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Question 1 of 10
1. Question
How long must all debt securities have for prepayment with 80% of the net proceeds of any sale or refinancing of the assets previously owned by the partnership entitles subject to the limited partnership rollup transaction or any part thereof
Correct
2310. Direct Participation Programs
Participation in Rollups: All debt securities must have a term no greater than 8 years and provide for prepayment with 80% of the net proceeds of any sale or refinancing of the assets previously owned by the partnership entitles subject to the limited partnership rollup transaction or any part thereof;Incorrect
2310. Direct Participation Programs
Participation in Rollups: All debt securities must have a term no greater than 8 years and provide for prepayment with 80% of the net proceeds of any sale or refinancing of the assets previously owned by the partnership entitles subject to the limited partnership rollup transaction or any part thereof; -
Question 2 of 10
2. Question
Regarding Participation in Rollups, what is the period that the number of securities to be received in return for limited partnership interests must be determined in relation to the average last sale price of the freely tradeable securities?
Correct
2310. Direct Participation Programs
Participation in Rollups: freely tradeable securities used as compensation to dissenting limited partners must be previously listed on a national securities exchange prior to the limited partnership rollup transaction, and the number of securities to be received in return for limited partnership interests must be determined in relation to the average last sale price of the freely tradeable securities in the 20-day period following the date of the meeting at which the vote on the limited partnership rollup transaction occurs.Incorrect
2310. Direct Participation Programs
Participation in Rollups: freely tradeable securities used as compensation to dissenting limited partners must be previously listed on a national securities exchange prior to the limited partnership rollup transaction, and the number of securities to be received in return for limited partnership interests must be determined in relation to the average last sale price of the freely tradeable securities in the 20-day period following the date of the meeting at which the vote on the limited partnership rollup transaction occurs. -
Question 3 of 10
3. Question
Considering the Participation in Rollups, which one of the following is/are correct?
Correct
2310. Direct Participation Programs
Participation in Rollups: to receive or retain a security with substantially the same terms and conditions as the security originally held. Securities received or retained will be considered to have the same terms and conditions as the security originally held if:
1. there is no material adverse change to dissenting limited partners’ rights with respect to the business plan or the investment, distribution and liquidation policies of the limited partnership; and
2. the dissenting limited partners receive substantially the same rights, preferences and priorities as they had pursuant to the security originally held;Incorrect
2310. Direct Participation Programs
Participation in Rollups: to receive or retain a security with substantially the same terms and conditions as the security originally held. Securities received or retained will be considered to have the same terms and conditions as the security originally held if:
1. there is no material adverse change to dissenting limited partners’ rights with respect to the business plan or the investment, distribution and liquidation policies of the limited partnership; and
2. the dissenting limited partners receive substantially the same rights, preferences and priorities as they had pursuant to the security originally held; -
Question 4 of 10
4. Question
Which one of the following is untrue while a review of the limited partnership rollup transaction by an independent committee of persons not affiliated with the general partner(s) or sponsor?
Correct
2310. Direct Participation Programs
Participation in Rollups: review of the limited partnership rollup transaction by an independent committee of persons not affiliated with the general partner(s) or sponsor. Whenever utilized, the independent committee:
A. shall be approved by a majority of the outstanding securities of each of the participating partnerships;
B. shall have access to the books and records of the partnerships;
C. shall prepare a report to the limited partners subject to the limited partnership rollup transaction that presents its findings and recommendations, including any minority views;
D. shall have the authority to negotiate the proposed transaction with the general partner or sponsor on behalf of the limited partners, but not the authority to approve the transaction on behalf of the limited partners;Incorrect
2310. Direct Participation Programs
Participation in Rollups: review of the limited partnership rollup transaction by an independent committee of persons not affiliated with the general partner(s) or sponsor. Whenever utilized, the independent committee:
A. shall be approved by a majority of the outstanding securities of each of the participating partnerships;
B. shall have access to the books and records of the partnerships;
C. shall prepare a report to the limited partners subject to the limited partnership rollup transaction that presents its findings and recommendations, including any minority views;
D. shall have the authority to negotiate the proposed transaction with the general partner or sponsor on behalf of the limited partners, but not the authority to approve the transaction on behalf of the limited partners; -
Question 5 of 10
5. Question
Regardless of whether a limited partnership rollup transaction is in compliance with subparagraph (C)(i), a limited partnership rollup transaction will be presumed to be unfair and unreasonable if the general partner(s) ———. Which of the following is correct?
