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Question 1 of 10
1. Question
Which of the following statements is true regarding is not included in Rule 501?
Correct
Rule 501
Business combination – when two or more businesses come together under common control, such as in an acquisition.
Calculation of number of purchasers – provides exclusions when calculating total number of investors under a Regulation D offering, including family members, and accredited investors.
Executive officer – any president or vice president of a functional division of a company, or other policy making persons.
Issuer – any person who issues securities.
Purchaser representative – a person capable of making financial decisions and has a written agreement with the purchaser to represent them.Incorrect
Rule 501
Business combination – when two or more businesses come together under common control, such as in an acquisition.
Calculation of number of purchasers – provides exclusions when calculating total number of investors under a Regulation D offering, including family members, and accredited investors.
Executive officer – any president or vice president of a functional division of a company, or other policy making persons.
Issuer – any person who issues securities.
Purchaser representative – a person capable of making financial decisions and has a written agreement with the purchaser to represent them. -
Question 2 of 10
2. Question
Which of the following statements is true regarding Rule 504?
Correct
Rule 504 provides an exemption for companies to offer and sell up to $1 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities and the investors will receive restricted securities, which limit their ability to sell the securities in the secondary market.
Incorrect
Rule 504 provides an exemption for companies to offer and sell up to $1 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities and the investors will receive restricted securities, which limit their ability to sell the securities in the secondary market.
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Question 3 of 10
3. Question
Which of the following statements is true regarding Rule 505?
Correct
Rule 505 provides an exemption for companies to offer and sell up to $5 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities, the investors will receive restricted securities, and the issuing company
can only sell to accredited investors or up to 35 other investors who do not meet the accredited investor requirements.Incorrect
Rule 505 provides an exemption for companies to offer and sell up to $5 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities, the investors will receive restricted securities, and the issuing company
can only sell to accredited investors or up to 35 other investors who do not meet the accredited investor requirements. -
Question 4 of 10
4. Question
Which of the following statements is true regarding Rule 506?
Correct
Rule 506 allows many of the same exemptions available under Rule 505. However, under Rule 506 all non-accredited investors must be “sophisticated” investors. Once securities are sold under Rule 504, 505, or 506 of Regulation D, the issuing company must file a Form D, which contains the names and addresses of the company’s owners and others involved in the promotion of the stock.
Incorrect
Rule 506 allows many of the same exemptions available under Rule 505. However, under Rule 506 all non-accredited investors must be “sophisticated” investors. Once securities are sold under Rule 504, 505, or 506 of Regulation D, the issuing company must file a Form D, which contains the names and addresses of the company’s owners and others involved in the promotion of the stock.
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Question 5 of 10
5. Question
Which of the following statements is false regarding Form D?
Correct
Form D
Form D is filed with the Securities and Exchange Commission when a company has issued securities under one of the exemptions provided under Rules 504, 505, and 506 of Regulation D. Generally speaking, these exemptions apply to small issuances of restricted securities to accredited or sophisticated investors. The information provided within Form D is limited to the names and addresses of the issuing company’s owners and those other individuals involved in the promotion and distribution of the security being offered.Incorrect
Form D
Form D is filed with the Securities and Exchange Commission when a company has issued securities under one of the exemptions provided under Rules 504, 505, and 506 of Regulation D. Generally speaking, these exemptions apply to small issuances of restricted securities to accredited or sophisticated investors. The information provided within Form D is limited to the names and addresses of the issuing company’s owners and those other individuals involved in the promotion and distribution of the security being offered. -
Question 6 of 10
6. Question
Which of the following statements is not included in the list?
Correct
Accredited investor and other excluded investors
The five classifications of an accredited investor are as follows:
i. a bank
ii. an insurance company
iii. an investment company registered under the Investment Company Act of 1940
iv. a Small Business Investment Company licensed by the Small Business Administration
v. an employee benefit plan or individual retirement account which is subject to the Employee Retirement Income Security Act of 1974 (ERISA) and in which
the investment decision is made by a fiduciaryIncorrect
Accredited investor and other excluded investors
The five classifications of an accredited investor are as follows:
i. a bank
ii. an insurance company
iii. an investment company registered under the Investment Company Act of 1940
iv. a Small Business Investment Company licensed by the Small Business Administration
v. an employee benefit plan or individual retirement account which is subject to the Employee Retirement Income Security Act of 1974 (ERISA) and in which
the investment decision is made by a fiduciary -
Question 7 of 10
7. Question
Which of the following statements is not included in the three classifications of investors?
