CEP Level 1 Exam Questions with Verified Answers Latest Update 2025 Graded A+
The Exchange Act rule that prohibits trading in securities by a person having "material non-public"
information is: - Answers Rule 10b-5
Which is the statute that sets forth provisions promulgated by the Board of Governors of the Federal
Reserve System to regulate the extension of credit by brokers and dealers in connection with the
purchase or carrying of securities? - Answers Regulation T
Which agency is responsible for the provision to regulate the extension of credit by brokers and dealers
in connection with the purchase or carrying of securities? - Answers Federal Reserve
How and when do an insider's purchases under a qualified Section 423 ESPP need to be reported to the
SEC? - Answers The purchases are not required to be reported, but the insider's holdings should be
updated to reflect the purchases on the next form filed by the insider
A public company's equity plan authorizes the delivery of previously-owned shares of stock as a
payment method for option exercises. A director of the company takes advantage of this payment
method by tendering 200 shares to exercise 500 options. What is her reporting responsibility in
connection with the award? - Answers She must report both the exercise and the sale of the shares she
used to effect the swap on a Form 4
Shares held in a brokerage account can be voted - Answers Only by the beneficial owner
When is the grant of an equity award required to be reported for Section 16 officers, and on which
form? - Answers Within 2 business days on Form 4
Broker -assisted cashless exercises can take what kind of forms: - Answers Same-day sales, sell-to-cover
and promissory note
Which of the following individuals would be considered an affiliate of the issuer? - Answers All directors
and certain key executive officers
During any 12-month period the aggregate sales price or amount of securities sold in reliance on Rule
701 cannot exceed the greatest of: - Answers $1 million, 15% of the total assets of the issuer, 15% of the
outstanding amount of the class securities being offered and sold in reliance on Rule 701
Rule 16b-3 - Answers lists matchable transactions under Section 16(b), includes exemptions to reporting
under Section 16(a), also is designed to facilitate the receipt of stock-based compensation by reporting
persons without incurring liability under Section 16(b)
In a sell-to-cover broker's transaction: - Answers shares are typically registered electronically in the
name of the broker, and held by the broker in "street name" on behalf of the new stockholder for ease
of future trading.
, Which is NOT required to be reported by a public company insider on Form 4? - Answers The expiration
or cancellation of a stock option
An executive receives 300 RSA shares and 150 RSU shares. At the time of the next annual shareholder
meeting, none of the shares have vested. How many votes does the executive have available to vote at
the shareholder meeting? - Answers 300. Because the stock is actually issued for restricted stock awards
at the time of grant, all shares are eligible for voting even before they vest. Restricted stock units are not
settled in issued stock until the units vest, so no voting rights attach to the units.
A plan prospectus is: - Answers A summary of the plan terms, description of the options' tax
consequences, and other information to help employees decide whether to exercise options.
What is false regarding voting rights? - Answers RSUs will have have voting rights upon vesting, RSUs will
have have voting rights upon vesting
Which are the main provisions of Sarbanes-Oxley? - Answers Form 4 must be filed within 2 days of
reportable event,
Limitations on loans to Executive Officers and Directors, Forfeiture of compensation for the CEO or COO
if financial restatement is necessary due to their misconduct.
The value of equity awards shown in the Summary Compensation table includes: - Answers both stock
and option awards granted during the last three completed fiscal years
The CEO of a publicly traded company conducts a same-day sale exercise during an open window
period. The exercised options had been granted to her three years earlier, immediately after the
company's successful IPO. The shares under the grant were covered by an S-8 registration statement.
