Series 7 Regulations UPDATED Exam
Questions and CORRECT Answers
Securities Act of 1933 - CORRECT ANSWER - Federal regulation of the securities
markets started after the stock market crash of 1929. Congressional investigations revealed
overly speculative new issue market fed by hype/rumor was cause of speculative bubble that
burst. Passed to regulate primary market new issues.
Securities exchange act of 1934 - CORRECT ANSWER - following investigation into
1929 crash, found manipulation of trading markets. passed to regulate secondary market trading
of securities.
Trust indenture act of 1939 - CORRECT ANSWER - passed to safeguard investors in
corporate bonds by requiring the appointment of a trustee to oversee corporate compliance with
requirements of the "trust indenture"
investment company act of 1940 - CORRECT ANSWER - passed to regulate the activities
of investment companies and to safeguard the purchasers of investment company securities
securities investor protection act of 1970 - CORRECT ANSWER - passed to protect
customer funds and securities when a brokerage firm fails
securities acts amendments of 1975 and 1988 - CORRECT ANSWER - in XXXX, the
securities acts were amended to make them "more current," and in XXXX, the 1934 act was
amended because of insider trading abuses that came to light just before the crash of 1987
sarbanes oxley act of 2002 - CORRECT ANSWER - passed in response to the wave of
corporate scandals that became evident after the great stock market meltdown of 2000
Securities Act of 1933 - CORRECT ANSWER - required issuers be provided with detailed
prospectus before purchase completed, applies to non-exempt issues, registration statement
(basically copy of prospectus - issuers responsibility) must be filed with SEC before any sales
related activities take place.
, Securities Act of 1933, registration statement - CORRECT ANSWER - includes general
character of business, uses of proceeds, historical audited financial statements, biographical data
on officers/their % holdings, legal issues
Securities Act of 1933, 20-day cooling off period - CORRECT ANSWER - once filed,
enters this period - SEC reviews the filing for full and fair disclosure, if theirs a problem, issuer
gets a deficiency letter. during period, issue cannot be sold, advertised, recommended, orders
solicited. issue CAN have underwriters issue preliminary prospectus - red herring. lists of
interested customers may be drawn up - taking indications of interest
Securities Act of 1933, effective date - CORRECT ANSWER - after 20 day cooling period
ends, registration is effective
Securities Act of 1933, prospectus details - CORRECT ANSWER - final prospectus must
be given to purchasers in 90 day period following effective date. if an issuer already has
registered stock outstanding, a prospectus only has to be delivered for 40 days. prospectus
delivery has been eased for issuers whose stock is listed on and exchange or NASDAQ - 25 day
delivery period
Securities Act of 1933, electronic prospectus delivery - CORRECT ANSWER - permitted
so that internet access equals delivery. no hard copy requirement - unless customer never
accessed company website/requested prospectus via email, emailed firm
Securities Act of 1933, quiet period requirements - CORRECT ANSWER - during period
while prospectus must be delivered following effective date, dealer effecting purchase of security
for a customer is obligated to deliver prospectus. must be quiet about issue, cannot hype issue
Securities Act of 1933, omission or misstatement of material fact is fraud - CORRECT
ANSWER - fraud for issuer, underwriters, accountants, lawyers - all involved
Securities Act of 1933, due diligence - CORRECT ANSWER - make sure no omissions or
misstatements - each party makes sure disclosure is truthful
Questions and CORRECT Answers
Securities Act of 1933 - CORRECT ANSWER - Federal regulation of the securities
markets started after the stock market crash of 1929. Congressional investigations revealed
overly speculative new issue market fed by hype/rumor was cause of speculative bubble that
burst. Passed to regulate primary market new issues.
Securities exchange act of 1934 - CORRECT ANSWER - following investigation into
1929 crash, found manipulation of trading markets. passed to regulate secondary market trading
of securities.
Trust indenture act of 1939 - CORRECT ANSWER - passed to safeguard investors in
corporate bonds by requiring the appointment of a trustee to oversee corporate compliance with
requirements of the "trust indenture"
investment company act of 1940 - CORRECT ANSWER - passed to regulate the activities
of investment companies and to safeguard the purchasers of investment company securities
securities investor protection act of 1970 - CORRECT ANSWER - passed to protect
customer funds and securities when a brokerage firm fails
securities acts amendments of 1975 and 1988 - CORRECT ANSWER - in XXXX, the
securities acts were amended to make them "more current," and in XXXX, the 1934 act was
amended because of insider trading abuses that came to light just before the crash of 1987
sarbanes oxley act of 2002 - CORRECT ANSWER - passed in response to the wave of
corporate scandals that became evident after the great stock market meltdown of 2000
Securities Act of 1933 - CORRECT ANSWER - required issuers be provided with detailed
prospectus before purchase completed, applies to non-exempt issues, registration statement
(basically copy of prospectus - issuers responsibility) must be filed with SEC before any sales
related activities take place.
, Securities Act of 1933, registration statement - CORRECT ANSWER - includes general
character of business, uses of proceeds, historical audited financial statements, biographical data
on officers/their % holdings, legal issues
Securities Act of 1933, 20-day cooling off period - CORRECT ANSWER - once filed,
enters this period - SEC reviews the filing for full and fair disclosure, if theirs a problem, issuer
gets a deficiency letter. during period, issue cannot be sold, advertised, recommended, orders
solicited. issue CAN have underwriters issue preliminary prospectus - red herring. lists of
interested customers may be drawn up - taking indications of interest
Securities Act of 1933, effective date - CORRECT ANSWER - after 20 day cooling period
ends, registration is effective
Securities Act of 1933, prospectus details - CORRECT ANSWER - final prospectus must
be given to purchasers in 90 day period following effective date. if an issuer already has
registered stock outstanding, a prospectus only has to be delivered for 40 days. prospectus
delivery has been eased for issuers whose stock is listed on and exchange or NASDAQ - 25 day
delivery period
Securities Act of 1933, electronic prospectus delivery - CORRECT ANSWER - permitted
so that internet access equals delivery. no hard copy requirement - unless customer never
accessed company website/requested prospectus via email, emailed firm
Securities Act of 1933, quiet period requirements - CORRECT ANSWER - during period
while prospectus must be delivered following effective date, dealer effecting purchase of security
for a customer is obligated to deliver prospectus. must be quiet about issue, cannot hype issue
Securities Act of 1933, omission or misstatement of material fact is fraud - CORRECT
ANSWER - fraud for issuer, underwriters, accountants, lawyers - all involved
Securities Act of 1933, due diligence - CORRECT ANSWER - make sure no omissions or
misstatements - each party makes sure disclosure is truthful
