MASTERY EXAM 3 | Questions & Answers (100 %Score) Latest Updated 2024/2025
Comprehensive Questions A+ Graded Answers | 100% Pass
All of the following are accredited investors EXCEPT:
A individual earning $200,000 per year
B couple earning $300,000 per year
C person with a net worth of $1,000,000 exclusive of residence
D person buying $150,000 of the issue within 5 years - The best answer is D.
To be accredited, an individual must have an annual income of $200,000 per year; or a couple must have
an annual income of $300,000 per year; or the purchaser must have a net worth of at least $1,000,000,
exclusive of residence. One is not accredited because a large purchase of the private placement is made.
Under Regulation D, which of the following statements are TRUE?
I A Prospectus must be delivered to all purchasers
II An Offering Memorandum must be delivered to all purchasers
III Full disclosure must be made to investors
IV No disclosure is required to investors
A I and III
B I and IV
C II and III
D II and IV - The best answer is C.
Under Regulation D, purchasers of private placements must be given full disclosure about the issue,
even though no prospectus is required (the issue is exempt). Disclosure is accomplished by providing the
purchaser with a copy of an "Offering Circular," which for smaller private placements is called the
"Offering Memorandum."
11,750,000 Shares
Whatchamacallit Corporation
,Common Stock ($.01 Par Value)
Prospectus
Certain stockholders (the "Selling Stockholders") of Whatchamacallit Corporation (the "Company") are
offering 11,750,000 shares of Common Stock for sale in concurrent offerings in the United States and
outside the United States. Of the shares being offered, 9,750,000 shares are being offered for sale in the
United States and 2,000,000 shares are being offered for sale outside the United States. The price to the
public and underwriting discount for both the U.S. Offering and the International Offering will be the
same. The company will not receive any of the proceeds from the sale of the shares.
The Company's Common Stock is listed on NASDAQ and trades under the symbol WCHM. As of March
15, 2015, the last reported sale price for the Company's common stock was $15.99 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED - The best answer is A.
Generally, registered secondary distributions are used by officers of public held companies and larger
shareholders, who when selling shares, are subject to the requirements of Rule 144 (public notice of sale
and limits on the amount of shares that can be sold each quarter). If an officer or selling shareholder
wishes to sell a large amount of shares (in excess of Rule 144 limits) of that company, it must register
the sale with the SEC, use an underwriter to manage the sale of the shares, and sell with a prospectus.
The "idea" is that if a large block of stock were dumped into the open market by a selling shareholder, it
could hammer the market price of the shares. By using a manager, the stock will be sold in an orderly
fashion into the market and the market price of the outstanding shares should not be adversely
affected.
Since the shares are being offered at the current market price of the stock, Choice B is false. The tax laws
are the same for capital gains treatment of shares that are sold either using underwriters or that are
sold on an exchange, making Choice C incorrect. This company is already publicly traded, therefore it is
filing its financial information with the SEC, which makes the information available to the public, making
Choice D incorrect.
Which of the following statements are TRUE about Rule 147?
I The rule exempts intrastate issues from Federal registration
II The rule exempts intrastate issues from State registration
III Both the issuer and all purchasers must be state residents
IV Resale is permitted to state residents only, for the 180 day period following the offering
,A I and II only
B I, III, IV
C II, III, IV
D I, II, III, IV - The best answer is B.
Rule 147 exempts "intrastate" issues from registration with the SEC. However, the issue is still subject to
state (blue-sky) registration. To obtain the 147 exemption, both the issuer and the purchaser must be
state residents. Resale is restricted to state residents for 6 months following the offering; thereafter, the
issue can be sold interstate. Note, however, that because these securities were never registered with
the SEC, they cannot be publicly traded. The only way to resell them is in a "private transaction."
A new issue private placement offering is:
I exempt under Regulation D
II exempt under Regulation A
III allowed to be sold to a maximum of 35 non-accredited investors
IV limited to a maximum sale of $5,000,000 within 1 year
A I and III
B I and IV
C II and III
D II and IV - The best answer is A.
