A type of offering in which whatever is not sold is retained by the issuing corporation is:
a. A firm-commitment underwriting
b. A best-efforts underwriting
c. An all-or-none underwriting
d. A standby underwriting
b
A type of offering in which whatever is not sold is returned to the issuing corporation is a best-efforts underwriting.
Which TWO of the following statements are TRUE of treasury stock?
I.It is stock that has been repurchased by a corporation
II.It receives dividends
III.It has voting rights
IV.It is listed on the company's balance sheet
a.I and II
b.II and III
c.I and IV
c
Treasury stock (shares repurchased by the company) does not receive dividends and does not have voting rights. It is listed on the company's balance sheet.
When a broker-dealer receives a confirmation of a trade from another member firm and has no knowledge of the transaction, the broker-dealer will send a:
a.Complaint notice to FINRA
b.Complaint notice to the exchange where the transaction was executed
c.Do
c
A DK notice is used for a don't know trade. This occurs when one side does not recognize the trade or the firms disagree on the details.
Mrs. Green enters an order to sell stock that is currently in her safe deposit box. According to SEC rules, a broker-dealer must buy-in the stock if Mrs. Green does not deliver the shares within:
a. 3 business days after the trade date
b. 3 business days
d
SEC rules require that the broker-dealer must receive the stock (or, if necessary, buy it in) within 10 business days after settlement
Which TWO of the following orders is a designated market maker (DMM) prohibited from accepting on his book?
I. An open (GTC) order
II. A market order
III. A day order
IV. A not-held order
a.I and III
b.I and IV
c.II and III
d.II and IV
d
A designated market maker may accept open GTC orders and day orders on his book. The DMM may not accept market orders and not-held orders on his book. A not-held order allows a floor broker to use his expertise with regard to the proper time and price f
An investor sells uncovered calls and, just prior to their expiration, sells short the underlying stock. The intent is to keep the price from rising above the exercise price. Such an action is called:
a. Pegging
b. Supporting
c. Capping
d. Front-running
c
Writers of uncovered calls will benefit if they can prevent the price of stock from rising above the exercise price. They could accomplish this by capping the stock (entering sell orders to prevent the price from rising above a certain level). Capping i
When a broker-dealer is not acting for its own account but is making securities transactions for the accounts of others, the firm is acting as a(n):
a. Broker
b. Principal
c. Underwriter
d. Dealer
a
When a broker-dealer is making securities transactions for the accounts of others, the broker-dealer or brokerage firm is acting as a broker (agent). When the firm is selling from its own inventory, it is acting as a principal (dealer).
Which TWO of the following statements are TRUE concerning the characteristics of rights?
I.They have an exercise price that
is higher than the current market price
II.They have an exercise price that is lower than the current market price
III.They are iss
c
Each existing common stockholder would receive one right for each share owned. The number of rights needed to buy one share of the new stock, the purchase price, and the period for exercising the rights vary. Usually, the offer is only good for a limite
Quotes for non-Nasdaq, over-the-counter traded equities can be obtained from the:
I.Third market
II.OTC Pink Market
III.Consolidated Quotation System
IV.OTC Bulletin Board
a. I and III only
b. I and IV only
c. II and III only
d. II and IV only
d
Quotes for non-Nasdaq, over-the-counter traded equities can be found in the OTC Pink Market and the OTC Bulletin Board (OTCBB). The third market refers to exchange-listed securities trading over-the-counter and the quotes can be found on the Consolidate
A corporation calls for the redemption of 1,000,000 shares of convertible preferred stock. The corporation announces that the convertible preferred will be redeemed at a price of $20 plus an accumulated dividend of 12 cents. Each share of preferred can be
c
The least attractive alternative for a preferred stockholder is to convert the shares into common stock. If an investor redeemed the shares, the preferred stockholder can receive $20 + $0.12 of accrued dividends, which would amount to $20.12. If the inv
In an initial public offering (IPO), indications of interest are: I.Binding on the broker-dealer
II.Not binding on the broker-dealer
III.Binding on the customer
IV.Not binding on the customer
a. I and III
b. I and IV
c. II and III
d. II and IV
d
Broker-dealers are not obligated to fill (allocate securities) for indications of interest since there may not be enough securities to fill all indications of interest. The customer is also not bound by his indication of interest.
Which TWO of the following statements are TRUE regarding ADRs?
I.They facilitate the trading of foreign securities in U.S. markets
II.They facilitate the trading of U.S. securities in foreign markets
III.They are receipts issued for foreign securities
IV.
a
American Depositary Receipts (ADRs) are receipts issued for foreign stock. The actual stocks are deposited in foreign branches of American banks and the receipts are traded in the U.S. The issuance of the receipts aids in the transfer of ownership and f
An individual wishes to sell restricted securities according to the Rule 144 exemption. There are 6,000,000 shares outstanding. The trading volume for the last 5 weeks prior to the sale are:
April 1..........45,000
April 8..........62,000
April 15........
c
The average weekly volume for the last four weeks prior to the sale equals 69,750 shares. (Add the weekly volume for the four weeks from 4/8 to 4/29 and divide by 4.) One percent of the shares outstanding is 60,000. The individual may sell the greater o
The Board of Directors of a corporation is responsible for establishing all of the following dates, EXCEPT the:
a. Declaration date
b. Payable date
c. Ex-date
d. Record date
c
The ex-dividend date is standardized in the securities industry and is normally two business days prior to the record date.
