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Question 1 of 10
1. Question
Which of the following statements is true regarding substantive issues?
I. The Administrator will suspend, revoke or deny the registration of a security if there are significant concerns regarding the offering
II. Registration will not be granted if there has been an intentional violation of the Administrator’s rules or orders or the provisions of the Uniform Securities Act
III. The Administrator will also consider any court injunction or Administrator’s continue order issued by another state or federal jurisdiction
IV. The Administrator will grant registration if the compensation mechanisms for the underwriters and/or promoters are not consistent with ethical business practicesCorrect
Substantive issues
The Administrator will suspend, revoke or deny the registration of a security if there are significant concerns regarding the offering. For example, registration will not be granted if the current or planned business practices of the security’s issuer are illegal. Registration will not be granted if there has been an intentional violation of the Administrator’s rules or orders or the provisions of the Uniform Securities Act in association with the offering of the security. The Administrator will also consider any court injunction or Administrator’s stop order issued by another state or federal jurisdiction. The Administrator will also consider the terms of the offering. Registration will not be granted if the offering of the security has been or will be fraudulent. Finally, the Administrator will not grant registration if the compensation mechanisms for the underwriters and/or promoters are not consistent with ethical business practices.Incorrect
Substantive issues
The Administrator will suspend, revoke or deny the registration of a security if there are significant concerns regarding the offering. For example, registration will not be granted if the current or planned business practices of the security’s issuer are illegal. Registration will not be granted if there has been an intentional violation of the Administrator’s rules or orders or the provisions of the Uniform Securities Act in association with the offering of the security. The Administrator will also consider any court injunction or Administrator’s stop order issued by another state or federal jurisdiction. The Administrator will also consider the terms of the offering. Registration will not be granted if the offering of the security has been or will be fraudulent. Finally, the Administrator will not grant registration if the compensation mechanisms for the underwriters and/or promoters are not consistent with ethical business practices. -
Question 2 of 10
2. Question
Which of the following statements is true regarding information regarding the issuer’s directors and officers?
I. When the issuer registers a security using the registration by qualification process, the registration statement for the security must include specific information regarding the issuer’s officers and directors
II. The registration statement must provide the name and address of each and every one of the issuer’s directors and officers and indicate the primary employment for the preceding five years for each of the issuer’s directors and officers
III. The issuer must confuse the volume of the issuer’s securities possessed by each officer and director as of a date that is no earlier than thirty days prior to the date of filing
IV. The issuer must state the actual compensation for each director and officer for the previous year and the anticipated compensation for the next yearCorrect
Information regarding the issuer’s directors and officers
When the issuer registers a security using the registration by qualification process, the registration statement for the security must include specific information regarding the issuer’s officers and directors. The registration statement must provide the name and address of each and every one of the issuer’s directors and officers and indicate the primary employment for the preceding five years for each of the issuer’s directors and officers. In addition to this biographical information, the issuer must specify the volume of the issuer’s securities possessed by each officer and director as of a date that is no earlier than thirty days prior to the date of filing, and the issue must also specify the volume of the security or securities to be registered that each director and officer plans to possess. Finally, the issuer must state the actual compensation for each director and officer for the previous year and the anticipated compensation for the next year.Incorrect
Information regarding the issuer’s directors and officers
When the issuer registers a security using the registration by qualification process, the registration statement for the security must include specific information regarding the issuer’s officers and directors. The registration statement must provide the name and address of each and every one of the issuer’s directors and officers and indicate the primary employment for the preceding five years for each of the issuer’s directors and officers. In addition to this biographical information, the issuer must specify the volume of the issuer’s securities possessed by each officer and director as of a date that is no earlier than thirty days prior to the date of filing, and the issue must also specify the volume of the security or securities to be registered that each director and officer plans to possess. Finally, the issuer must state the actual compensation for each director and officer for the previous year and the anticipated compensation for the next year. -
Question 3 of 10
3. Question
Which of the following statements is true regarding financial information the issuer must provide?
