D filing Under the terms of a selected dealer agreement, participant firms I. act as principal II. act as agent III. may distribute registered securities only IV. may distribute either registered or unregistered securities - CORRECT ANSWER II and IV A selected dealer agreement specifies the terms between the managing underwriter and the selling group members. Selling group members act as agents because they have no financial responsibility for unsold securities. Distributions subject to a selected dealer agreement include both registered and exempt securities (e.g. municipal bonds). A syndicate member in an offering is also known as a - CORRECT ANSWER co- manager A co-manager is a junior participant in an offering of securities, often less than 15% of the overall offering. They are also referred to as syndicate members In an offering with multiple bookrunners, the lead bookrunner's name is shown in which location on the prospectus in relation to the other underwriters? - CORRECT ANSWER Top Left ROA = - CORRECT ANSWER net income/average total assets A contract provision that permits underwriters to cancel a purchase agreement without penalty under specified circumstances is the - CORRECT ANSWER market out clause; A market out clause within an underwriting agreement describes the circumstances under which an underwriter can cancel a purchase agreement without penalty. A qualified institutional buyer (QIB) participates in a Rule 144A offering and is given piggyback rights. What is the advantage of these rights to the QIB? - CORRECT ANSWER ability to sell the shares acquired later in the public market Piggyback registration rights are often used in connection with pre-IPO Rule 144A offerings, sold only to QIBs. The QIB buys stock that can only be sold immediately to other QIBs. However, when the issuer goes public, the shares purchased by the trading. Only one market-maker can be used during regular trading hours. Daily stock buybacks may not exceed 25% of the average daily trading volume which in this case is 2,500,000 shares. For the current quarter, a company reports basic earnings per share of $2.50 and diluted earnings per share of $2.00. It has a dividend payout ratio of 20%. What is its quarterly dividend? - CORRECT ANSWER $0.50 Always use reported (basic) earnings per share, never diluted EPS, in the calculation of dividend payout ratio. During the cooling-off period, the CEO of a company going public accidentally discloses material information to a member of the media. This information is not contained in the prospectus or registration statement. The disclosure takes place at 4 p.m. on Friday. When must a free-writing prospectus be filed with the SEC, disclosing the same information? - CORRECT ANSWER Friday; When there is an inadvertent disclosure of material information during a cooling- off period, it is possible to correct the mistake after-the-fact by filing a free- writing prospectus with the SEC no later than the date of first use. This usually means on the same day the error was made. Time is of the essence in making the information public. Note that this is related to the timing of an FWP rather than under Regulation FD. Under Regulation FD disclosure would be required before the open of trading on the next business day. In an underwriting, a competitive bid is generally used - CORRECT ANSWER by primary dealers when purchasing government securities in Treasury auctions A broker is involved in taking indications of interest for an IPO. The broker talks to a customer who is interested and circles an indication. One day before the effective date, the broker realizes she has not obtained the customer information required by the Suitability Rule. If the information is obtained that same day, is this a violation of the rule? - CORRECT ANSWER No, because the rule requires information to be obtained before execution NewPublicCo raises capital by selling shares to the public at $58.00 per share. The spread is equal to 6% of the total proceeds. What would be a reasonable estimate of the selling concession for this transaction? - CORRECT ANSWER $2.09 (see next question) Corporate Underwriting Spread -Types and % of total - CORRECT ANSWER -sydicate manager's fee (20%) -underwriting fee (20%) -Selling concession (60%) As a broker for ABC Securities, Ted has the opportunity to allocate to his clients shares in an IPO his firm is underwriting. He wants to allocate 1,000 shares to a client who is the CEO of a firm that might decide to hire ABC for future investment banking business. There has been no prior investment banking relationship. Can Ted allocate these shares to curry goodwill with the CEO? - CORRECT ANSWER only if there is no investment