FINRA Series 79 Exam Questions with
Verified Answers
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
Verified Answers
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
