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Question 1 of 10
1. Question
Find the appropriate answer from the following about Restrictions on the Purchase and Sale of Initial Equity Public Offerings: General Prohibitions.
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
General Prohibitions
(1) A member or a person associated with a member may not sell, or cause to be sold, a new issue to any account in which a restricted person has a beneficial interest, except as otherwise permitted herein.
(2) A member or a person associated with a member may not purchase a new issue in any account in which such member or person associated with a member has a beneficial interest, except as otherwise permitted herein.
(3) A member may not continue to hold new issues acquired by the member as an underwriter, selling group member or otherwise, except as otherwise permitted herein.
(4) Nothing in this paragraph (a) shall prohibit:
(A) sales or purchases from one member of the selling group to another member of the selling group that are incidental to the distribution of a new issue to a non-restricted person at the public offering price;
(B) sales or purchases by a broker-dealer of a new issue at the public offering price as part of an accommodation to a non-restricted person customer of the broker-dealerIncorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
General Prohibitions
(1) A member or a person associated with a member may not sell, or cause to be sold, a new issue to any account in which a restricted person has a beneficial interest, except as otherwise permitted herein.
(2) A member or a person associated with a member may not purchase a new issue in any account in which such member or person associated with a member has a beneficial interest, except as otherwise permitted herein.
(3) A member may not continue to hold new issues acquired by the member as an underwriter, selling group member or otherwise, except as otherwise permitted herein.
(4) Nothing in this paragraph (a) shall prohibit:
(A) sales or purchases from one member of the selling group to another member of the selling group that are incidental to the distribution of a new issue to a non-restricted person at the public offering price;
(B) sales or purchases by a broker-dealer of a new issue at the public offering price as part of an accommodation to a non-restricted person customer of the broker-dealer -
Question 2 of 10
2. Question
Regarding Preconditions for Sale, which of the following statement(s) is/are true?
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Preconditions for Sale:
Before selling a new issue to any account, a member must in good faith have obtained within the twelve months prior to such saleIncorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Preconditions for Sale:
Before selling a new issue to any account, a member must in good faith have obtained within the twelve months prior to such sale -
Question 3 of 10
3. Question
Regarding Beneficial Owners, From the following statement(s) about Beneficial Owners, which one you think is/are true?
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Preconditions for Sale: Beneficial Owners
the account holder(s), or a person authorized to represent the beneficial owners of the account, that the account is eligible to purchase new issues in compliance with this Rule;Incorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Preconditions for Sale: Beneficial Owners
the account holder(s), or a person authorized to represent the beneficial owners of the account, that the account is eligible to purchase new issues in compliance with this Rule; -
Question 4 of 10
4. Question
Regarding Conduits, which of the following statement(s) is/are untrue?
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Preconditions for Sale: Conduits
a bank, foreign bank, broker-dealer, or investment adviser or other conduit that all purchases of new issues are in compliance with this Rule.
A member may not rely upon any representation that it believes, or has reason to believe, is inaccurate. A member shall maintain a copy of all records and information relating to whether an account is eligible to purchase new issues in its files for at least three years following the member’s last sale of a new issue to that account.Incorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Preconditions for Sale: Conduits
a bank, foreign bank, broker-dealer, or investment adviser or other conduit that all purchases of new issues are in compliance with this Rule.
A member may not rely upon any representation that it believes, or has reason to believe, is inaccurate. A member shall maintain a copy of all records and information relating to whether an account is eligible to purchase new issues in its files for at least three years following the member’s last sale of a new issue to that account. -
Question 5 of 10
5. Question
How many accounts of investments does the fund have when there are General Exemptions?