I. Issuers that seek to register securities with a state Administrator under the registration by qualification process must include financial information with the registration statement
II. The issuer must include a previous balance sheet that reflects data that was current more than four months prior to the filing
III. Starting from the date used in the calculation of the balance sheet, the issuer must also provide a statement of its income for each of the ten previous fiscal years
IV. The registration statement must note all of the issuer’s long-term debt and capitalizationCorrect
Financial information the issuer must provide
Issuers that seek to register securities with a state Administrator under the registration by qualification process must include financial information with the registration statement. The issuer must include a current balance sheet that reflects data that was current no more than four months prior to the filing. Starting from the date used in the calculation of the balance sheet, the issuer must also provide a statement of its income for each of the three previous fiscal years. In the event the issuer intends to use some or all of the proceeds from the sale of the security to finance the purchase of another company or business, the registration statement must also include all of the information listed above for that company or business as well. In addition to the information listed above, the registration statement must note all of the issuer’s long-term debt and capitalization.Incorrect
Financial information the issuer must provide
Issuers that seek to register securities with a state Administrator under the registration by qualification process must include financial information with the registration statement. The issuer must include a current balance sheet that reflects data that was current no more than four months prior to the filing. Starting from the date used in the calculation of the balance sheet, the issuer must also provide a statement of its income for each of the three previous fiscal years. In the event the issuer intends to use some or all of the proceeds from the sale of the security to finance the purchase of another company or business, the registration statement must also include all of the information listed above for that company or business as well. In addition to the information listed above, the registration statement must note all of the issuer’s long-term debt and capitalization. -
Question 4 of 10
4. Question
Which of the following statements is true regarding federally covered securities?
I. There are a number of factors that may result in a particular security being deemed a federally covered security
II. One of the more easily understood concepts applies to securities that trade on a international level
III. Interstate transactions are out of the province of the federal government, so these securities are federally covered
IV. Securities that are issued by investment companies that are covered by the Investment Company Act of 1940 are federally covered securitiesCorrect
Federally covered securities
There are a number of factors that may result in a particular security being deemed a federally covered security. One of the more easily understood concepts applies to securities that trade on a national level. Securities that trade on a national level (for example, on the New York Stock exchange) involve interstate trade. Interstate transactions fall under the province of the federal government, so these securities are federally covered. In addition, for the issuers of the securities discussed above, any additional securities with greater or equal seniority to a nationally traded federally covered security are also considered federally covered security. Finally, securities that are issued by investment companies that are covered by the Investment Company Act of 1940 are federally covered securities. The issuers of these securities are federally regulated, so it reasonably follows that their securities should be federally regulated as well.Incorrect
Federally covered securities
There are a number of factors that may result in a particular security being deemed a federally covered security. One of the more easily understood concepts applies to securities that trade on a national level. Securities that trade on a national level (for example, on the New York Stock exchange) involve interstate trade. Interstate transactions fall under the province of the federal government, so these securities are federally covered. In addition, for the issuers of the securities discussed above, any additional securities with greater or equal seniority to a nationally traded federally covered security are also considered federally covered security. Finally, securities that are issued by investment companies that are covered by the Investment Company Act of 1940 are federally covered securities. The issuers of these securities are federally regulated, so it reasonably follows that their securities should be federally regulated as well. -
Question 5 of 10
5. Question
Which of the following statements is true regarding government issued, guaranteed, or insured securities exempt from state registration?
