Which of the following activities are allowed once a registration statement for a new issue is filed with the SEC?

The federal regulation aimed at curbing manipulation and fraud in the new issue market. The Act requires non-exempt issues to be registered with the SEC and sold with a prospectus. Requires the registration of non-exempt securities and  does not require the registration of exempt securities.

Exempted issuers are defined under the

Securities act of 1933. The Securities Act of 1933 defines exempt issuers and exempt transactions. If an issuer is exempt or if a new non-exempt issue is sold in an exempt transaction, that new issue does not have to be registered under the Act. Otherwise, registration is required.

20 day cool off period for Securities act of 1933 prohibit

• The issue cannot be sold;
• The issue cannot be advertised;
• The issue cannot be recommended;
• Orders to buy the issue cannot be solicited.

20 day cool off period for Securities act of 1933 allow

• The underwriters are allowed to distribute a "preliminary prospectus" to interested parties.
• During this period, lists of interested customers may be drawn up, but no orders can be taken to buy the issue and no sales can be made.

exempt from the registration provisions of the Securities Act of 1933

U.S. Government bonds , Government National Mortgage Association Pass Through certificates , General Obligation bonds. Insurance company issues, Bank issues , Savings and loan issues, Common carrier issues. small business investment company, Benevolent Association issues

Securities and Exchange Act of 1934

the federal regulation to curb manipulation and fraud in the trading (secondary) markets. The Act consists of a broad array of provisions to: curb insider abuses; require registration and self-regulation of exchanges under SEC oversight; require registration of member firms and their sales employees; require issuers to make public their financial statements; give the Federal Reserve the power to set margins; and numerous rules to curb manipulative market practices.

define(s) exempt issuers and exempt transactions?

The Securities Act of 1933 defines exempt issuers.  The Securities Act of 1933 defines exempt transactions. 

Fixed annuity contract,  Eurodollar Debt , Foreign Government Debt, Municipal Debt,  Insurance companies , Agency issues

non-exempt issues under the Securities Act of 1933?

Variable annuity contracts , Listed option contracts, ADR (american depository receipts), American Depositary Shares , American Style Options, Industrial Company issues, and Listed common stock

Trust Indenture Act Of 1939

federal law enacted to protect corporate bondholders from harmful actions by the issuer. The Trust Indenture Act of 1939 requires issuers of non-exempt debt securities to include SEC approved protective covenants for the purchasers of the debt securities. Additionally, the issuer must appoint an independent trustee to monitor its adherence to the covenants.

Investment Company Act Of 1940

federal regulation administered by the SEC that defines the structure for investment companies (face amount certificate company; unit investment trust; or management company) and which sets the regulations under which the companies must operate.

money market instruments used to finance imports and exports exempt from the Securities Act of 1933 and can be sold without a prospectus

The maximum maturity on commercial paper is

270 days, because a longer maturity would cause the issue to be non-exempt

Securities Investor Protection Act Of 1970

created SIPC - Securities Investor Protection Corporation, which insures customer accounts against loss if a broker-dealer fails. Coverage limits are $500,000 of equity in an account, inclusive of maximum cash coverage of $250,000.

Securities Acts Amendments Of 1975 And 1988

In 1975, the Securities Acts were amended to make them "more current," and in 1988, the 1934 Act was amended because of "insider trading" abuses that came to light just before and after the market "crash" of 1987.

Sarbanes Oxley Act Of 2002

passed in response to the wave of scandals that became evident after the great market meltdown of 2000, this Act tightened corporate reporting rules including faster reporting of insider trades, mandated that research analysts be separated from broker-dealer investment banking functions, and increased auditor liability for fraudulent corporate actions.

allowed prior to the filing of the registration statement?

nothing can be done. Once the registration statement is filed, a preliminary prospectus may be used to obtain indications of interest. Once the registration is effective, the final prospectus can be used to offer and sell the issue.

regarding the preliminary prospectus?

The preliminary prospectus may be sent to a potential customer prior to that customer expressing an indication of interest. The preliminary prospectus does not constitute an offer to sell the issue. 

use of a "red herring" preliminary prospectus? The preliminary prospectus may only be sent to customers:

who have expressed an indication of interest or who are likely purchasers, during the cooling off period. 

about the acceptance of an "indication of interest" for a registered offering during the 20 day cooling off period?

The indication can be canceled by the customer; the indication can be canceled by the brokerage firm

A registered representative has prepared a research report about a new stock issue that is currently in registration. The registered representative wishes to send the report to customers.

The report constitutes an "offer" under the 1933 Act and cannot be sent. 

If the SEC sends a deficiency letter to the issuer regarding an issue in registration

disclosure is not considered to be adequate

allowed once a registration statement for a new issue is filed with the SEC?

Sending a customer a "red herring" preliminary prospectus and Accepting an indication of interest from the customer

When the Securities and Exchange Commission sets the effective date for a new issue in registration, this means that the

proper documents for registration have been filed with the SEC. 