Correct
130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
General Exemptions
The general prohibitions in paragraph (a) of this Rule shall not apply to sales to and purchases by the following accounts or persons, whether directly or through accounts in which such persons have a beneficial interest:
(1) An investment company registered under the Investment Company Act;
(2) A common trust fund or similar fund as described in Section 3(a)(12)(A)(iii) of the Exchange Act, provided that:
(A) the fund has investments from 1,000 or more accounts; and
(B) the fund does not limit beneficial interests in the fund principally to trust accounts of restricted persons;Incorrect
130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
General Exemptions
The general prohibitions in paragraph (a) of this Rule shall not apply to sales to and purchases by the following accounts or persons, whether directly or through accounts in which such persons have a beneficial interest:
(1) An investment company registered under the Investment Company Act;
(2) A common trust fund or similar fund as described in Section 3(a)(12)(A)(iii) of the Exchange Act, provided that:
(A) the fund has investments from 1,000 or more accounts; and
(B) the fund does not limit beneficial interests in the fund principally to trust accounts of restricted persons; -
Question 6 of 10
6. Question
Regarding Issuer-Directed Securities, which of the following statement(s) is/are true?
Correct
130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Issuer-Directed Securities
The prohibitions on the purchase and sale of new issues in this Rule shall not apply to securities that:
are specifically directed by the issuer and are part of an offering in which no broker-dealer:
(A) underwrites any portion of the offering;
(B) solicits or sells any new issue securities in the offering; and
(C) has any involvement or influence, directly or indirectly, in the issuer’s allocation decisions with respect to any of the new issue securities in the offering;Incorrect
130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Issuer-Directed Securities
The prohibitions on the purchase and sale of new issues in this Rule shall not apply to securities that:
are specifically directed by the issuer and are part of an offering in which no broker-dealer:
(A) underwrites any portion of the offering;
(B) solicits or sells any new issue securities in the offering; and
(C) has any involvement or influence, directly or indirectly, in the issuer’s allocation decisions with respect to any of the new issue securities in the offering; -
Question 7 of 10
7. Question
If you are asked to find the correct answer about Anti-Dilution Provisions, which of the following statement(s) is/are true?
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Anti-Dilution Provisions
The prohibitions on the purchase and sale of new issues in this Rule shall not apply to an account in which a restricted person has a beneficial interest that meets the following conditions:
(1) the account has held an equity ownership interest in the issuer, or a company that has been acquired by the issuer in the past year, for a period of one year prior to the effective date of the offering;
(2) the sale of the new issue to the account shall not increase the account’s percentage equity ownership in the issuer above the ownership level as of three months prior to the filing of the registration statement in connection with the offering;
(3) the sale of the new issue to the account shall not include any special terms; and
(4) the new issue purchased pursuant to this paragraph (e) shall not be sold, transferred, assigned, pledged or hypothecated for a period of three months following the effective date of the offering.Incorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Anti-Dilution Provisions
The prohibitions on the purchase and sale of new issues in this Rule shall not apply to an account in which a restricted person has a beneficial interest that meets the following conditions:
(1) the account has held an equity ownership interest in the issuer, or a company that has been acquired by the issuer in the past year, for a period of one year prior to the effective date of the offering;
(2) the sale of the new issue to the account shall not increase the account’s percentage equity ownership in the issuer above the ownership level as of three months prior to the filing of the registration statement in connection with the offering;
(3) the sale of the new issue to the account shall not include any special terms; and
(4) the new issue purchased pursuant to this paragraph (e) shall not be sold, transferred, assigned, pledged or hypothecated for a period of three months following the effective date of the offering. -
Question 8 of 10
8. Question
Regarding Stand-by Purchasers, which of the following statement(s) is/are true while the prohibitions on the purchase and sale of new issues in this Rule shall not apply to the purchase and sale of securities pursuant to a stand-by agreement?
