Series 24 crunch time facts
Chapter 1 - correct answer ✔o The Effective Date of an IPO is determined
by the SEC (NOT FINRA or the issuer).
o If the SEC sues an issuer and underwriter for false statements and/or
material omissions in a prospectus, the customer may still file a lawsuit
against both the issuer and the underwriter.
o What would preclude an issuer from obtaining WKSI status? Involvement in
bankruptcy in the past 3 years.
o Prospectus Delivery requirement for a Reporting Company follow-on
offering is 0 days from the offering date.
o Prospectus Delivery requirement for an IPO that will be listed is 25 days
from the effective date.
o Prospectus Delivery requirement for an unlisted follow-on offering is 40 days
from the effective date.
o Prospectus Delivery requirement for an IPO that will NOT be listed is 90
days from the effective date.
o An issuer that loses its WKSI status after filing an Automatic Shelf
Registration (ASR) may continue that offering until the next Form 10-K is filed.
o A registered representative (RR) receives a check from a client to reserve
shares of an IPO during the cooling-off period. What do you instruct the RR to
do? Return the check.
o Reg. A (maximum of $5 million) offerings can be offered to the public.
o Reg A+ permits offerings of up to $50 million
o The look-back period for a Reg. A offering is 12 months.
o A Reg. 147 offering is restricted from out of state resales for 9 months.
o A partnership may purchase a 147 offering even if some partners are not in-
state residents.
o Reg. D buyers sign an investment letter (typically agreeing to a 6 month
lock-up period) .
, o Private placement/Reg. D--Issuers must issue stop transfer instructions to
transfer agent to ensure that no illegal sales take place.
o Can a Purchaser's Representative be affiliated with the issuer? No, unless
the representative is related to the investor.
o If a partner
Chapter 2 - correct answer ✔o A tender offer is NOT considered to be a type
of distribution.
o Foreign broker-dealers may join a syndicate to sell outside of the U.S. even
if they are not FINRA members.
o An Escrow Account is NOT required for a Firm-Commitment underwriting.
o All-or-none and mini-maxi are contingencies. Contingent underwritings
require an escrow account.
o A Market-Out clause protects the underwriter from event risk during the
underwriting.
o A Section 11 (Due Diligence) defense protects the underwriter from false
statements made by the issuer in offering documents.
o The final settlement of a syndicate account must occur within 90 days
following the date on which the securities are delivered to the underwriter.
o Underwriting compensation of options or warrants with duration of greater
than 5 years is considered unreasonable.
o Securities received as underwriting compensation are restricted for 6
months from the effective date.
o FINRA's Corporate Financing Rule requires the filing of the underwriting
agreement (if not eligible for an exemption).
o When might the participation of a qualified independent underwriter be
required? When there is a conflict of interest involving the issuer and
underwriter of a security.
o The Reg. M exemption applies to actively traded securities (ADTV $1MM
and MV of public float $150MM).
o Reg. M Passive Market Making is allowed up to the Daily Purchase Limit.
Chapter 1 - correct answer ✔o The Effective Date of an IPO is determined
by the SEC (NOT FINRA or the issuer).
o If the SEC sues an issuer and underwriter for false statements and/or
material omissions in a prospectus, the customer may still file a lawsuit
against both the issuer and the underwriter.
o What would preclude an issuer from obtaining WKSI status? Involvement in
bankruptcy in the past 3 years.
o Prospectus Delivery requirement for a Reporting Company follow-on
offering is 0 days from the offering date.
o Prospectus Delivery requirement for an IPO that will be listed is 25 days
from the effective date.
o Prospectus Delivery requirement for an unlisted follow-on offering is 40 days
from the effective date.
o Prospectus Delivery requirement for an IPO that will NOT be listed is 90
days from the effective date.
o An issuer that loses its WKSI status after filing an Automatic Shelf
Registration (ASR) may continue that offering until the next Form 10-K is filed.
o A registered representative (RR) receives a check from a client to reserve
shares of an IPO during the cooling-off period. What do you instruct the RR to
do? Return the check.
o Reg. A (maximum of $5 million) offerings can be offered to the public.
o Reg A+ permits offerings of up to $50 million
o The look-back period for a Reg. A offering is 12 months.
o A Reg. 147 offering is restricted from out of state resales for 9 months.
o A partnership may purchase a 147 offering even if some partners are not in-
state residents.
o Reg. D buyers sign an investment letter (typically agreeing to a 6 month
lock-up period) .
, o Private placement/Reg. D--Issuers must issue stop transfer instructions to
transfer agent to ensure that no illegal sales take place.
o Can a Purchaser's Representative be affiliated with the issuer? No, unless
the representative is related to the investor.
o If a partner
Chapter 2 - correct answer ✔o A tender offer is NOT considered to be a type
of distribution.
o Foreign broker-dealers may join a syndicate to sell outside of the U.S. even
if they are not FINRA members.
o An Escrow Account is NOT required for a Firm-Commitment underwriting.
o All-or-none and mini-maxi are contingencies. Contingent underwritings
require an escrow account.
o A Market-Out clause protects the underwriter from event risk during the
underwriting.
o A Section 11 (Due Diligence) defense protects the underwriter from false
statements made by the issuer in offering documents.
o The final settlement of a syndicate account must occur within 90 days
following the date on which the securities are delivered to the underwriter.
o Underwriting compensation of options or warrants with duration of greater
than 5 years is considered unreasonable.
o Securities received as underwriting compensation are restricted for 6
months from the effective date.
o FINRA's Corporate Financing Rule requires the filing of the underwriting
agreement (if not eligible for an exemption).
o When might the participation of a qualified independent underwriter be
required? When there is a conflict of interest involving the issuer and
underwriter of a security.
o The Reg. M exemption applies to actively traded securities (ADTV $1MM
and MV of public float $150MM).
o Reg. M Passive Market Making is allowed up to the Daily Purchase Limit.