Regulation D allows a "private placement" exemption if an issue is sold to a maximum of 35 "non-
accredited" investors. The issue can be sold to an unlimited number of "accredited" (wealthy and
institutional) investors under this exemption and still be considered a private placement. There is no
dollar limitation on the amount of securities that can be sold under a private placement exemption.
The Securities Act of 1933:
I requires the registration of non-exempt securities
II does not require the registration of non-exempt securities
III requires the registration of exempt securities
, IV does not require the registration of exempt securities
A I and III
B I and IV
C II and III
D II and IV - The best answer is B.
The Securities Act of 1933 requires registration of non-exempt securities - these are issues that are not
exempt from the registration provisions of the Act. Exempt securities do not have to be registered under
the 1933 Act.
A Regulation A exemption from full SEC registration is available for new issue offerings that do not
exceed:
I $20,000,000 within a 12 month period for Tier 1 offerings
II $20,000,000 within a 12 month period for Tier 2 offerings (A+ offerings)
III $75,000,000 within a 12 month period for Tier 1 offerings
IV $75,000,000 within a 12 month period for Tier 2 offerings (A+ offerings)
A I and III
B I and IV
C II and III
D II and IV - The best answer is B.
Regulation A is intended to make it easier for start-up companies to raise capital. It gives an exemption
from full registration for offerings of up to $75 million within a 12 month period. The rule is split into
Tier 1 and Tier 2.
Tier 1 offerings, up to a maximum amount of $20 million, are given the easiest registration method and
do not require audited financial statements.
Tier 2 offerings allow a maximum of $75 million to be raised, but require audited financial statements.
Tier 2 issues are also called Regulation A+ issues and can be exchange listed.
Form 1-A is filed with the SEC to claim the exemption. It gives disclosure about the issue and a "20 day
review period" must be completed before the issue can be sold. Disclosure to investors is made through
an Offering Circular rather than a Prospectus.
Comprehensive Questions A+ Graded Answers | 100% Pass
All of the following are accredited investors EXCEPT:
A individual earning $200,000 per year
B couple earning $300,000 per year
C person with a net worth of $1,000,000 exclusive of residence
D person buying $150,000 of the issue within 5 years - The best answer is D.
To be accredited, an individual must have an annual income of $200,000 per year; or a couple must have
an annual income of $300,000 per year; or the purchaser must have a net worth of at least $1,000,000,
exclusive of residence. One is not accredited because a large purchase of the private placement is made.
Under Regulation D, which of the following statements are TRUE?
I A Prospectus must be delivered to all purchasers
II An Offering Memorandum must be delivered to all purchasers
III Full disclosure must be made to investors
IV No disclosure is required to investors
A I and III
B I and IV
C II and III
D II and IV - The best answer is C.
Under Regulation D, purchasers of private placements must be given full disclosure about the issue,
even though no prospectus is required (the issue is exempt). Disclosure is accomplished by providing the
purchaser with a copy of an "Offering Circular," which for smaller private placements is called the
"Offering Memorandum."
11,750,000 Shares
Whatchamacallit Corporation
,Common Stock ($.01 Par Value)
Prospectus
Certain stockholders (the "Selling Stockholders") of Whatchamacallit Corporation (the "Company") are
offering 11,750,000 shares of Common Stock for sale in concurrent offerings in the United States and
outside the United States. Of the shares being offered, 9,750,000 shares are being offered for sale in the
United States and 2,000,000 shares are being offered for sale outside the United States. The price to the
public and underwriting discount for both the U.S. Offering and the International Offering will be the
same. The company will not receive any of the proceeds from the sale of the shares.
The Company's Common Stock is listed on NASDAQ and trades under the symbol WCHM. As of March
15, 2015, the last reported sale price for the Company's common stock was $15.99 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED - The best answer is A.