Correct
2310. Direct Participation Programs
Participation in Rollups: Regardless of whether a limited partnership rollup transaction is in compliance with subparagraph (C)(i), a limited partnership rollup transaction will be presumed to be unfair and unreasonable:
a. if the general partner(s):
1. converts an equity interest in any limited partnership(s) subject to a limited partnership rollup transaction for which consideration was not paid and which was not otherwise provided for in the limited partnership agreement and disclosed to limited partners, into a voting interest in the new entity (provided, however, an interest originally obtained in order to comply with the provisions of Internal Revenue Service Revenue Proclamation 89-12 may be converted);
2. fails to follow the valuation provisions, if any, in the limited partnership agreements of the subject limited partnerships when valuing their limited partnership interests; or
3. utilizes a future value of their equity interest in the limited partnership rather than the current value of their equity interest, as determined by an appraisal conducted in a manner consistent with subparagraph (C)(i)a., when determining their interest in the new entity;Incorrect
2310. Direct Participation Programs
Participation in Rollups: Regardless of whether a limited partnership rollup transaction is in compliance with subparagraph (C)(i), a limited partnership rollup transaction will be presumed to be unfair and unreasonable:
a. if the general partner(s):
1. converts an equity interest in any limited partnership(s) subject to a limited partnership rollup transaction for which consideration was not paid and which was not otherwise provided for in the limited partnership agreement and disclosed to limited partners, into a voting interest in the new entity (provided, however, an interest originally obtained in order to comply with the provisions of Internal Revenue Service Revenue Proclamation 89-12 may be converted);
2. fails to follow the valuation provisions, if any, in the limited partnership agreements of the subject limited partnerships when valuing their limited partnership interests; or
3. utilizes a future value of their equity interest in the limited partnership rather than the current value of their equity interest, as determined by an appraisal conducted in a manner consistent with subparagraph (C)(i)a., when determining their interest in the new entity; -
Question 6 of 10
6. Question
Which of the following statement(s) is/are true when a majority of the interests in an entity resulting from a limited partnership rollup transaction may not, without concurrence by the sponsor, general partner(s), board of directors, trustee, or similar governing entity, depending on the form of entity and to the extent not inconsistent with applicable state law, vote to?
Correct
2310. Direct Participation Programs
Participation in Rollups: Regardless of whether a limited partnership rollup transaction is in compliance with subparagraph (C)(i), a limited partnership rollup transaction will be presumed to be unfair and unreasonable: as to voting rights, if:
a majority of the interests in an entity resulting from a limited partnership rollup transaction may not, without concurrence by the sponsor, general partner(s), board of directors, trustee, or similar governing entity, depending on the form of entity and to the extent not inconsistent with applicable state law, vote to:
A. amend the limited partnership agreement, articles of incorporation or by-laws, or indenture;
B. dissolve the entity;
C. remove the general partner, board of directors, trustee or similar governing entity, and elect a new general partner, board of directors, trustee or similar governing entity; or
D. approve or disapprove the sale of substantially all of the assets of the entity;Incorrect
2310. Direct Participation Programs
Participation in Rollups: Regardless of whether a limited partnership rollup transaction is in compliance with subparagraph (C)(i), a limited partnership rollup transaction will be presumed to be unfair and unreasonable: as to voting rights, if:
a majority of the interests in an entity resulting from a limited partnership rollup transaction may not, without concurrence by the sponsor, general partner(s), board of directors, trustee, or similar governing entity, depending on the form of entity and to the extent not inconsistent with applicable state law, vote to:
A. amend the limited partnership agreement, articles of incorporation or by-laws, or indenture;
B. dissolve the entity;
C. remove the general partner, board of directors, trustee or similar governing entity, and elect a new general partner, board of directors, trustee or similar governing entity; or
D. approve or disapprove the sale of substantially all of the assets of the entity; -
Question 7 of 10
7. Question
Which of the following statement(s) is/are true about the fees of general partners?
Correct
2310. Direct Participation Programs
Participation in Rollups: Regardless of whether a limited partnership rollup transaction is in compliance with subparagraph (C)(i), a limited partnership rollup transaction will be presumed to be unfair and unreasonable: as to fees of general partners, if:
1. general partners are not prevented from receiving both unearned management fees discounted to a present value (if such fees were not previously provided for in the limited partnership agreement and disclosed to limited partners) and new asset-based fees;
2. property management fees and other general partner fees are inappropriate, unreasonable and more than, or not competitive with, what would be paid to third parties for performing similar services; or
3. changes in fees which are substantial and adverse to limited partners are not approved by an independent committee according to the facts and circumstances of each transaction.Incorrect
2310. Direct Participation Programs
Participation in Rollups: Regardless of whether a limited partnership rollup transaction is in compliance with subparagraph (C)(i), a limited partnership rollup transaction will be presumed to be unfair and unreasonable: as to fees of general partners, if:
1. general partners are not prevented from receiving both unearned management fees discounted to a present value (if such fees were not previously provided for in the limited partnership agreement and disclosed to limited partners) and new asset-based fees;
2. property management fees and other general partner fees are inappropriate, unreasonable and more than, or not competitive with, what would be paid to third parties for performing similar services; or
3. changes in fees which are substantial and adverse to limited partners are not approved by an independent committee according to the facts and circumstances of each transaction. -
Question 8 of 10
8. Question
Regarding the terms “compensation,” “non-cash compensation” and “offeror” for the purposes of this paragraph (c), which of the following meanings is correct?