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Stand-by Purchasers
The prohibitions on the purchase and sale of new issues in this Rule shall not apply to the purchase and sale of securities pursuant to a stand-by agreement that meets the following conditions:
(1) the stand-by agreement is disclosed in the prospectus;
(2) the stand-by agreement is the subject of a formal written agreement;
(3) the managing underwriter(s) represents in writing that it was unable to find any other purchasers for the securities; and
(4) the securities sold pursuant to the stand-by agreement shall not be sold, transferred, assigned, pledged or hypothecated for a period of three months following the effective date of the offering.Incorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Stand-by Purchasers
The prohibitions on the purchase and sale of new issues in this Rule shall not apply to the purchase and sale of securities pursuant to a stand-by agreement that meets the following conditions:
(1) the stand-by agreement is disclosed in the prospectus;
(2) the stand-by agreement is the subject of a formal written agreement;
(3) the managing underwriter(s) represents in writing that it was unable to find any other purchasers for the securities; and
(4) the securities sold pursuant to the stand-by agreement shall not be sold, transferred, assigned, pledged or hypothecated for a period of three months following the effective date of the offering. -
Question 9 of 10
9. Question
Which of the following definitions(s) is/are untrue?
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Definitions
(1) “Beneficial interest” means any economic interest, such as the right to share in gains or losses. The receipt of a management or performance based fee for operating a collective investment account, or other fees for acting in a fiduciary capacity, shall not be considered a beneficial interest in the account.
(2) “Collective investment account” means any hedge fund, investment partnership, investment corporation or any other collective investment vehicle that is engaged primarily in the purchase and/or sale of securities. A “collective investment account” does not include a “family investment vehicle” or an “investment club.”
(3) “Conversion offering” means any offering of securities made as part of a plan by which a savings and loan association, insurance company or other organization converts from a mutual to a stock form of ownership.
(4) “Family investment vehicle” means a legal entity that is beneficially owned solely by immediate family members.Incorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Definitions
(1) “Beneficial interest” means any economic interest, such as the right to share in gains or losses. The receipt of a management or performance based fee for operating a collective investment account, or other fees for acting in a fiduciary capacity, shall not be considered a beneficial interest in the account.
(2) “Collective investment account” means any hedge fund, investment partnership, investment corporation or any other collective investment vehicle that is engaged primarily in the purchase and/or sale of securities. A “collective investment account” does not include a “family investment vehicle” or an “investment club.”
(3) “Conversion offering” means any offering of securities made as part of a plan by which a savings and loan association, insurance company or other organization converts from a mutual to a stock form of ownership.
(4) “Family investment vehicle” means a legal entity that is beneficially owned solely by immediate family members. -
Question 10 of 10
10. Question
Which of the following definition(s) is/are incorrect?
Correct
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Definitions
(5) “Immediate family member” means a person’s parents, mother-in-law or father-in-law, spouse, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children, and any other individual to whom the person provides material support.
(6) “Investment club” means a group of friends, neighbors, business associates or others that pool their money to invest in stock or other securities and are collectively responsible for making investment decisions.
(7) “Limited business broker-dealer” means any broker-dealer whose authorization to engage in the securities business is limited solely to the purchase and sale of investment company/variable contracts securities and direct participation program securities.
(8) “Material support” means directly or indirectly providing more than 25% of a person’s income in the prior calendar year. Members of the immediate family living in the same household are deemed to be providing each other with material support.Incorrect
5130. Restrictions on the Purchase and Sale of Initial Equity Public Offerings
Definitions
(5) “Immediate family member” means a person’s parents, mother-in-law or father-in-law, spouse, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children, and any other individual to whom the person provides material support.
(6) “Investment club” means a group of friends, neighbors, business associates or others that pool their money to invest in stock or other securities and are collectively responsible for making investment decisions.
(7) “Limited business broker-dealer” means any broker-dealer whose authorization to engage in the securities business is limited solely to the purchase and sale of investment company/variable contracts securities and direct participation program securities.
(8) “Material support” means directly or indirectly providing more than 25% of a person’s income in the prior calendar year. Members of the immediate family living in the same household are deemed to be providing each other with material support.