Generally, registered secondary distributions are used by officers of public held companies and larger
shareholders, who when selling shares, are subject to the requirements of Rule 144 (public notice of sale
and limits on the amount of shares that can be sold each quarter). If an officer or selling shareholder
wishes to sell a large amount of shares (in excess of Rule 144 limits) of that company, it must register
the sale with the SEC, use an underwriter to manage the sale of the shares, and sell with a prospectus.
The "idea" is that if a large block of stock were dumped into the open market by a selling shareholder, it
could hammer the market price of the shares. By using a manager, the stock will be sold in an orderly
fashion into the market and the market price of the outstanding shares should not be adversely
affected.
Since the shares are being offered at the current market price of the stock, Choice B is false. The tax laws
are the same for capital gains treatment of shares that are sold either using underwriters or that are
sold on an exchange, making Choice C incorrect. This company is already publicly traded, therefore it is
filing its financial information with the SEC, which makes the information available to the public, making
Choice D incorrect.
Which of the following statements are TRUE about Rule 147?
I The rule exempts intrastate issues from Federal registration
II The rule exempts intrastate issues from State registration
III Both the issuer and all purchasers must be state residents
IV Resale is permitted to state residents only, for the 180 day period following the offering
,A I and II only
B I, III, IV
C II, III, IV
D I, II, III, IV - The best answer is B.
Rule 147 exempts "intrastate" issues from registration with the SEC. However, the issue is still subject to
state (blue-sky) registration. To obtain the 147 exemption, both the issuer and the purchaser must be
state residents. Resale is restricted to state residents for 6 months following the offering; thereafter, the
issue can be sold interstate. Note, however, that because these securities were never registered with
the SEC, they cannot be publicly traded. The only way to resell them is in a "private transaction."
A new issue private placement offering is:
I exempt under Regulation D
II exempt under Regulation A
III allowed to be sold to a maximum of 35 non-accredited investors
IV limited to a maximum sale of $5,000,000 within 1 year
A I and III
B I and IV
C II and III
D II and IV - The best answer is A.
Regulation D allows a "private placement" exemption if an issue is sold to a maximum of 35 "non-
accredited" investors. The issue can be sold to an unlimited number of "accredited" (wealthy and
institutional) investors under this exemption and still be considered a private placement. There is no
dollar limitation on the amount of securities that can be sold under a private placement exemption.
The Securities Act of 1933:
I requires the registration of non-exempt securities
II does not require the registration of non-exempt securities
III requires the registration of exempt securities
, IV does not require the registration of exempt securities
A I and III
B I and IV
C II and III
D II and IV - The best answer is B.
The Securities Act of 1933 requires registration of non-exempt securities - these are issues that are not
exempt from the registration provisions of the Act. Exempt securities do not have to be registered under
the 1933 Act.
A Regulation A exemption from full SEC registration is available for new issue offerings that do not
exceed:
I $20,000,000 within a 12 month period for Tier 1 offerings
II $20,000,000 within a 12 month period for Tier 2 offerings (A+ offerings)
III $75,000,000 within a 12 month period for Tier 1 offerings
IV $75,000,000 within a 12 month period for Tier 2 offerings (A+ offerings)
A I and III
B I and IV
C II and III
D II and IV - The best answer is B.
Regulation A is intended to make it easier for start-up companies to raise capital. It gives an exemption
from full registration for offerings of up to $75 million within a 12 month period. The rule is split into
Tier 1 and Tier 2.
Tier 1 offerings, up to a maximum amount of $20 million, are given the easiest registration method and
do not require audited financial statements.
Tier 2 offerings allow a maximum of $75 million to be raised, but require audited financial statements.
Tier 2 issues are also called Regulation A+ issues and can be exchange listed.
Form 1-A is filed with the SEC to claim the exemption. It gives disclosure about the issue and a "20 day
review period" must be completed before the issue can be sold. Disclosure to investors is made through
an Offering Circular rather than a Prospectus.