Correct
Besides accredited investors, the other three classifications of investors that are excluded from the calculation of number of purchasers under Rules 505 and 506 of Regulation D are as follows:
1. a natural person with net worth, excluding primary residence, in excess of $1 million
2. a natural person with individual income of $200,000 in each of the past 2 years, or $300,000 income jointly with their spouse
3. a trust, corporation, charitable organization, or partnership with assets in excess of $5 millionIncorrect
Besides accredited investors, the other three classifications of investors that are excluded from the calculation of number of purchasers under Rules 505 and 506 of Regulation D are as follows:
1. a natural person with net worth, excluding primary residence, in excess of $1 million
2. a natural person with individual income of $200,000 in each of the past 2 years, or $300,000 income jointly with their spouse
3. a trust, corporation, charitable organization, or partnership with assets in excess of $5 million -
Question 8 of 10
8. Question
Which of the following statements is true regarding Rule 135a of the Securities Act of 1933?
Correct
Under Rule 135a of the Securities Act of 1933, generic advertising will not be considered as an offering of a security so long as it meets at least one of the following requirements:
i. Explanatory information relating to securities of investment companies generally or to the nature of investment companies, or to services offered in
connection with the ownership of such securities,
ii. The mention or explanation of investment companies of different generic types or having various investment objectives, such as balanced funds,
growth funds, income funds, leveraged funds, specialty funds, variable annuities, bond funds, and no-load funds,
iii. Offers, descriptions, and explanation of various products and services not constituting a security subject to registration under the act, provided that such offers, descriptions, and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered
investment company,
iv. Invitation to inquire for further information,Incorrect
Under Rule 135a of the Securities Act of 1933, generic advertising will not be considered as an offering of a security so long as it meets at least one of the following requirements:
i. Explanatory information relating to securities of investment companies generally or to the nature of investment companies, or to services offered in
connection with the ownership of such securities,
ii. The mention or explanation of investment companies of different generic types or having various investment objectives, such as balanced funds,
growth funds, income funds, leveraged funds, specialty funds, variable annuities, bond funds, and no-load funds,
iii. Offers, descriptions, and explanation of various products and services not constituting a security subject to registration under the act, provided that such offers, descriptions, and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered
investment company,
iv. Invitation to inquire for further information, -
Question 9 of 10
9. Question
Which of the following statements is true regarding Email blast?
Correct
Email blast
An email blast that is sent to thousands of recipients and contains only a description of a firm’s services and their general investment strategy would constitute generic advertising as it would fall under at least one of the four categories provided in Rule 135a of the Securities Act of 1933. More specifically, this email blast would constitute generic advertising because it is only generally describing the services and investment strategy of the investment company and is not specifically naming any particular securities or offerings.Incorrect
Email blast
An email blast that is sent to thousands of recipients and contains only a description of a firm’s services and their general investment strategy would constitute generic advertising as it would fall under at least one of the four categories provided in Rule 135a of the Securities Act of 1933. More specifically, this email blast would constitute generic advertising because it is only generally describing the services and investment strategy of the investment company and is not specifically naming any particular securities or offerings. -
Question 10 of 10
10. Question
Which of the following statements is true regarding An investor’s age?
Correct
An investor’s age is critical in determining a suitable investment recommendation because younger investors typically have much longer time horizons and are therefore able to take more substantial risks in order to achieve their goals. Also, as younger investors continue to save and invest the impact of dollar cost averaging can help achieve attractive returns through all market cycles. Older investors, to the contrary, typically have shorter time horizons as they near retirement or other significant life events and are more concerned with the protection of principal as their level of retirement income has already been largely determined.
Incorrect
An investor’s age is critical in determining a suitable investment recommendation because younger investors typically have much longer time horizons and are therefore able to take more substantial risks in order to achieve their goals. Also, as younger investors continue to save and invest the impact of dollar cost averaging can help achieve attractive returns through all market cycles. Older investors, to the contrary, typically have shorter time horizons as they near retirement or other significant life events and are more concerned with the protection of principal as their level of retirement income has already been largely determined.