EXAMFX PRACTICE TEST | ALL QUESTIONS
AND CORRECT ANSWERS WITH
EXPLANATIONS | GRADED A+ | VERIFIED
ANSWERS | LATEST VERSION
Which of the following does NOT describe the OTC market?
A. An auction market
B. A market where shares of the largest corporations are traded
C. A negotiated market
D. A decentralized market ---------CORRECT ANSWER-----------------An
auction market
The OTC is negotiated and competitive, involving dealers and traders
processing orders and automatic quotes. Shares of the largest
corporations trade OTC. he stock exchange, like the NYSE, is an
auction market.
The announcement that must be filed in connection with a Regulation D
offering is
A. An official statement
B. An official notice
C. An offering memorandum
D.d An offering circular ---------CORRECT ANSWER-----------------An
offering memorandum
The announcement that must be filed in connection with a Regulation
D offering is an offering memorandum.
,Which of the following terms would be used to describe a pre-offering
solicitation under Reg A+?
A. A preliminary prospectus
B. Testing the waters
C. Statement of additional information
D. An omitting prospectus ---------CORRECT ANSWER-----------------Testing
the waters
Testing the waters is a term that is used when the issuer is gauging
marketability of their offering.
XYZ Corp. is planning a subsequent primary offering to raise capital for
expansion. One of the executives at XYZ Corp. has a large holding of
unregistered shares which he would like to sell in the open market. Which
of the following would be the most suitable offering for this situation?
A. Shelf offerings
B. Combined offering
C. Registered secondary
D. Subsequent primary ---------CORRECT ANSWER-----------------Combined
offering
The issuer's subsequent primary offering is combined with the
executive's registered secondary offering. The primary proceeds go
to XYZ and the secondary proceeds go to the executive.
Once a red herring (preliminary prospectus) has been issued to a
customer, each of the following activities is permissible EXCEPT
,A. Discussing the information in the preliminary prospectus with the
customer.
B. Sending the final prospectus to the customer once the registration is
effective.
C. Obtaining an indication of interest in the issue from the customer.
D. Guaranteeing the offering price of the issue to the customer. ---------
CORRECT ANSWER-----------------Guaranteeing the offering price of the
issue to the customer.
Since the offering price has not yet been determined, it cannot be
guaranteed. The word "guarantee" should always be treated
cautiously on the exam.
Which of the following must be sold by prospectus?
A. Illinois 5% bond
B. ABC Bank 6% debenture
C. ABC Bank Corp 6% debenture
D. LMN County 4% bond ---------CORRECT ANSWER-----------------ABC
Bank Corp 6% debenture
Securities issued by bank holding companies are not exempt.
If certain requirements are met, a corporation can offer securities sold
within the borders of one state using the intrastate offering exemption, also
known as ---------CORRECT ANSWER-----------------Rule 147
SEC Rule 147 is the intrastate offering exemption. Certain
requirements must be met in regard to the company's assets,
revenues, and proceeds. Also, 100% of the purchasers must be
principal residents of the state.
ABC Corporation owns a division that manufactures a niche product used
in the automotive industry. ABC feels that this division would be better
, served as its own entity, separate from the parent company. If ABC
chooses to separate this portion of its manufacturing business, the process
is a ---------CORRECT ANSWER-----------------Spinoff
When a company decides to separate a division into its own entity,
the process is called a spinoff. Sometimes it is advantageous for a
division to operate independently.
Which of the following is false regarding a Rule 147 offering?
A. 100% of the proceeds must be invested in the state.
B. 80% of the issuer's assets must be in the state
C. 80% of the issuer's revenues must be generated in the state.
D. 100% of the purchasers must reside in the state ---------CORRECT
ANSWER-----------------100% of the proceeds must be invested in the state.
Under Rule 147, 80% of the proceeds must be invested in the state.
A "Chinese Wall" is
A. A separation between the issuer and the syndicate.
B. A separation between investment banking and the other functions inside
a broker/dealer.
C. A separation between the trading department and the back office inside
a broker/dealer.
D. A separation between the managing underwriter and the syndicate
members. ---------CORRECT ANSWER-----------------A separation between
investment banking and the other functions inside a broker/dealer
The Chinese Wall separates the investment banking (also called the
underwriting department), which handles inside information, from
other departments of the broker/dealer
AND CORRECT ANSWERS WITH
EXPLANATIONS | GRADED A+ | VERIFIED
ANSWERS | LATEST VERSION
Which of the following does NOT describe the OTC market?