banking business within the next 3 months For Emerging Growth Companies (i.e. with less than $_____ in revenue) research can be published ___________________ - CORRECT ANSWER $1B; immediately after the effective date Under Rule 144A, which investors would be considered a qualified institutional buyer? - CORRECT ANSWER Under Rule 144A, a QIB is defined as any institution managing $100mm in discretionary assets or any broker-dealer with $10mm in assets. The word discretion is key to identifying the non-QIB in this question The fairness opinion is rendered - CORRECT ANSWER prior to the signing of the DA When a company files for bankruptcy, the unsecured creditors committee will consist of the - CORRECT ANSWER 7 largest unsecured creditors as appointed by the U.S. Trustee Karen is a broker who has a control relationship with the issuer of securities that she is offering. Under Rule 15c1-5, when must she disclose this relationship in writing to avoid manipulation and deceptive practices? - CORRECT ANSWER Before completion of the transaction Regulation M - CORRECT ANSWER The SEC restricts distribution participants (underwriters and issuers) from bidding for or making secondary market purchases of the stock that is being offered in a distribution. requires underwriters to notify the SEC prior to entering a stabilization bid A partnership wishes to participate in a private placement as an accredited investor. To qualify, the partnership must have total assets of at least - CORRECT ANSWER $5mm at the time of purchase What M&A document would not be part of the tender offer process - CORRECT ANSWER Proxy statement A company has set up a tax-advantaged deferred compensation plan for its senior executive team, but it has not set aside any funding to pay the cost of the plan. The company's obligations under the plan will be made on a "pay-as-you-go" basis. The plan meets all IRS requirements for deferring taxable income to executives. If the company goes bankrupt, where will its executives stand in claiming their benefits? - CORRECT ANSWER on par with other unsecured creditors An attorney representing a company in bankruptcy has priority of the debtor's assets - CORRECT ANSWER after secured creditors but before recent employee wages A company accelerates its taxable income so that the income reported for tax purposes is $10 million greater than the income reported on its 10-K. If the company has a 40% marginal tax rate and a 36% effective tax rate, which of the following is created by this bookkeeping difference? - CORRECT ANSWER $4.0 mm DTA; .4 x 10mm At the end of 2013, Company A has retained earnings of $25,000,000. During 2014 the company earns pre-tax income of $5,000,000. Also, in December, 2014, the company declares a dividend of $0.20 per share on 2,000,000 outstanding shares, to be paid in January, 2015. The company has a marginal tax rate of 40% Affiliates must file Form 144 with the SEC if a proposed sale of control stock exceeds either 5,000 shares or an aggregate dollar amount of $50,000 in any three-month period. Selling her 2,000 shares at the current stock price would create an aggregate sale of $80,000, which is over the limit. An IPO has a very poor reception in the public market. After pricing at $55 per share, the stock price sinks in Nasdaq trading as low as $51. Underwriters are forced to buy shares at a discount to the offering price to support the stock. The offering has a greenshoe option. Can underwriters exercise it to offset their losses? - CORRECT ANSWER yes, within 30 days of the effective date, if the stock price rises above $55 A greenshoe option can be exercised by underwriters in whole or part within 30 days of the effective date. However, it will only be exercised if the stock is selling above the public offering price. What is true about venture capital firms? I. They could be classified as "angel investors." II. Venture Capitalists only fund companies with equity. They would never consider supplementing their contributions with debt. III. An LBO valuation is typically relevant to VC firms. IV. An LBO valuation is typically not relevant to VC firms. - CORRECT ANSWER I and IV In which case can a registered representative participate in an IPO through a brokerage account in which he/she owns 100% of the beneficial interest? - CORRECT ANSWER to avoid dilution of existing holdings Jordan, a research analyst, conducts a comprehensive on-site visit with ABC Metals, Inc., a company he covers. He then summarizes some informal notes in a one-page memo that is sent only to institutional clients of his firm. The memo reiterates the firm's Buy rating on the company. Is this memo a research report? - CORRECT ANSWER only if it is