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115 Cards in this Set
- Front
- Back
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When given earnings yield, how do yo find th PE?
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Take 1/Earnings yield
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What is a branch office?
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Location where one or more associated persons regularly conducts business of affecting transactions
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What rule says what about restricted stock holding period?
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Rule 144
Have to hold for at least 6 months |
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What are some requirments of rule 144A?
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Those securities that are same class as those traded on exchange are NON exempt
Securities of registered investment companies are in-exempt Purchaser of securities must be a QIB |
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What does SEC Rule 14e-5 say?
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Covered person in a tender offer may not purchase common or convertible securities during open period
Person who has made tender offer for stock may purchase non-convertible bonds of issuer |
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How do you find an exchange ratio?
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Offer price / Acq. Price * Target Shares
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What is the difference between a hedge fund and a fund of funds?
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Fund of funds must report
Fund of Hedge Funds are somewhat illiquid with no guaranteed daily redemption |
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What does SEC rule 17f-2 say?
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Fingerprints required of any person engaged in or handling processing of securities including supervisors
If securities not evidenced by certificate this may be waived |
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What is control stock?
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Registered stock held by insiders
Both restricted and control are subject to volume limitations under Rule 144 |
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What intangibles do you include when calculating tangible book value per share?
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Those with idenifiable market value
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How do you calculate forward PE using gordon growth model?
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Get growth rate:
g = div payout * ROE Get next period's price: P = div in year two / (equity cost of capital - g) Then: Projecte Price / Projected earnings |
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What is SEC Rule 14e-1 called and what does it say?
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Unlawful Tender Offer practices
If a person extends length of a tender offer they must issue notice of extension through a press release or other public announcement Required no later than 9am eastern time on next business day following scheduled end of the offer Notice must include approximate number of securities deposited to date |
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What are the rules with gift giving?
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Broker dealers can give gifts to its own employees
No 100 dollar limitation as would be the case if jack were employed by a different firm Allocations in new deals not allowed Gift does not have to be related to regular duties |
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What does the 34' act say about audit proceedures?
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They must:
Detect illegal acts that would have material effect on statements Identify material related party transactions or otherwise require disclosure Evaluation of doubt as to whether company can be going concern during ensuing fiscal year |
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What is Form D?
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Notice of sale of securities
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What is the stable growth FCF model?
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Year End FCF / (Wacc - Growth)
Subtract debt Divide by shares |
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Under SRO regulations whos responsibility is it to not talk to bankers and others about transactions?
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Research Analysts
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Are FINRA members allowed to publish an circulate quotes?
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No
Unless member believes quote is bona fide bid for or offer for the security |
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What are there examples of a growing economy?
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Rising sales
Falling weekly jobless claims Rising CPI |
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What are garp investors looking for?
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Low PEs
Low PEGS Low PBs |
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What are three major Nasdaq requirments?
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Corporate governance rules
Bid price must not fall below minimum Financial test of public shares must be satisfied |
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When does the compliance and and supervision certification happen?
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Once a year
Signed by CEO |
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What do regulations about partnerships say?
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Sponsor or general partner must agree to pay expenses associated with solicitation of investors in a roll up
B/Ds soliciting approvals from LPs in connection with roll up is limited to 2% of value created in roll up and new share issuance Compensation may not be based on number of investors who agree to transaction |
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What does SEC Rule 135 say?
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Issuer is permitted to publish notice with limited information
No need to file with SEC Must have legend saying it does not intend to offer securities |
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What does SECU Rule 145 relate to?
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Situations in which securities are offered as a result of business combinations
Information needed: Name of person whos assests are to be sold Names of any other parties Description of business Date / time / place of meeting of security holders Brief description of transaction |
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What is exempt from Rule 145?
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Stock splits, dividends and resulting changes in par value
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What is special about partnerships?
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Unless specified, all partners are fully able to transact business on behalf of the fund
Unlimited liability Flow throuhg taxation |
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What does ROIC measure and what valuation metric does it best match to?
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Effectiveness and efficiency of capital
Best with Earnings Yield |
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What is the order of events when dealing with a merger?
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Boards vote to approve
Form 425 filed S-1 Filed Shareholders vote |
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What is dividend exclusion and what is not exempt?
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Ability of corporations to not pay taxes on dividends
REITS and Money Markets are not examples |
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What does rule 101 of Reg M say?
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BDs may not solicit orders from customers to purchase outstanding securities of the same issuer
Unsolicited transactions always welcomed BD is allowed to solicit offiers for new securities |
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What does the registration period notification form say?
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Firm must notify FINRA if changing its market making status based on upcoming offering
Or if engaged in stabalizing transactions |
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When is an S-4 NOT required?
