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Question 1 of 10
1. Question
Which of the following statements is true regarding cooling-off period and due diligence meetings?
Correct
Cooling-off period and due diligence meetings
Issuers of securities are required to file with the SEC for the new offering. At the date of filing, a cooling-off period commences, at the end of which the issue is either cleared or rejected for public sale. The cooling-off period lasts at least twenty days, and during it, underwriters can advertise for the offering and solicit (nonbinding) indications of interest. Syndicate members are permitted to leave the underwriting agreement within the cooling- off period, but forbidden once the period has ended.Incorrect
Cooling-off period and due diligence meetings
Issuers of securities are required to file with the SEC for the new offering. At the date of filing, a cooling-off period commences, at the end of which the issue is either cleared or rejected for public sale. The cooling-off period lasts at least twenty days, and during it, underwriters can advertise for the offering and solicit (nonbinding) indications of interest. Syndicate members are permitted to leave the underwriting agreement within the cooling- off period, but forbidden once the period has ended. -
Question 2 of 10
2. Question
Which of the following statements is true regarding cooling-off period and due diligence meetings?
Correct
Cooling-off period and due diligence meetings
Issuers of securities are required to file with the SEC for the new offering. At the date of filing, a cooling-off period commences, at the end of which the issue is either cleared or rejected for public sale. The cooling-off period lasts at least twenty days, and during it, underwriters can advertise for the offering and solicit (nonbinding) indications of interest. Syndicate members are permitted to leave the underwriting agreement within the cooling- off period, but forbidden once the period has ended. Near the end of the cooling-off period, the underwriter holds a meeting to give information for the new offering to syndicate members, selling groups, brokers, institutions, and any other interested parties. This is the due diligence meeting, designed to ensure that all material information related to the offering is disclosed to potential investors.Incorrect
Cooling-off period and due diligence meetings
Issuers of securities are required to file with the SEC for the new offering. At the date of filing, a cooling-off period commences, at the end of which the issue is either cleared or rejected for public sale. The cooling-off period lasts at least twenty days, and during it, underwriters can advertise for the offering and solicit (nonbinding) indications of interest. Syndicate members are permitted to leave the underwriting agreement within the cooling- off period, but forbidden once the period has ended. Near the end of the cooling-off period, the underwriter holds a meeting to give information for the new offering to syndicate members, selling groups, brokers, institutions, and any other interested parties. This is the due diligence meeting, designed to ensure that all material information related to the offering is disclosed to potential investors. -
Question 3 of 10
3. Question
Which of the following statements is true regarding filing date and effective date for securities registration?
Correct
Filing date and effective date for securities registration
The filing date is the date when the (hopeful) issuer of securities files the requisite registration statement with the SEC. This filing date initiates the cooling-off period, which is at least twenty days long. The effective date is the date when the cooling-off period ends, that is, once the securities are cleared for public sale.Incorrect
Filing date and effective date for securities registration
The filing date is the date when the (hopeful) issuer of securities files the requisite registration statement with the SEC. This filing date initiates the cooling-off period, which is at least twenty days long. The effective date is the date when the cooling-off period ends, that is, once the securities are cleared for public sale. -
Question 4 of 10
4. Question
Which of the following statements is false regarding annual report?
Correct
Annual report
An annual report is intended to comprehensively summarize a company’s activities for investors (and others) over the past year. (Interim reports are reports issued more frequently.) Annual reports include financial statements (such as income statements, balance sheets, and statements of cash flows), notes to the financial statements, accounting policies, statements and reports from management, directors, chairmen, and/or auditors, material risk disclosures, and other information.Incorrect
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Question 5 of 10
5. Question
Which of the following statements is true regarding delivery of annual reports and notices of corporate actions?