sent to at least 15 recipients A research report is defined as any analysis of equities with a recommendation that is sent to at least 15 recipients. Which of the following are "Excepted Activities" of Rule 102 of Regulation M? I. Odd-lot transactions II. Transactions by closed-end investment companies III. Redemptions by commodity pools or limited partnerships IV. Exercises of securities (e.g. options, warrants, rights, or any conversion privileges) - CORRECT ANSWER I, II, III, IV Each of the items above are excepted activities, and therefore permitted, under Reg M Rule 102. In addition, Rule 102 excepts (permits) offers to sell or the solicitation of offers to buy, unsolicited purchases, and transactions in Rule 144A securities. If an issuer wishes to raise equity via crowdfunding and does not offer through a registered broker-dealer, what other alternative is available? - CORRECT ANSWER The issuer may make the offering through a FINRA-registered funding portal Issuers that wish to raise equity via crowdfunding must approach investors through an intermediary, not directly. Regulation Crowdfunding defines two types of intermediaries: 1) registered broker-dealers; and 2) a FINRA-registered funding portal. What financial metric is impacted by both the interest income a company is generating and the interest expense it is paying? - CORRECT ANSWER Operating Cash flow Interest income and interest expense are both considered components of operating cash flow. They are not cash flow from financing activities. This is because they are continuing income and cost items not one-off events. Who is ultimately responsible for determining that an underwriter's due diligence defense is solid, based on a reasonable investigation of statements and facts contained in a registration statement? - CORRECT ANSWER the underwriter; The due diligence defense means that the underwriter decides when it has done sufficient due diligence to meet the standard for a reasonable investigation. This responsibility cannot be delegated to the underwriter's legal counsel or anyone else. The due diligence defense protects the underwriter from civil liability for false or misleading statement. Under Rule 430A, a preliminary prospectus may be filed as part of a registration statement, and omit timely details of the offering, if the securities are offered for cash and the omitted information is contained in a prospectus - CORRECT ANSWER Within 15 days of the effective date of the registration A preliminary prospectus may be filed as part of the registration statement and omit certain timely details such as the public offering price and amount of proceeds raised. In this case, the omitted material may be included in a final prospectus filed within 15 days of the effective date. who cannot qualify as a "smaller reporting company" - CORRECT ANSWER Investment companies, business development companies and asset-backed issuers are not eligible Section 403 of the Sarbanes-Oxley Act requires disclosures by any stockholder who holds a beneficial interest (directly or indirectly) in - CORRECT ANSWER 10% or more of any class of equity security The disclosure must be filed by directors or officers of the issuer and any stockholder who holds (directly or indirectly) 10% or more of any equity security. Mary Beth is designated by XYZ Corp., a public company, as the person responsible for understanding GAAP and financial statements, for purposes of Sarbanes-Oxley compliance. How is she identified in Sarbanes-Oxley disclosures? - CORRECT ANSWER audit committee financial expert An IPO of ZZZ Corporation will register 1,600,000 shares. ZZZ Corporation will sell 1,000,000 shares to the public and receive proceeds of $49,000,000 net of the underwriting spread. As part of the same offering ZZZ Corporation registers and sells on behalf of the CEO of the firm, 500,000 shares for $24,500,000 net of the underwriting spread. In addition, ABC Corporation's 100,000 shares of ZZZ will be registered and sold for $4,900,000 net of the underwriting spread. ABC had II and IV D) I and III - CORRECT ANSWER B Which of the following is true regarding Private Placements? A) There is a limit to the number of total investors permitted. B) There is a limit to both the amount of money that can be raised and the number of permitted investors. C) There is a limit to the amount of money that can be raised. D) There is no limit to the amount of money that can be raised and there is no limit to the number of total investors. - CORRECT ANSWER D; Private placements can be executed for an unlimited amount of money. Deals in excess of $10 million may be limited to 35 non-accredited investors, but there is no limit to the number of