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Cash offers
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What does 13f-1 say?
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Quarterly filings must be made for institutions exercising discretion over at least 100mm in equity securities
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What is the maximum compensation for selling partnership units in an IPO?
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10%
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When is stabalizing allowed?
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At price no higher than last transaction on principal market
If security has traded in its princpal market the day of or day before If neither it can happen at opening price no higher than last indi bid Max stabalizing bid is offering price |
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What does section 5 of the 33 act say?
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Unlawful to use instrument of interstate commerce to sell a security unless registration statement is in effect
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What do the resale rules of 145 related to?
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Rule 144
Securities can be resold if: Sold in accordance with 144 rules for public information limitations on amount sold and manner of sale Person is not affiliate of issuer and has held securities for at least 6 months and public information condition is met Person has not been affiliate of issuer for at least 3 months and has held securities for at least one year |
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What happens when interest rates decline?
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Bond prices rise
Longer maturities rise more because of market risk Bonds selling at discount will rise sharper than those at premium |
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What are arbitration panels made mostly of?
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Non industry arbitrators
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What does rule 14d-9 say?
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Recommendations and solicitations by subject companies and other parties related to a tender offer
Requires 14d-9 or TO to be filed by: Subject company Owner of security of subject company Any other person who makes recommendation or solicitation to shareholders on behalf of aforementioned Exceptions: Personal not participating in offer providing information on unsolicited basis to customers If company is providing stop look and listen communication |
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What is stop look and listen communication?
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States that a tender offer is underconsideration by subjects board and that in no later than 10 days it will notify shareholders
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In a contingency offering, when are deal expenses paid?
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After closing
BD must deposit funds promptly in an Escrow account Set up so that investor can have all funds returned in case offering is un-successful |
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If discount rate is decrease, what would happen?
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Long term bonds would decrease more than short term bonds
More sensitive |
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What is the federal funds rate?
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Interest rate banks charge to lend to eachother overnight
Fluctuates daily and is the most volatile money market (short term) rate |
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Analysts may attend internal meetings for IPOs if...
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No one from banking or the issuer is present
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When can you short tender?
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When investor is long the stock or an equivalent security
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What are equivalent securities?
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Rights, warrants and others subject to tender offer
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What defines a covered person?
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Issuer or individual making tender offer with banker acting as dealer manager in transaction
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What does SEC Rule 14e-5 say?
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Covered person in TO may not purchase common stock or convertible securities during the period that a tender is open
Exemptions: Purchases by dealer manager on agency basis Purchases on principal basis if BD is not the market maker Purchases made by affiliate of BD |
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What does rule 144 say about who can sell restricted stock?
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Brokers or market makers
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What does SEC Rule 165 say?
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Written communications permitted once there is public announcement of business combination
If securities are being offered an SEC filing is required - usually S4 Written communication must be filed according to rule 425 If both companies are public both must file with SEC |
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What does Reg D say?
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Private placement can be offered to an unlimited amount of accredited investors
Only 35 unaccredited investors Officers and directors of an issuer are considered accredited |
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What does Sarbox say about the audit committee?
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Each member must be independent and a member of the issuer BOD
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What does NYSE say about audit committee?
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At least one financial expert on audit committee
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What about statutory disqualification?
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Says person cant be affiliated with registration in any way
Finra must be notified |
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When is an unseasoned issuer allowed to use a Free Writing Prospectus?
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After filing a registration statement AND with a statutory prospectus
Hyperlink should accompany or precede FWP |
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How long are BDs supposd to keep term sheets?
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3 years
Documents of original entry must be kept for 6 years Documents of origination must be kept for life of the copro |
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In a jump ball situation - how is profit allocated?
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Member's sales
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What does the new issue rule prohibit?
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Employee participation in IPOs
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What is the SRO rule on selling away?
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Written notice to firm must be provided
If getting Comp firm must approve |
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Are special inactives allowed to receive compensation while in military service?
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Yes - if someone is taking care of the account
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WKSIs must...
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Have been reporting for 12 months
Have public float of debt and equity |
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What are the main REIT multiples?
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EBITDA and FFO
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Who is least accountable in insider trading?
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Broker Dealer if they didnt know the trade was based on non-public information
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What happens in chapter 7?
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Liquidation
Trustee may attempt to recover payments for 90 day period |
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Where can you find info about non-financial content under the 33 act?
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Reg S-K
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What is the lock up for BDs when compensated from offering with stock?
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6 months
Options or warrants can be used at any time |
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How many days in advance must prospectus be delivered to purchasers after effective date of registration for OTCBB?
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40 days for companies with publich stock
90 days for new issuers Exceptions: If already filer - no need If new filer and will be listed on an exchange- 25 days needed |
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What offers do not require approval from the BOD?