Correct
2310. Direct Participation Programs
Non-Cash Compensation: Definitions
The terms “compensation,” “non-cash compensation” and “offeror” for the purposes of this paragraph (c) shall have the following meanings:
(A) “Compensation” shall mean cash compensation and non-cash compensation.
(B) “Non-cash compensation” shall mean any form of compensation received in connection with the sale and distribution of direct participation securities that is not cash compensation, including but not limited to merchandise, gifts and prizes, travel expenses, meals and lodging.
(C) “Offeror” shall mean an issuer, sponsor, an adviser to an issuer or sponsor, an underwriter and any affiliated person of such entities.Incorrect
2310. Direct Participation Programs
Non-Cash Compensation: Definitions
The terms “compensation,” “non-cash compensation” and “offeror” for the purposes of this paragraph (c) shall have the following meanings:
(A) “Compensation” shall mean cash compensation and non-cash compensation.
(B) “Non-cash compensation” shall mean any form of compensation received in connection with the sale and distribution of direct participation securities that is not cash compensation, including but not limited to merchandise, gifts and prizes, travel expenses, meals and lodging.
(C) “Offeror” shall mean an issuer, sponsor, an adviser to an issuer or sponsor, an underwriter and any affiliated person of such entities. -
Question 9 of 10
9. Question
While telling about Restriction on Non-Cash Compensation, which of the following statement(s) is/are true?
Correct
2310. Direct Participation Programs
Non-Cash Compensation: Restriction on Non-Cash Compensation
In connection with the sale and distribution of direct participation program or REIT securities, no member or person associated with a member shall directly or indirectly accept or make payments or offers of payments of any non-cash compensation, except as provided in this provision. Non-cash compensation arrangements are limited to the following:
(A) Gifts that do not exceed an annual amount per person fixed periodically by the Board of Governors1 and are not conditioned on achievement of a sales target.
(B) An occasional meal, a ticket to a sporting event or the theater, or comparable entertainment which is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target.
(C) Payment or reimbursement by offerors in connection with meetings held by an offeror or by a member for the purpose of training or education of associated persons of a member,Incorrect
2310. Direct Participation Programs
Non-Cash Compensation: Restriction on Non-Cash Compensation
In connection with the sale and distribution of direct participation program or REIT securities, no member or person associated with a member shall directly or indirectly accept or make payments or offers of payments of any non-cash compensation, except as provided in this provision. Non-cash compensation arrangements are limited to the following:
(A) Gifts that do not exceed an annual amount per person fixed periodically by the Board of Governors1 and are not conditioned on achievement of a sales target.
(B) An occasional meal, a ticket to a sporting event or the theater, or comparable entertainment which is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target.
(C) Payment or reimbursement by offerors in connection with meetings held by an offeror or by a member for the purpose of training or education of associated persons of a member, -
Question 10 of 10
10. Question
In Non-Cash Compensation: Restriction on Non-Cash Compensation, which of the following statement(s) is/are true?
Correct
2310. Direct Participation Programs
Non-Cash Compensation: Restriction on Non-Cash Compensation
Payment or reimbursement by offerors in connection with meetings held by an offeror or by a member for the purpose of training or education of associated persons of a member, provided that:
(i) associated persons obtain the member’s prior approval to attend the meeting and attendance by a member’s associated persons is not conditioned by the member on the achievement of a sales target or any other incentives pursuant to a non-cash compensation arrangement permitted by paragraph (c)(2)(D);
(ii) the location is appropriate to the purpose of the meeting, which shall mean a United States office of the offeror or the member holding the meeting, or a facility located in the vicinity of such office, or a United States regional location with respect to meetings of associated persons who work within that region or, with respect to meetings with direct participation programs or REITs, a United States location at which a significant or representative asset of the program or REIT is located;
(iii) the payment or reimbursement is not applied to the expenses of guests of the associated person; and
(iv) the payment or reimbursement by the offeror is not conditioned by the offeror on the achievement of a sales target or any other non-cash compensation arrangement permitted by paragraph (c)(2)(D).Incorrect
2310. Direct Participation Programs
Non-Cash Compensation: Restriction on Non-Cash Compensation
Payment or reimbursement by offerors in connection with meetings held by an offeror or by a member for the purpose of training or education of associated persons of a member, provided that:
(i) associated persons obtain the member’s prior approval to attend the meeting and attendance by a member’s associated persons is not conditioned by the member on the achievement of a sales target or any other incentives pursuant to a non-cash compensation arrangement permitted by paragraph (c)(2)(D);
(ii) the location is appropriate to the purpose of the meeting, which shall mean a United States office of the offeror or the member holding the meeting, or a facility located in the vicinity of such office, or a United States regional location with respect to meetings of associated persons who work within that region or, with respect to meetings with direct participation programs or REITs, a United States location at which a significant or representative asset of the program or REIT is located;
(iii) the payment or reimbursement is not applied to the expenses of guests of the associated person; and
(iv) the payment or reimbursement by the offeror is not conditioned by the offeror on the achievement of a sales target or any other non-cash compensation arrangement permitted by paragraph (c)(2)(D).