total investors What is true about the requirements necessary to file a Form 13F? A)Institutional investment managers that manage a discretionary portfolio of $100 million or more must file this form once a year. B)If a 13-F document is required of an investment manager, the only holdings they must disclose in their report is long equity positions. C)Corporate insiders must file a Form 13F once a year. D) A mutual fund that manages a discretionary portfolio of $100 million or more must divulge its holdings of all investments by filing the 13-F on a quarterly basis. - CORRECT ANSWER B; Institutional investment managers that manage a discretionary portfolio of $100 million or more must file a quarterly report due 45 days after the close of each quarter. The only holdings disclosed in this report is the investment manager's long equity positions. Company A is a large public company. Company B is a private firm with a single owner. If Company A makes a deal to acquire Company B in exchange for Company A's stock, payable to B's owner, must terms of the deal be made public? A)no, it is considered a private transaction B) no, because there are fewer than five owners of the acquired company C) yes, on the public company's Form 8-K D) yes, on the public company's Form S-4 - CORRECT ANSWER D. Form S-4 is filed with the SEC for business combination or exchange offers. If a public company acquires a private company and issues stock in the transaction, the public can learn details in the S-4 filing of the public company. What is the maximum amount for Regulation A+ Tier 2 offering that can constitute secondary sales by affiliates - CORRECT ANSWER $22.5 A firm commitment underwriting has an effective date of May 18 and a scheduled closing date of May 23. However, due to complications, the underwriters decide to delay the closing to May 26. When must FINRA be notified of the closing delay? - CORRECT ANSWER No later than May 23rd How long must a modified tender offer terms remain open - CORRECT ANSWER 10 days An account in which a restricted person owns less than________________________ can invest in an IPO - CORRECT ANSWER 10% of the beneficial interest The shareholders of ABC Corp. will meet on July 16 and vote on whether to approve a merger. When must ABC shareholders be given a prospectus describing terms and risk of the proposed transaction? A) prior to July 16 B) at least 10 business days prior to July 16 C) within 30 days after the merger is announced D) with sufficient advance notice to be able to read and understand the proposed transaction - CORRECT ANSWER A.) The SEC requires prospectus delivery for securities transactions involving corporate mergers, acquisitions, reclassifications or asset transfers. Securities may not be sold or delivered in these transactions unless preceded by a prospectus, which means prior to the vote of securities holders. Underwriting fees are calculated as a % of - CORRECT ANSWER PAR VALUE Which securities issued by the US government or US government agencies are exempt from the requirement to distribute a prospectus to all investors? - CORRECT ANSWER All US government and agency securities Blue sky fees are - CORRECT ANSWER NOT considered underwriting compensation An underwriter meets a prospective investor for lunch during the cooling-off period for an offering. Without presenting any written information, the underwriter discusses the offering and makes a casual verbal offer to the investor. Is such an offer allowed? A) Yes, provided that a red herring is delivered before the verbal offer is made B) Yes, provided that no sales are completed until the effective date C) No, because offers may not be made until the effective date D) No, because the offer constitutes a prospectus - CORRECT ANSWER B Which one of the following securities can always be sold in New York State, by a New York State-licensed registered rep, without the issuer having to register the securities under the blue-sky laws of New York State? - CORRECT ANSWER A national exchange listed stock The issuer of a private offering prepares offering documents to inform qualified investors and facilitate subscriptions. When must the offering documents be submitted to FINRA? - CORRECT ANSWER Date of first use "at or prior to the time they are made available to any investor The purpose of a lock-up period following an IPO is to A) prohibit corporate insiders from selling shares in the open market. B)give retail investors the opportunity to sell shares in the secondary market. C) avoid negative perception of the transaction. D) maximize the number of shares sold by the underwriter. - CORRECT ANSWER C The purpose of a lock-up period is the help ensure a stable share