Test 1 Incorrect

Front 1

Which of the following are typically done during the 20-day cooling-off period?

Back 1

The issuer will blue sky the issue in the states where the underwriter plans to sell the securities

A preliminary prospectus is prepared and sent out to prospective investors

The issuer and underwriter hold a due diligence meeting

Front 2

Which of the following would be considered non-exempt securities, according to the Securities Act of 1933?

Back 2

Securities of a publicly held finance company

Nonexempt securities are securities that are subject to the registration requirements of the Securities Act of 1933. Securities of a publicly held finance company are the only nonexempt securities listed. All of the other securities would be exempt from the Securities Act of 1933.

Front 3

Which of the following are true regarding the sale of restricted securities under SEC Rule 144?

Back 3

Restricted securities must be fully paid, owned for one year, and can be sold on an agency or principal. A 144 notice of sale, which is good for 90 days, must be filed with the SEC prior to, or at the time of, the sale. Control securities have no required holding period.

Front 4

The Securities Exchange Act of 1934 regulates

Back 4

Securities trading

Stock exchanges

Extension of credit for margin purchases


The Securities Exchange Act of 1934 regulates all of the items listed except the issuance of new securities which is regulated by the Securities Act of 1933.

Front 5

An individual wishes to sell restricted securities according to the Rule 144 exemption. There are 6,000,000 shares outstanding. The trading volume for the last 5 weeks prior to the sale is:

April 1 ....... 45,000
April 8 ....... 62,000
April 15 ....... 70,000
April 22 ....... 75,000
April 29 ....... 72,000

If the customer was to sell the securities as of May 6th, how many shares can he sell?

Back 5

The average weekly volume for the last four weeks prior to the sale equals 69,750 shares (add the weekly volume for the four weeks from 4/8 to 4/29 and divide by 4). One percent of the shares outstanding is 60,000. The individual can sell the greater of these two amounts which is 69,750 shares.

Front 6

The third market is concerned with:

Back 6

The "third market" is the term used to describe a situation where a security listed on the NYSE is traded in the OTC market by a non-member of the NYSE.

Front 7

A customer is currently short 100 shares of ABC common stock at 57.50 and, for protection, has entered a buy stop order at 60. Round lot trades that took place after these orders were entered were:

58 . 59.50 . 60.10 . 60.50 . 60 . 59.85
At what price was the trade executed?

Back 7

Buy stop orders, once activated (triggered), become market orders and are executed on the next available round-lot trade. Here, the trade following the trigger price is 60.50. The result to the customer is a loss of $300.

Front 8

A customer enters a stop-limit order to sell 100 shares at 18.50. The last round-lot sale that took place before the offer was entered was 18.85. Round-lot sales that took place after the order was entered occurred at 18.25, 18.35, 18.50, and 18.60. The round-lot sale that activated the order was at:

Back 8

In order for a sell-stop order to be activated, a round-lot must sell at or below the stop price. In this example, the stop was at 18.50. The round-lot sale at 18.25, which sold below the stop price of 18.50, was the sale that activated the order.

Front 9

The following appears on the NYSE ticker tape: X 67. 3s .10. This means that:

Back 9

The answer is 100 shares of X (the symbol for U.S. Steel) traded at 67, followed by a trade of 300 shares at 67.10. When 100 shares of stock trades, only the symbol of the stock and price are printed. Then the amount is from 200 to 9,900, the last two zeros are omitted and the symbol for the 100 share round-lot is added. For example, it is shown as 2s for 200, 3s for 300, 10s for 1,000, and 99s for 9,900. When the amount traded is 10,000 shares or more, the entire amount is printed (for example, X 10,000s 67, X 11,000s 67, etc).

Front 10

Which of the following orders will be reduced when XYZ Corporation sells ex-dividend?

Back 10

Open or good-until-cancelled orders (GTC) that are entered below the market are automatically reduced when a stock sells ex-dividend unless they are marked do not reduce (DNR). Orders that are entered below the current market at the time they are entered are buy limit orders, sell-stop orders, and sell stop-limit orders. Open orders that are entered above the market are sell limit order, buy-stop, and buy stop-limit orders. The GTC buy limit and sell-stop orders are entered below the market, and are reduced on the ex-dividend date.

Front 11

A customer sells 100 GM short. GM declares a 5% stock dividend. When the customer covers the short sale, the customer will have to deliver:

Back 11

When a customer sells short, the brokerage firm borrows stock to deliver it to the buyer. All cash and stock dividends declared are the responsibility of the customer who sold the stock short. In this example, GM declared a 5% stock dividend. Therefore, a customer who sold 100 GM short would have to deliver 105 shares (100 shares x 5% = 5 additional shares) when he covers the short sale.

Front 12

Who cannot trade on the floor of the NYSE?

Back 12

An institutional block trader forwards orders to the NYSE trading floor from the brokerage firm's trading desk and is not physically located and trading on the floor of the NYSE. The two dollar broker, specialist, and competitive trader all trade on the NYSE floor.

Front 13

A stock closes on a plus tick at 89. Prior to the next day's opening, the stock is adjusted for a $1.00 dividend. A customer wishing to sell short at the opening:

Back 13

When a stock goes ex-dividend, its price is reduced by an amount sufficient to cover the dividend. Thus, the price must be reduced by 1 ($1) to 88 (which is the equivalent of 89 after the dividend adjustment). The short sale rule requires a short sale be done on a plus tick or zero-plus tick. Since the stock closed on a plus tick at 89, an opening trade at 88 would be considered a zero-plus tick.

Front 14

All of the following should be taken into consideration by an over-the-counter dealer when determining the commission to charge in an agency transaction EXCEPT:

Back 14

All of the choices given should be taken into consideration by an over-the-counter dealer when determining the commission to charge in an agency transaction except the cost price of securities held in inventory by the dealer. The price charged should be based on the current market price, not the cost of the inventory position.

Front 15

Which of the following can be found on the Nasdaq Level III System?

Back 15

Of the choices given, only firm quotes would be found on the Nasdaq Level III. Nasdaq Level I shows the highest bid and lowest offer. This is known as the inside market. Level II shows firm quotes and the market makers who are making a market in the security. Level III shows firm quotes, the market makers in the securities, and allows the market makers to change their quotations in the system.