FINRA EXAM 2026/2027 NEWEST PACKAGE DEAL WITH
COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |ALREADY GRADED A+|
Debt to capitalization ratio use _____________ - ANSWER book value, including of equity
Green shoe clause - 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? - 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? - 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. - 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 _______________ - ANSWER securities,
under federal and state laws
The Securities Exchange Act of 1934 defines insiders as - 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? - 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? - 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? - 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 - 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
-insider compensation (fairness of compensation to any insider of the client company relative to
compensation to public shareholders or employees
An investment banking firm is receiving a fee of $25,000 for writing a fairness opinion and providing
other advice pertaining to an M&A transaction. In which case must the amount of the fee be
disclosed? - ANSWER In no case
,The ratio of current assets to current liabilities is most commonly known as the - ANSWER current
ratio
Price to Book Value Calculation - ANSWER (stock price x outstanding shares) / (shareholders equity -
goodwill)
Rule 139 exclusion is available for - ANSWER The Rule 139 exclusion is available only for research
coverage that is ongoing and does not represent a broker dealer's initial coverage on the issuer or its
securities.
two main exemptions that an underwriter may claim as defense against a civil suit alleging an untrue
statement in a registration - ANSWER -"reasonable investigation and grounds for belief"
-"lack of knowledge"
Which of the following categories of filers must file their Form 10-Q within 40 calendar days?
I. Large accelerated filer
II. Non-accelerated filer
III.Small accelerated filer
IV. Accelerated filer - ANSWER I and IV
Large accelerated filers ($700 million or greater public float) and accelerated filers ($75 million or
greater public float and less than $700 million) have 40 calendar days from the end of the fiscal
quarter to file a Form 10-Q.
10-Q filing deadlines of large accelerated filers, compared to accelerated filers, and non-accelerated?
- ANSWER The same for both
The 10-Q filing deadline is 40 days after the end of each fiscal quarter for both large accelerated filers
and accelerated filers. It is 45 days for other (non-accelerated) filers.
Three categories of filers and qualifications - ANSWER -Large Accelerated ($700mm + non-affiliate
market cap or more)
, -Accelerated ($75mm-$699mm)
-Non-Accelerated (<75mm)
Underwriters act in an agency capacity when engaged in which types of underwritings?
I. Firm commitment
II. Mini-max
III.Best efforts
IV. Standby - ANSWER II and III.
Underwriters are acting in an agent capacity when the issuer has the risk of the offering
Zenith Securities is an underwriter in an IPO. The underwriting agreement specifies that Zenith will
be paid a pre-set amount of deal revenue, based on its allocation of shares, regardless of the number
of shares Zenith is actually able to distribute. What type of underwriting is this? - ANSWER fixed
economics
If taxable income is greater than book income, a ___________ is generated - ANSWER deferred tax
asset
Levered Beta Calculation - ANSWER BL= BU x (1+(1-T)*(D/E))
The spread between the nominal yield and current yield is roughly equal to - ANSWER the spread
between the CY and YTM
If a bond is trading at a premium, rank of yield - ANSWER NCYYc
-Nominal
-Current
-YTM
-YTC
Bond trading at a discount, rank of yield - ANSWER YcYCN
COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |ALREADY GRADED A+|
Debt to capitalization ratio use _____________ - ANSWER book value, including of equity
Green shoe clause - 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? - 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? - 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. - 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 _______________ - ANSWER securities,
under federal and state laws
The Securities Exchange Act of 1934 defines insiders as - 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? - 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? - 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? - 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 - 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
-insider compensation (fairness of compensation to any insider of the client company relative to
compensation to public shareholders or employees
An investment banking firm is receiving a fee of $25,000 for writing a fairness opinion and providing
other advice pertaining to an M&A transaction. In which case must the amount of the fee be
disclosed? - ANSWER In no case
,The ratio of current assets to current liabilities is most commonly known as the - ANSWER current
ratio
Price to Book Value Calculation - ANSWER (stock price x outstanding shares) / (shareholders equity -
goodwill)
Rule 139 exclusion is available for - ANSWER The Rule 139 exclusion is available only for research
coverage that is ongoing and does not represent a broker dealer's initial coverage on the issuer or its
securities.
two main exemptions that an underwriter may claim as defense against a civil suit alleging an untrue
statement in a registration - ANSWER -"reasonable investigation and grounds for belief"
-"lack of knowledge"
Which of the following categories of filers must file their Form 10-Q within 40 calendar days?
I. Large accelerated filer
II. Non-accelerated filer
III.Small accelerated filer
IV. Accelerated filer - ANSWER I and IV
Large accelerated filers ($700 million or greater public float) and accelerated filers ($75 million or
greater public float and less than $700 million) have 40 calendar days from the end of the fiscal
quarter to file a Form 10-Q.
10-Q filing deadlines of large accelerated filers, compared to accelerated filers, and non-accelerated?
- ANSWER The same for both
The 10-Q filing deadline is 40 days after the end of each fiscal quarter for both large accelerated filers
and accelerated filers. It is 45 days for other (non-accelerated) filers.
Three categories of filers and qualifications - ANSWER -Large Accelerated ($700mm + non-affiliate
market cap or more)
, -Accelerated ($75mm-$699mm)
-Non-Accelerated (<75mm)
Underwriters act in an agency capacity when engaged in which types of underwritings?
I. Firm commitment
II. Mini-max
III.Best efforts
IV. Standby - ANSWER II and III.
Underwriters are acting in an agent capacity when the issuer has the risk of the offering
Zenith Securities is an underwriter in an IPO. The underwriting agreement specifies that Zenith will
be paid a pre-set amount of deal revenue, based on its allocation of shares, regardless of the number
of shares Zenith is actually able to distribute. What type of underwriting is this? - ANSWER fixed
economics
If taxable income is greater than book income, a ___________ is generated - ANSWER deferred tax
asset
Levered Beta Calculation - ANSWER BL= BU x (1+(1-T)*(D/E))
The spread between the nominal yield and current yield is roughly equal to - ANSWER the spread
between the CY and YTM
If a bond is trading at a premium, rank of yield - ANSWER NCYYc
-Nominal
-Current
-YTM
-YTC
Bond trading at a discount, rank of yield - ANSWER YcYCN