I. A number of securities that are government issued or subject to alternative regulation are exempt from regulation due to the nature of the security
II. These securities include securities issued by non-profit organizations such as churches, schools, athletic clubs, and other charitable institutions
III. Securities offered in the form of investment contracts issued in connection with an employee benefit plan are also exempt from registration
IV. Securities issued as a promissory note that have a minimum worth of at least $50,000Correct
Government issued, guaranteed, or insured securities exempt from state registration
A number of securities that are not government issued or subject to alternative regulation are nevertheless exempt from regulation due to the nature of the security. These securities include securities issued by non-profit organizations such as churches, schools, athletic clubs, and other charitable institutions. Securities offered in the form of investment contracts issued in connection with an employee benefit plan, such as a stock option plan, pension plan, savings plan, or other employee profit-sharing plan, are also exempt from registration. Finally, securities issued as a promissory note that have a minimum worth of at least $50,000 and that receive one of the three highest possible rates from a nationally recognized statistical rating firm qualify for registration exemption if the promissory note matures within 270 calendar days (nine months) of issuance.Incorrect
Government issued, guaranteed, or insured securities exempt from state registration
A number of securities that are not government issued or subject to alternative regulation are nevertheless exempt from regulation due to the nature of the security. These securities include securities issued by non-profit organizations such as churches, schools, athletic clubs, and other charitable institutions. Securities offered in the form of investment contracts issued in connection with an employee benefit plan, such as a stock option plan, pension plan, savings plan, or other employee profit-sharing plan, are also exempt from registration. Finally, securities issued as a promissory note that have a minimum worth of at least $50,000 and that receive one of the three highest possible rates from a nationally recognized statistical rating firm qualify for registration exemption if the promissory note matures within 270 calendar days (nine months) of issuance. -
Question 6 of 10
6. Question
Which of the following statements is true regarding loss of exemption status?
Correct
Loss of exemption status
There are two types of exempt securities that are generally exempt that may lose their right to exemption. The first are securities issued by non-profit organizations such as churches, schools, athletic clubs, and other charitable institutions. The second are securities offered in the form of investment contracts issued in connection with an employee benefit plan such as a stock-option plan, pension plan, savings plan, or other employee profit-sharing plan are also exempt from registration. The individual issuers of these types of securities may at times lose their exemption and be required to register any securities that they issue. As a result, although these types of securities do not have to be registered with the state Administrator under normal circumstances, it is important to be aware that these issuers may lose their exemption status.Incorrect
Loss of exemption status
There are two types of exempt securities that are generally exempt that may lose their right to exemption. The first are securities issued by non-profit organizations such as churches, schools, athletic clubs, and other charitable institutions. The second are securities offered in the form of investment contracts issued in connection with an employee benefit plan such as a stock-option plan, pension plan, savings plan, or other employee profit-sharing plan are also exempt from registration. The individual issuers of these types of securities may at times lose their exemption and be required to register any securities that they issue. As a result, although these types of securities do not have to be registered with the state Administrator under normal circumstances, it is important to be aware that these issuers may lose their exemption status. -
Question 7 of 10
7. Question
Which of the following statements is true regarding material facts in securities transactions?
Correct
Material facts in securities transactions
It is illegal for any person to intentionally make any false or misleading statements regarding any material fact when selling or purchasing a security. Such conduct is considered an act of fraud and is prohibited for registered and unregistered persons alike. A material fact is any piece of information that a potential investor relies upon when deciding whether or not to invest. While information directly relating to the value of the security itself is considered material fact, the definition of material fact is much broader. The experience and reputation of a broker-dealer may be a material fact if a potential investor relies on that experience and reputation when making an investment decision. Any information, whether directly related to the security or not, that the investor considers as part of the investment decision is a material fact.Incorrect
Material facts in securities transactions
It is illegal for any person to intentionally make any false or misleading statements regarding any material fact when selling or purchasing a security. Such conduct is considered an act of fraud and is prohibited for registered and unregistered persons alike. A material fact is any piece of information that a potential investor relies upon when deciding whether or not to invest. While information directly relating to the value of the security itself is considered material fact, the definition of material fact is much broader. The experience and reputation of a broker-dealer may be a material fact if a potential investor relies on that experience and reputation when making an investment decision. Any information, whether directly related to the security or not, that the investor considers as part of the investment decision is a material fact. -
Question 8 of 10
8. Question
Which of the following statements is true regarding market performance?