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All stock for cash
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Do term sheets in private placements contain historical information?
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No - only information about offered securities
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Offices that only solicit IB business are:
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Non-branches
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What is the best source of precedent information for Spin Offs?
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Proxys
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What is the rule 144 volume limitation?
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1% of outstanding shares OR
Average daily trading volume for 4 weeks prior |
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What does rule 137 say about research?
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No restrictions for non-participants
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What allows US public company to raise unlimited funds quickly without registration?
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reg S
exemption: offshore |
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What does Reg D do?
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Limit accredited investors to 35
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What does rule 144A say?
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Offerings may only be offered to qibs
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What does an increase in money supply suggest?
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Eased interest rates
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If a shelf registration is issued with something other than an S-3 how long is it good for?
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2 years
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Who is ineligible to file a FWP as a disclosure doc for a new issue?
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Shell cos
Blank check cos Penny stock cos Companies filed for bankruptcy within past 3 years |
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How do underwriters determine the spread?
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Dollar amount of issue
Business and financial history of issuer Type of corporation and industry |
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What are the two safeharbors from gun jumping?
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Releasing normal information and projections
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What is the max amount that can be sold by shareholders in Reg A?
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1.5mm
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What is a reference security
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security is a security into which the subject security can be converted, exchanged, or exercised, or which, to a significant extent, determines the value of the subject security
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What is section 363 sale?
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Sale of assets outside of normal course of business
Must be approved by court |
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What does FINRA rule 5122 show?
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Required to provide:
Disclosure doc Must file with the Corporate Finance Department at, or prior to, the first time it is provided to any prospective investor At least 85 percent of proceeds must be used for business and remaining 15% can be used for underwriting |
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What is a form S-8?
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Filing for employee benefit plans
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What is a stand-by underwriting?
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A type of underwriting in which the underwriter agrees to buy all the shares not subscribed to in a rights offering is a standby underwriting
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Under anti-money laundering requirements, brokerage procedures should provide for:
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Independent Audio
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What is a development stage company?
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One without significant track record or revenue
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What about disclosure with automatic shelf registration?
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Issuer can omit unknown information such as identity of security holders and whether or not offering is primary or secondary
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What is a placement agent?
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Broker dealer who finds institutional investors to purchase securities in a private placement
Only for accredited institutional investors |
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What does a IB office do if it wants to have electronic storage?
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Notify the Designated Examining Authority at least 90 days prior to implementing the system
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What does generic advertising have?
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* Explanatory information relating to securities of investment companies
* Explanation of investment company investment objectives * Offers, descriptions, and explanation of various products and services that do not constitute a security subject to registration * An invitation to inquire for further information |
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What does the managing underwriter have to provide to FINRA corporate financing?
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Max offering price
Max underwriter discount Statements of affiliation and arrangements Statement of underwriting compensation compliance |
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What is a common sales account used for?
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Liquidating holdings of 1,000 or less when there will be no continuing relationship with customer
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Which exchanges are excluded from compensation filing?
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NYSE, Nasdaq Global Market, and AMEX
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What is the purpose of aggressive accounting?
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To report lower earnings
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If a member firm will be imposing a penalty bid or engaging syndicate covering transactions, it is required to...
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Submit a form to FINRA for both Nasdaq-listed securities and OTC equity securities
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What are the restrictions for purchaser representatives?
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May not be affiliate, director, officer, employer unless related
May not own more than 10% of stock Must be knowledgeable with finance |
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What is the punishment for violating provisions of the 33 act?
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The investment amount, a reasonable amount of interest on the investment, minus any amount of income received from the investment
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What bonds do you bid on?
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General obligation
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What about NYSE shareholders?
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The NYSE initial listing standards require a minimum of 400 U.S. round-lot shareholders. The
Exchange will consider the number of beneficial holders of stock held in street name to satisfy the requirement |
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What is a limited broker dealer?
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Restricts its business to investment company/variable contract securities or direct participation programs
Exempt from New Issue Rule |
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When are acquiring shareholders not consulted?
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When cash offer is made
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A suspicious activity report must be filed within...
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30 days
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Which party doesn't really review fairness opinions?
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Buyers
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What does SEC Rule 14c-2 say?
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Proxy must be filed 20 cal days before annual meeting
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When does OFAC need to be contacted?
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Within 10 days
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For mergers, what is the Reg M restriction period?
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Day of proxy to completion of distribution
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What about basis reducing distributions?
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Non taxable if S-corp
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What signals that trading has begun?
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Opening trade on the main stock exchange its listed on
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What dont you use in IPO valuations?
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Deal comps
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Who pays syndicate expenses?
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Manager (comes out of fee)
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