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Question 1 of 10
1. Question
Among the definitions regarding Public Offerings of Securities With Conflicts of Interest, find the correct one.
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Conflict of Interest
The term “conflict of interest” means, if at the time of a member’s participation in an entity’s public offering, any of the following applies:
(A) the securities are to be issued by the member;
(B) the issuer controls, is controlled by or is under common control with the member or the member’s associated persons;
(C) at least five percent of the net offering proceeds, not including underwriting compensation, are intended to be:
(i) used to reduce or retire the balance of a loan or credit facility extended by the member, its affiliates and its associated persons, in the aggregate; or
(ii) otherwise directed to the member, its affiliates and associated persons, in the aggregate; or
(D) as a result of the public offering and any transactions contemplated at the time of the public offering:
(i) the member will be an affiliate of the issuer;
(ii) the member will become publicly owned; or
(iii) the issuer will become a member or form a broker-dealer subsidiary.Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Conflict of Interest
The term “conflict of interest” means, if at the time of a member’s participation in an entity’s public offering, any of the following applies:
(A) the securities are to be issued by the member;
(B) the issuer controls, is controlled by or is under common control with the member or the member’s associated persons;
(C) at least five percent of the net offering proceeds, not including underwriting compensation, are intended to be:
(i) used to reduce or retire the balance of a loan or credit facility extended by the member, its affiliates and its associated persons, in the aggregate; or
(ii) otherwise directed to the member, its affiliates and associated persons, in the aggregate; or
(D) as a result of the public offering and any transactions contemplated at the time of the public offering:
(i) the member will be an affiliate of the issuer;
(ii) the member will become publicly owned; or
(iii) the issuer will become a member or form a broker-dealer subsidiary. -
Question 2 of 10
2. Question
Regarding Public Offerings of Securities With Conflicts of Interest: Definitions, which one of the following is not the meaning of the term “Control”?
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Control
The term “control” means:
(i) beneficial ownership of 10 percent or more of the outstanding common equity of an entity, including any right to receive such securities within 60 days of the member’s participation in the public offering;
(ii) the right to 10 percent or more of the distributable profits or losses of an entity that is a partnership, including any right to receive an interest in such distributable profits or losses within 60 days of the member’s participation in the public offering;
(iii) beneficial ownership of 10 percent or more of the outstanding preferred equity of an entity, including any right to receive such preferred equity within 60 days of the member’s participation in the public offering; or
(iv) the power to direct or cause the direction of the management or policies of an entity.Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Control
The term “control” means:
(i) beneficial ownership of 10 percent or more of the outstanding common equity of an entity, including any right to receive such securities within 60 days of the member’s participation in the public offering;
(ii) the right to 10 percent or more of the distributable profits or losses of an entity that is a partnership, including any right to receive an interest in such distributable profits or losses within 60 days of the member’s participation in the public offering;
(iii) beneficial ownership of 10 percent or more of the outstanding preferred equity of an entity, including any right to receive such preferred equity within 60 days of the member’s participation in the public offering; or
(iv) the power to direct or cause the direction of the management or policies of an entity. -
Question 3 of 10
3. Question
For purposes of the definitions of affiliate, conflict of interest and control under this Rule, the term “entity” does not exclude?
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Entity
For purposes of the definitions of affiliate, conflict of interest and control under this Rule, the term “entity”:
(A) includes a company, corporation, partnership, trust, sole proprietorship, association or organized group of persons; and
(B) excludes the following:
(i) an investment company registered under the Investment Company Act;
(ii) a “separate account” as defined in Section 2(a)(37) of the Investment Company Act;
(iii) a “real estate investment trust” as defined in Section 856 of the Internal Revenue Code; or
(iv) a “direct participation program” as defined in Rule 2310.Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Entity
For purposes of the definitions of affiliate, conflict of interest and control under this Rule, the term “entity”:
(A) includes a company, corporation, partnership, trust, sole proprietorship, association or organized group of persons; and
(B) excludes the following:
(i) an investment company registered under the Investment Company Act;
(ii) a “separate account” as defined in Section 2(a)(37) of the Investment Company Act;
(iii) a “real estate investment trust” as defined in Section 856 of the Internal Revenue Code; or
(iv) a “direct participation program” as defined in Rule 2310. -
Question 4 of 10
4. Question
Regarding Public Offerings of Securities With Conflicts of Interest: Definitions, what does the term “investment grade rated” refers to?
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Investment Grade Rated
The term “investment grade rated” refers to securities that are rated by a nationally recognized statistical rating organization in one of its four highest generic rating categories.Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Investment Grade Rated
The term “investment grade rated” refers to securities that are rated by a nationally recognized statistical rating organization in one of its four highest generic rating categories. -
Question 5 of 10
5. Question
What does the term “preferred equity” mean?