Correct
Delivery of annual reports and notices of corporate actions
A broker is responsible for informing his customer of various actions taken by corporations in which the customer has some share or interest. This includes notifying the customer about annual reports for the corporation (as well as interim reports, if necessary) and notices of various corporate actions. If a corporation has split its stock, tendered new stock, established some kind of shareholder voting by proxy, announced plans to repurchase stock, or done some other action which is worthy of the customer’s attention, the broker should seek to notify him.Incorrect
Delivery of annual reports and notices of corporate actions
A broker is responsible for informing his customer of various actions taken by corporations in which the customer has some share or interest. This includes notifying the customer about annual reports for the corporation (as well as interim reports, if necessary) and notices of various corporate actions. If a corporation has split its stock, tendered new stock, established some kind of shareholder voting by proxy, announced plans to repurchase stock, or done some other action which is worthy of the customer’s attention, the broker should seek to notify him. -
Question 6 of 10
6. Question
Which of the following statements is true regarding required disclosures for specific transactions?
Correct
Required disclosures for specific transactions
Offering documents are disclosures provided by issuers of securities providing specific and detailed financial information concerning both the issuer and the offering itself. Prospectuses are formal documents which brokers are legally required to file with the SEC. They provide information about investments being offered for sale to the public, giving information so that investors can make intelligent and informed decisions. Stocks and bonds have two types of prospectuses, preliminary and final.Incorrect
Required disclosures for specific transactions
Offering documents are disclosures provided by issuers of securities providing specific and detailed financial information concerning both the issuer and the offering itself. Prospectuses are formal documents which brokers are legally required to file with the SEC. They provide information about investments being offered for sale to the public, giving information so that investors can make intelligent and informed decisions. Stocks and bonds have two types of prospectuses, preliminary and final. -
Question 7 of 10
7. Question
Which of the following statements is true regarding red herrings?
Correct
Red herrings are preliminary prospectuses. They are called such, not because they are misleading (as are “red herrings” in logic and rhetoric), but because they include a statement in red lettering on the cover declaring that they are preliminary, and thus that some items might be subject to change.
Incorrect
Red herrings are preliminary prospectuses. They are called such, not because they are misleading (as are “red herrings” in logic and rhetoric), but because they include a statement in red lettering on the cover declaring that they are preliminary, and thus that some items might be subject to change.
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Question 8 of 10
8. Question
Which of the following statements is true regarding statements of additional information?
Correct
Statements of additional information, sometimes abbreviated as SAIs, are supplementary documents which are added to prospectuses for mutual fund offerings. These statements provide further details on the fund, although they are not strictly necessary for investors to make informed decisions, and therefore they are not legally required by fund companies to include. (However, they must provide such information for free to customers upon request.)
Incorrect
Statements of additional information, sometimes abbreviated as SAIs, are supplementary documents which are added to prospectuses for mutual fund offerings. These statements provide further details on the fund, although they are not strictly necessary for investors to make informed decisions, and therefore they are not legally required by fund companies to include. (However, they must provide such information for free to customers upon request.)
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Question 9 of 10
9. Question
Which of the following statements is false regarding material events?
Correct
Material events are any events which substantively impact a prospective investor’s decision to invest or not. These can be economic events, political events, or anything else. Brokers should be aware of these and report them to customers as is appropriate. In order to avoid conflicts of interest and thereby protect customers, brokers are required to disclose any control relationships they have with the issuer of securities, bonds in particular.
Incorrect
Material events are any events which substantively impact a prospective investor’s decision to invest or not. These can be economic events, political events, or anything else. Brokers should be aware of these and report them to customers as is appropriate. In order to avoid conflicts of interest and thereby protect customers, brokers are required to disclose any control relationships they have with the issuer of securities, bonds in particular.
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Question 10 of 10
10. Question
Which of the following statements is true regarding control relationships?
Correct
In order to avoid conflicts of interest and thereby protect customers, brokers are required to disclose any control relationships they have with the issuer of securities, bonds in particular. Although the initial disclosure can be merely verbal, before a transaction actually goes through, the customer must be informed in writing of the control issue. This usually takes place at confirmation.
Incorrect
In order to avoid conflicts of interest and thereby protect customers, brokers are required to disclose any control relationships they have with the issuer of securities, bonds in particular. Although the initial disclosure can be merely verbal, before a transaction actually goes through, the customer must be informed in writing of the control issue. This usually takes place at confirmation.