A. An auction market
B. A market where shares of the largest corporations are traded
C. A negotiated market
D. A decentralized market ---------CORRECT ANSWER-----------------An
auction market
The OTC is negotiated and competitive, involving dealers and traders
processing orders and automatic quotes. Shares of the largest
corporations trade OTC. he stock exchange, like the NYSE, is an
auction market.
The announcement that must be filed in connection with a Regulation D
offering is
A. An official statement
B. An official notice
C. An offering memorandum
D.d An offering circular ---------CORRECT ANSWER-----------------An
offering memorandum
The announcement that must be filed in connection with a Regulation
D offering is an offering memorandum.
,Which of the following terms would be used to describe a pre-offering
solicitation under Reg A+?
A. A preliminary prospectus
B. Testing the waters
C. Statement of additional information
D. An omitting prospectus ---------CORRECT ANSWER-----------------Testing
the waters
Testing the waters is a term that is used when the issuer is gauging
marketability of their offering.
XYZ Corp. is planning a subsequent primary offering to raise capital for
expansion. One of the executives at XYZ Corp. has a large holding of
unregistered shares which he would like to sell in the open market. Which
of the following would be the most suitable offering for this situation?
A. Shelf offerings
B. Combined offering
C. Registered secondary
D. Subsequent primary ---------CORRECT ANSWER-----------------Combined
offering
The issuer's subsequent primary offering is combined with the
executive's registered secondary offering. The primary proceeds go
to XYZ and the secondary proceeds go to the executive.
Once a red herring (preliminary prospectus) has been issued to a
customer, each of the following activities is permissible EXCEPT
,A. Discussing the information in the preliminary prospectus with the
customer.
B. Sending the final prospectus to the customer once the registration is
effective.
C. Obtaining an indication of interest in the issue from the customer.
D. Guaranteeing the offering price of the issue to the customer. ---------
CORRECT ANSWER-----------------Guaranteeing the offering price of the
issue to the customer.
Since the offering price has not yet been determined, it cannot be
guaranteed. The word "guarantee" should always be treated
cautiously on the exam.
Which of the following must be sold by prospectus?
A. Illinois 5% bond
B. ABC Bank 6% debenture
C. ABC Bank Corp 6% debenture
D. LMN County 4% bond ---------CORRECT ANSWER-----------------ABC
Bank Corp 6% debenture
Securities issued by bank holding companies are not exempt.
If certain requirements are met, a corporation can offer securities sold
within the borders of one state using the intrastate offering exemption, also
known as ---------CORRECT ANSWER-----------------Rule 147
SEC Rule 147 is the intrastate offering exemption. Certain
requirements must be met in regard to the company's assets,
revenues, and proceeds. Also, 100% of the purchasers must be
principal residents of the state.
ABC Corporation owns a division that manufactures a niche product used
in the automotive industry. ABC feels that this division would be better
, served as its own entity, separate from the parent company. If ABC
chooses to separate this portion of its manufacturing business, the process
is a ---------CORRECT ANSWER-----------------Spinoff
When a company decides to separate a division into its own entity,
the process is called a spinoff. Sometimes it is advantageous for a
division to operate independently.
Which of the following is false regarding a Rule 147 offering?
A. 100% of the proceeds must be invested in the state.
B. 80% of the issuer's assets must be in the state
C. 80% of the issuer's revenues must be generated in the state.
D. 100% of the purchasers must reside in the state ---------CORRECT
ANSWER-----------------100% of the proceeds must be invested in the state.
Under Rule 147, 80% of the proceeds must be invested in the state.
A "Chinese Wall" is
A. A separation between the issuer and the syndicate.
B. A separation between investment banking and the other functions inside
a broker/dealer.
C. A separation between the trading department and the back office inside
a broker/dealer.
D. A separation between the managing underwriter and the syndicate
members. ---------CORRECT ANSWER-----------------A separation between
investment banking and the other functions inside a broker/dealer
The Chinese Wall separates the investment banking (also called the
underwriting department), which handles inside information, from
other departments of the broker/dealer