A stock closed at $44 on the NYSE on September 14. It trades ex-dividend 50 cents a share on the opening of trading on September 15. Which TWO of the following GTC orders will be reduced?
I.An open buy limit order
II.An open sell limit order
III.An open b
b
All GTC orders that are entered below the market (buy limit orders, sell stop orders, and sell stop-limit orders) are automatically reduced by the dollar amount of the dividend or right when the stock sells ex- (without the) dividend or right. These ord
An investor owns shares of stock that have declined in value. She wants to sell them at $39 a share but is not willing to accept less than $38. The RR should recommend which of the following orders?
a. A market order
b. Sell limit at $39
c. Sell stop $38,
d
If an investor wants to sell a security if the price falls, but is not willing to accept less than a certain price, the RR should recommend a sell stop-limit order. In this example, the first trade at or below $39 would trigger (activate) the order into
The third market is concerned with:
a. OTC securities only
b. Listed securities only
c. NYSE-listed securities traded in the OTC market
d. U.S. government securities traded OTC
c
c
The third market is the term used to describe a situation where a security listed on the NYSE is traded in the OTC market.
Which of the following choices is an example of a stabilizing bid by the syndicate manager of a new issue?
Public Offering Price..........Bid
a. $15............................$15
b. $21............................$21.13
c. $25............................
a
The syndicate manager would place a stabilizing bid at or below the public offering price ($15) of the new issue. The syndicate bid could be at $15. Stabilization prevents the market price from declining below the offering price, thereby aiding the mark
Ms. Green owns 600,000 shares of a company's stock. If there are 3,000,000 outstanding shares, she will be considered an insider:
a. Only if she is an officer or director
b. Only if she does not report all changes in position to the SEC
c. Only if she doe
d
According to the Securities Exchange Act of 1934, any person who is an officer or director, or who owns more than 10% of a company's outstanding stock, is considered an insider. Ms. Green owns 20% of the outstanding shares (600,000 divided by 3,000,000)
Which of the following persons may purchase a new issue from a member firm according to the New Issue Rule?
a.The brother-in-law of a person associated with the member firm
b.The uncle of a person associated with a member firm
c.A buy-side trader employed
b
Restricted persons are not permitted to purchase shares of an equity IPO under FINRA's New Issue Rule. Immediate family members of a person associated with a member firm, portfolio managers, and owners of a broker-dealer are considered restricted person
On February 22, an investor sold 100 shares of ABC short at $34 a share. The investor covered the position on November 3 by purchasing 100 shares of ABC at $39 a share, establishing a 5-point loss. If, on December 15, the investor shorts 100 shares of ABC
d
Reinstating a position within 30 days of realizing a loss will trigger the wash sale rule. Since the position is reinstated after 30 days, the client may recognize a $500 short-term capital loss.
An individual owns 100 shares of GHI stock. If GHI announces a 3-for-1 stock split, the individual:
I. Will receive an additional stock certificate for 200 shares
II. Must return his old stock certificate and will be issued a new certificate for 300 share
b
After a 3-for-1 split, a stockholder owning 100 shares of common stock will receive a stock certificate for an additional 200 shares. However, the value of the investment in GHI stock will remain the same because a stock split creates more shares, thus
A Regulation D offering may be sold to a maximum of:
a. 15 nonaccredited investors
b. 15 accredited investors
c. 35 nonaccredited investors
d. 35 accredited investors
c
A Regulation D (private placement) offering may be sold to a maximum of 35 nonaccredited investors. There is no limit on the number of accredited investors. An individual will be considered an accredited investor if he has a net worth of $1,000,000 or h
A Regulation A exemption is allowed of an issuer offering:
a. 500,000 shares or less
b. Securities with a value not exceeding $10,000,000
c. Securities with a value not exceeding $5,000,000
d. Securities only to residents of a specific state
c
A Regulation A offering is exempt from the registration and prospectus requirements under the Securities Act of 1933. The offering is limited to the issuance of $5,000,000 worth of securities during a 12-month period.
A company declares a forward stock split. What is the effect on the stock's par value?
a. No effect on the par value
b. An increase in the par value
c. A decrease in the par value
d. An increase in the par value and a decrease in the number of shares outs
c
When a company declares a forward stock split, the number of outstanding shares increases and the par value decreases proportionately. One reason for a forward stock split is to make the stock attractive to a wider range of investors. By having the stoc