Correct
Market performance
The historical or projected performance of a security involved in a securities transaction is considered a material fact. If an agent implied that a particular security had experienced good performance year after year, when in reality the security was issued only a year ago, the agent would be providing false information concerning a material fact. Similarly, if the agent told a potential investor that a particular security issued yearly dividends that average a specific amount per share, but neglected to inform the investor that future dividends were expected to be much smaller, the agent would have omitted a material fact. If the agent provided such false or misleading information knowingly, the agent would have committed fraud in violation of the Uniform Securities Act.Incorrect
Market performance
The historical or projected performance of a security involved in a securities transaction is considered a material fact. If an agent implied that a particular security had experienced good performance year after year, when in reality the security was issued only a year ago, the agent would be providing false information concerning a material fact. Similarly, if the agent told a potential investor that a particular security issued yearly dividends that average a specific amount per share, but neglected to inform the investor that future dividends were expected to be much smaller, the agent would have omitted a material fact. If the agent provided such false or misleading information knowingly, the agent would have committed fraud in violation of the Uniform Securities Act. -
Question 9 of 10
9. Question
Which of the following statements is true regarding ethical business practices?
Correct
Ethical business practices
The Uniform Securities Act establishes standards for ethical business practices for all persons engaged in the business of issuing, buying, and/or selling securities and for all persons engaged in the business of providing investment advice regarding securities transactions. Although the provisions of the Uniform Securities Act that deal with ethical business practices are very broad, these provisions are not intended to provide an exhaustive list of prohibited behaviors. However, the Uniform Securities Act does provide many specific examples of prohibited business practices and fraudulent behaviors. The violation of the provisions concerning ethical business practices may result in the suspension, revocation, or denial of registration, and, depending upon the nature of the violation, in some cases, a violation may result in criminal charges.Incorrect
Ethical business practices
The Uniform Securities Act establishes standards for ethical business practices for all persons engaged in the business of issuing, buying, and/or selling securities and for all persons engaged in the business of providing investment advice regarding securities transactions. Although the provisions of the Uniform Securities Act that deal with ethical business practices are very broad, these provisions are not intended to provide an exhaustive list of prohibited behaviors. However, the Uniform Securities Act does provide many specific examples of prohibited business practices and fraudulent behaviors. The violation of the provisions concerning ethical business practices may result in the suspension, revocation, or denial of registration, and, depending upon the nature of the violation, in some cases, a violation may result in criminal charges. -
Question 10 of 10
10. Question
Which of the following statements is true regarding sharing information regarding future listing of a security?
Correct
Sharing information regarding future listing of a security
A broker-dealer or agent may not provide information to a client, or a potential client, regarding an upcoming change in the list for a particular security unless the broker-dealer or agent knows with certainty that the change in listing will occur in the near future. This type of information is considered a material fact. A change in the listing of a security may cause an increase in the security’s market value, and it may provide an indication of the anticipated future performance of the security. It is unethical and fraudulent for an agent or broker-dealer to inform a client that such a change is pending based on speculation. If the agent or broker-dealer does not have specific knowledge of the change as a factual matter, the agent or broker-dealer is prohibited from informing a client that such a change is pending.Incorrect
Sharing information regarding future listing of a security
A broker-dealer or agent may not provide information to a client, or a potential client, regarding an upcoming change in the list for a particular security unless the broker-dealer or agent knows with certainty that the change in listing will occur in the near future. This type of information is considered a material fact. A change in the listing of a security may cause an increase in the security’s market value, and it may provide an indication of the anticipated future performance of the security. It is unethical and fraudulent for an agent or broker-dealer to inform a client that such a change is pending based on speculation. If the agent or broker-dealer does not have specific knowledge of the change as a factual matter, the agent or broker-dealer is prohibited from informing a client that such a change is pending.