price by reducing selling pressure and to avoid negative perception that can be create when corporate insider liquidate immediately following a new issue Charles is the CFO of a public company. He wants to know if he is allowed by Sarbanes-Oxley to borrow money from his company 401(k). The answer is A) yes, because it's a loan from the plan, not the company B) only if the loan is taken for a financial hardship C) no, because the law prohibits this type of personal loan D) yes, provided the loan is made at a competitive interest rate - CORRECT ANSWER Sarbanes-Oxley's prohibition on personal loans to executive officers and directors does not extend to the company 401(k) FINRA Rule 2290 contains three required types of written procedures for fairness committees: - CORRECT ANSWER 1) the method for selecting committee members, 2) qualifications needed to sit on the committee, 3) safeguards to promote a balanced review by the committee. Documentation of the committee's compensation is not required. Research analysts who work for deal managers and syndicate members normally have a ______ research quiet period following the IPO, during which no reports can be issued and no public appearances held. The research quiet period is _________ for the manager of follow-on offerings. Syndicate members have no quiet period for research for follow-on offerings and there is never any quiet periods if the issuer is ___________________ - CORRECT ANSWER 10 days; 3 days; an EGC Forms 3, 4, 5; when are they filed? - CORRECT ANSWER Form 3 is filed when a person or entity becomes an insider. Form 4 is filed when an insider makes a trade in the open market or when the insider no longer meets the definition of an insider. Form 5 is filed for every other change in ownership that is not a buy/sell in the open market. This would include: receiving stock as compensation, exercising a stock option, investing in a private placement, or gifting stock. During the restricted period, a passive market maker's per day limit on net purchases is the greater of - CORRECT ANSWER 30% of average daily trading volume or 200 shares Non automatic shelf registration lenght - CORRECT ANSWER 3 years and 180 days vs 3 yrs for ASR Who must/does not have to receive an offering circular in a private placement under RegD - CORRECT ANSWER QIBS never required --non-accredited investors are required to receive an offering circular unless its Rule 504 (less than 10mm) Aside from price, on the basis of which two of the following factors might a buyer differentiate itself on its first round bid? I. Structural considerations II. Independent board III. Poison pill IV. Ability to move quickly - CORRECT ANSWER I and IV; A buyer's ability to move quickly may be valuable to a seller depending on the circumstances. Structural considerations, such as the buyer's willingness to allow the seller to maintain a portion of stock in the combined entity, may also be valuable and set a buyer's bid apart from the pack. FINRA rules prohibit an equity research analyst from attending ______________________. An analyst could be involved in ______________ or ____________________ if the issuer is an emerging growth company (i.e. less than $1 billion in revenue during the prior year). - CORRECT ANSWER investment banking road show; joint due diligence; attend a pitch In a business combination that requires a vote of shareholders to approve a proposed deal, involving a change of securities, a prospectus must be delivered - CORRECT ANSWER prior to the vote Stabilization expenses are subtracted from - CORRECT ANSWER the underwriting fee In the event the lead bookrunner of a follow-on offering seeks to exercise an overallotment option, at what point is the distribution deemed completed? - CORRECT ANSWER -after the securities have been distributed and trading restrictions are terminated Regulation A+ authorizes the SEC to exempt registration for _____________________ offerings not exceeding ____________________ - CORRECT ANSWER public 75mm; 12 month Company O enters into a Definitive Agreement to purchase Company N. Company O plans to execute the merger via a two-step merger, beginning with a tender offer to Company N shareholders, including the CEO. Contingent on the closing of the deal, the CEO will also be receiving a compensation package for taking on a new role at Company O. This compensation package would be permitted only with approval from - CORRECT ANSWER a majority of Company O's compensation committee. Under SEC Rule 10b-18, an issuer that purchases its own shares is limited to daily purchases of no more than - CORRECT ANSWER 25% of ADTV In a all-cash one step merger, what documents are required - CORRECT ANSWER Just proxy