What is true of this transaction? - Answers The shares are subject to Rule 144
Former officers and directors: - Answers must report non-exempt transactions that occur after they are
no longer subject to Section 16 if those transactions occur within six months of an opposite-way non-
exempt transaction that occurred while they were subject to Section 16
Rule 144 includes: - Answers Minimum holding period of six months from purchase; Resales of restricted
securities must be reported on Form 144; Volume sales limitations measured over a rolling three-month
period; A Form 144 needs to be filed with the listing stock exchange
Regulation S - Answers a clarification of a territorial approach to the registration requirements of Section
5 of the 1933 Act
Regulation D - Answers exemption from registration under Section 3(b) of the 1933 Act
Regulation G - Answers applies to the extension of credit by certain corporations in connection with the
purchase of shares of stock under an employee stock option plan
The Exchange Act rule that prohibits trading in securities by a person having "material non-public"
information is: - Answers Rule 10b-5
Which is the statute that sets forth provisions promulgated by the Board of Governors of the Federal
Reserve System to regulate the extension of credit by brokers and dealers in connection with the
purchase or carrying of securities? - Answers Regulation T
Which agency is responsible for the provision to regulate the extension of credit by brokers and dealers
in connection with the purchase or carrying of securities? - Answers Federal Reserve
How and when do an insider's purchases under a qualified Section 423 ESPP need to be reported to the
SEC? - Answers The purchases are not required to be reported, but the insider's holdings should be
updated to reflect the purchases on the next form filed by the insider
A public company's equity plan authorizes the delivery of previously-owned shares of stock as a
payment method for option exercises. A director of the company takes advantage of this payment
method by tendering 200 shares to exercise 500 options. What is her reporting responsibility in
connection with the award? - Answers She must report both the exercise and the sale of the shares she
used to effect the swap on a Form 4
Shares held in a brokerage account can be voted - Answers Only by the beneficial owner
When is the grant of an equity award required to be reported for Section 16 officers, and on which
form? - Answers Within 2 business days on Form 4
Broker -assisted cashless exercises can take what kind of forms: - Answers Same-day sales, sell-to-cover
and promissory note
Which of the following individuals would be considered an affiliate of the issuer? - Answers All directors
and certain key executive officers
During any 12-month period the aggregate sales price or amount of securities sold in reliance on Rule
701 cannot exceed the greatest of: - Answers $1 million, 15% of the total assets of the issuer, 15% of the
outstanding amount of the class securities being offered and sold in reliance on Rule 701
Rule 16b-3 - Answers lists matchable transactions under Section 16(b), includes exemptions to reporting
under Section 16(a), also is designed to facilitate the receipt of stock-based compensation by reporting
persons without incurring liability under Section 16(b)
In a sell-to-cover broker's transaction: - Answers shares are typically registered electronically in the
name of the broker, and held by the broker in "street name" on behalf of the new stockholder for ease
of future trading.
, Which is NOT required to be reported by a public company insider on Form 4? - Answers The expiration
or cancellation of a stock option
An executive receives 300 RSA shares and 150 RSU shares. At the time of the next annual shareholder
meeting, none of the shares have vested. How many votes does the executive have available to vote at
the shareholder meeting? - Answers 300. Because the stock is actually issued for restricted stock awards
at the time of grant, all shares are eligible for voting even before they vest. Restricted stock units are not
settled in issued stock until the units vest, so no voting rights attach to the units.
A plan prospectus is: - Answers A summary of the plan terms, description of the options' tax
consequences, and other information to help employees decide whether to exercise options.
What is false regarding voting rights? - Answers RSUs will have have voting rights upon vesting, RSUs will
have have voting rights upon vesting
Which are the main provisions of Sarbanes-Oxley? - Answers Form 4 must be filed within 2 days of
reportable event,
Limitations on loans to Executive Officers and Directors, Forfeiture of compensation for the CEO or COO
if financial restatement is necessary due to their misconduct.
The value of equity awards shown in the Summary Compensation table includes: - Answers both stock
and option awards granted during the last three completed fiscal years
The CEO of a publicly traded company conducts a same-day sale exercise during an open window
period. The exercised options had been granted to her three years earlier, immediately after the
company's successful IPO. The shares under the grant were covered by an S-8 registration statement.
What is true of this transaction? - Answers The shares are subject to Rule 144
Former officers and directors: - Answers must report non-exempt transactions that occur after they are
no longer subject to Section 16 if those transactions occur within six months of an opposite-way non-
exempt transaction that occurred while they were subject to Section 16
Rule 144 includes: - Answers Minimum holding period of six months from purchase; Resales of restricted
securities must be reported on Form 144; Volume sales limitations measured over a rolling three-month
period; A Form 144 needs to be filed with the listing stock exchange
Regulation S - Answers a clarification of a territorial approach to the registration requirements of Section
5 of the 1933 Act
Regulation D - Answers exemption from registration under Section 3(b) of the 1933 Act
Regulation G - Answers applies to the extension of credit by certain corporations in connection with the
purchase of shares of stock under an employee stock option plan