When a customer buys a new stock issue from a syndicate member, the customer pays

the public offering price as stated in the prospectus without any commission. New stock issues are sold under a prospectus that states the Public Offering Price which is inclusive of any compensation to the underwriter (the spread). Additional commissions or charges above the P.O.P. are not allowed.

new registered stock offerings

Any purchaser who received a preliminary prospectus must also receive the final prospectus. Any purchaser will pay the Public Offering Price.

Streamlined registration rules for offerings up to $50 million, intended to make capital raising easier for small start-up companies

Streamlined registration rules for established seasoned issuers that have previously registered securities with the SEC. known as the "shelf registration rule," this is a streamlined registration process under the Securities Act of 1933 for large, established companies. Rather than having to file a registration statement and complete a 20 day cooling off period for each new securities offering, the issuer files a blanket registration statement with the SEC that goes on the SEC's "shelf" for 3 years. Once the "shelf" filing is made, by giving 2 days' notice to the SEC, the issuer can sell new securities in the market. This procedure is much faster and cheaper.

The intent of Regulation A is to make it easier and less costly for smaller start-up companies to raise capital through a securities offering registered with the SEC. It provides for 2 "tiers" of capital raising:

Good for offerings of up to $20 million raised within a 12 month period, however audited financial statements are not required. Tier 1 offerings are not subject to purchase limitations

Good for offerings of up to $50 million raised within a 12 month period, but audited financial statements must be filed. Tier 2 offerings are subject to purchase limitations

Electronic delivery of a prospectus is permitted for

common stock issues , preferred stock issues, and corporate debt issues

New issues are not marginable until 30 days from the completion of the offering

registered primary distribution. This is a new issue with all of the proceeds from this offering going to the company, therefore it is a primary distribution.

Which SEC rule gives a simplified registration process to offerings of no more than $50 million within a 12 month time frame?

an offer of securities that is made only in one state (as opposed to an interstate offer made in more than 1 state) that is an exempt transaction under the Securities Act of 1933, since the Federal government does not have jurisdiction unless the transaction crosses state lines. However, the offering must still be registered in that state, under the state "Blue Sky" laws.

the SEC rule that spells out the requirements for an issuer to obtain an exemption from registration for a new issue because the offering will be made only in 1 state (an intrastate exemption). 100% of the issue must be sold solely to state residents to obtain the exemption. Issuer and purchaser must be a state resident. 6 month resale restriction, Resale is permitted to state residents only, for the 180 day period following the offering

an exempt transaction under the Securities Act of 1933 that allows a private placement of securities to the public without the filing of a registration statement with the SEC. Under Regulation D, a private placement can be sold to an unlimited number of accredited (wealthy) investors, but only to a maximum of 35 non-accredited investors. 

An exempt transaction under Regulation D that can be sold without a prospectus to an unlimited number of accredited (wealthy) investors, but only to a maximum of thirty-five (35) non-accredited investors. In reality, private placements are sold to a relatively small number of institutional investors. To claim a private placement exemption, a Form D must be filed with the SEC. 

• Individual with a net worth of $1,000,000, exclusive of residence.
• Individual with annual income of $200,000 a year for the past 2 years; or couple with a joint income of $300,000; and a reasonable expectation of continuing to earn that level of income.
• Person who is an officer or director of the issuer.
• Financial Institutions such as banks, insurance companies, mutual funds, with assets in excess of $5,000,000.
• Non-profit institutional investors such as pension plans and college endowment funds with assets in excess of $5,000,000.

investor is able to evaluate the merits of the issue. This does not mean that the purchaser cannot bear the investment's economic risk.

Under SEC rules, the purchaser of a Regulation D private placement must complete and sign a(n)

accredited investor questionnaire

Under Regulation D, issuers must provide which of the following to investors to obtain a private placement exemption?

Copy of the Offering Circular or Private Placement Memorandum. Under Regulation D, purchasers of private placements must be given full disclosure about the issue, even though no prospectus is required (the issue is exempt). Disclosure is accomplished by providing the purchaser with a copy of an "Offering Circular," which for smaller private placements is called the "Offering Memorandum."

Section 4 of the Securities Act of 1933 specifies 6 distinct exempt transactions, 2 of which must be known:

Section 4(2) - General Private Placement Exemption and Section 4(6) - Exemption For Offers Of $5 Mil. Max Only To Accredited Investors

is a "general" provision of the Act that allows private placements to be made to institutions and other wealthy investors deemed to be able to "fend for themselves" without a registration filing with the SEC. Then the SEC wrote specific private placement exemption rules, such as Reg. D and Rule 144A, that give the details of what is required to meet this "general" exemption.

states that offers of no more than $5,000,000 made only to accredited investors, where no advertising is used, are exempt.

SEC rule that permits the holders of private placement "restricted" shares to resell these securities in the public markets without filing a registration statement (is the responsibility of the seller). Requires public notice of the sale; places limitations on the timing of the sales; and limits the amount that can be sold. Holders of "control" stock also come under most of the Rule 144 limitations. 

Restricted shares subject to sale under Rule 144 are most commonly acquired through

Restricted stock is best described

A security which was never registered and can only be sold in the public markets when it is either registered, or sold under an exemption provision

In order to sell restricted stock under the provisions of Rule 144, the stock must be

fully paid and held for at least 6 months

Excluding the percentage of the outstanding shares test, the maximum permitted sale under Rule 144 is the weekly average of the last

4 weeks trading volume sold every 90 days

A high-ranking officer of ABC Corporation owns 10,000 shares of ABC Corporation control stock that she wishes to sell under the provisions of Rule 144. The company has 900,000 shares outstanding. The average weekly trading volume over the preceding 4 weeks was 3,000 shares. The maximum permitted sale under Rule 144 is

9000, Rule 144 allows the sale of the greater of 1% of the outstanding shares or the weekly average of the preceding 4 weeks trading volume every 90 days. 1% of 900,000 shares = 9,000 shares. This is greater than the 3,000 share average trading volume over the preceding 4 weeks, so this is the maximum permitted sale.

Restricted securities can be sold under Rule 144 if all of the following conditions are met

• they are sold on an agency basis
• solicitation of orders to buy is restricted to customers expressing interest within the past 10 days
• the issuer is reporting currently to the SEC

Under Rule 144, no filing is required if the sale amount every 90 days is for no more than 5,000 shares, worth no more than

An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares, the officer must meet all of the following requirements

• filing of the Form 144 with the SEC
• a maximum of 4 sales per year are permitted
• each sale is limited to the greater of 1% of the outstanding shares; or the weekly average of the prior 4 weeks' trading volume

The Chief Executive Officer of PDQ Company is married and has a husband who owns 5% of the common equity of PDQ. Regarding the husband and his PDQ stock holdings?

(Dribble rule) The husband is considered to be an "affiliate" under Rule 144 and To sell PDQ securities, the husband must file a Form 144

An unaffiliated investor wishes to sell a large amount of "144" shares. This person can do so, without being subject to the Rule 144 volume limitations, after holding the securities for

Required to sell "144" stock?

• Issuer's representation letter
  
• Broker's representation letter
  
• Seller's representation letter
  

Documentation Maintained By Broker Effecting 144 Transactions

• Copy of Form 144
  
• Issuer's Representation Letter
• Broker's Representation Letter

Issuer's Representation Letter

an affidavit from the issuer that it has made all required SEC filings and is current in its filings (otherwise, Rule 144 cannot be used).

Broker's Representation Letter 

an affidavit from the broker-dealer stating that it acted as agent in the transaction and did not solicit orders to buy that security.

this rule permits large private placement offerings to be made to Qualified Institutional Buyers (QIBs) who may trade these securities among themselves in PORTAL markets without having to register the securities.

Qualified Institutional Buyers

• Investment company with at least $100 million of assets to invest
• Insurance company with at least $100 million of assets to invest
• Trust fund with at least $100 million of assets to invest

raising of capital by small start-up businesses through relatively small investment amounts. These are private placement securities that are exempt from registration with the SEC. The intent is to help early-stage companies raise investment capital with little regulatory burden, improving job formation and economic growth in the U.S. economy. The maximum amount that can be invested by a client in a single issue under Regulation Crowdfunding is 100k. The maximum offering amount is 1 mil

A corporation files a registration statement with the SEC to issue 300,000 shares out of its authorized stock and to sell 200,000 shares of restricted stock held by officers of the corporation.

This is a primary distribution of 300,000 shares and  Proceeds from the sale of 300,000 shares will go to the company

actions on the part of a corporation would require registration statement filing with the SEC under Rule 145

Merger with another publicly held company or a Spin off of a subsidiary as a publicly held company

While there is no prospectus, each purchaser must be given disclosures that include

• A description of the business of the company;
• A discussion of the factors that make investment in the company speculative or risky;
• The names and position of the company’s officers and owners of 20% or more of the company’s stock;
• The price of the securities; and
• Financial disclosures:

• For offerings of $100,000 or less: Financial statements certified by the principal executive officer of the company;
• For offerings of more than $100,000 to $500,000: Unaudited financial statements reviewed by an independent accountant with the accountant’s review report.
• For offerings of more than $500,000 to $1,000,000: Audited financial statements certified by an independent accountant with the accountant’s audit report. (If this is the first time an issuer is raising capital, the financial statements can be reviewed instead of audited; thereafter, they must be audited.)

Broker-dealers and funding portals under Regulation Crowdfunding must

• Provide educational materials to investors about the offering;
• Allow investors, through communications channels, to direct questions and receive answers about the offering;
• Obtain a representation from the client that the entire investment may be lost;
• Receive answers to questions given to clients that they understand that the securities being purchased may be difficult or impossible to resell and that they are risky;
• Permit subscribing investors to cancel for any reason up to 48 hours prior to the end of the offering period.

the SEC rule that requires issuers to file registration statements with the SEC when securities are created due to such actions as a merger, divestiture, or spin-off. 

the shareholders must get a copy of the prospectus detailing the terms of the reorganization prior to the voting date.

things that dont require a rule 145 filing

• A stock split or reverse split;
• A change in par value;
• A stock dividend.

What is a registration statement with the SEC?

Which of the following securities is required to be registered with the SEC?

Which of the following is allowed by SEC Rule 144A quizlet?

What does registration with the Securities and Exchange Commission SEC require?