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Preferred Equity
The term “preferred equity” means the aggregate capital invested by all persons in the preferred securities outstanding without regard to class, whether voting or non-voting, convertible or non-convertible, exchangeable or non-exchangeable, redeemable or non-redeemable, as reflected on the consolidated financial statements of the company.Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Preferred Equity
The term “preferred equity” means the aggregate capital invested by all persons in the preferred securities outstanding without regard to class, whether voting or non-voting, convertible or non-convertible, exchangeable or non-exchangeable, redeemable or non-redeemable, as reflected on the consolidated financial statements of the company. -
Question 6 of 10
6. Question
Regarding Public Offerings of Securities With Conflicts of Interest: Definitions, which one of the following statement(s) is/are trur about the meaning of the term “public offering”?
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Public Offering
The term “public offering” means any primary or secondary offering of securities made pursuant to a registration statement or offering circular including exchange offers, rights offerings, offerings made pursuant to a merger or acquisition and all other securities offerings of any kind whatsoever,Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Public Offering
The term “public offering” means any primary or secondary offering of securities made pursuant to a registration statement or offering circular including exchange offers, rights offerings, offerings made pursuant to a merger or acquisition and all other securities offerings of any kind whatsoever, -
Question 7 of 10
7. Question
Which of the following statement(s) is/are true about the meaning of the term “qualified independent underwriter”?
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Qualified Independent Underwriter
The term “qualified independent underwriter” means a member:
(A) that does not have a conflict of interest and is not an affiliate of any member that has a conflict of interest;
(B) that does not beneficially own as of the date of the member’s participation in the public offering, more than 5% of the class of securities that would give rise to a conflict of interest, including any right to receive any such securities exercisable within 60 days;
(C) that has agreed in acting as a qualified independent underwriter to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof; and
(D) that has served as underwriter in at least three public offerings of a similar size and type during the three-year period immediately preceding the filing of the registration statement or the date of first sale in an offering without a registration statement.Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Qualified Independent Underwriter
The term “qualified independent underwriter” means a member:
(A) that does not have a conflict of interest and is not an affiliate of any member that has a conflict of interest;
(B) that does not beneficially own as of the date of the member’s participation in the public offering, more than 5% of the class of securities that would give rise to a conflict of interest, including any right to receive any such securities exercisable within 60 days;
(C) that has agreed in acting as a qualified independent underwriter to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof; and
(D) that has served as underwriter in at least three public offerings of a similar size and type during the three-year period immediately preceding the filing of the registration statement or the date of first sale in an offering without a registration statement. -
Question 8 of 10
8. Question
Regarding Subordinated Debt, which of the following statement(s) is/are untrue?
Correct
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Subordinated Debt
The term “subordinated debt” includes (A) debt of an issuer which is expressly subordinate in right of payment to, or with a claim on assets subordinate to, any existing or future debt of such issuer; or (B) all debt that is specified as subordinated at the time of issuance. Subordinated debt shall not include short-term debt with maturity at issuance of less than one year and secured debt and bank debt not specified as subordinated debt at the time of issuance.Incorrect
5121. Public Offerings of Securities With Conflicts of Interest: Definitions
Subordinated Debt
The term “subordinated debt” includes (A) debt of an issuer which is expressly subordinate in right of payment to, or with a claim on assets subordinate to, any existing or future debt of such issuer; or (B) all debt that is specified as subordinated at the time of issuance. Subordinated debt shall not include short-term debt with maturity at issuance of less than one year and secured debt and bank debt not specified as subordinated debt at the time of issuance. -
Question 9 of 10
9. Question
Which one of the following statement(s) is/are true about a member who is in the capacity of paying agent, transfer agent, trustee, or in any other similar capacity?
Correct
2060. Use of Information Obtained in Fiduciary Capacity
A member who in the capacity of paying agent, transfer agent, trustee, or in any other similar capacity, has received information as to the ownership of securities, shall under no circumstances make use of such information for the purpose of soliciting purchases, sales or exchanges except at the request and on behalf of the issuer.Incorrect
2060. Use of Information Obtained in Fiduciary Capacity
A member who in the capacity of paying agent, transfer agent, trustee, or in any other similar capacity, has received information as to the ownership of securities, shall under no circumstances make use of such information for the purpose of soliciting purchases, sales or exchanges except at the request and on behalf of the issuer. -
Question 10 of 10
10. Question
Regarding the Definitions of Research Analysts and Research Reports, which one of the following is not correct?
Correct
2241. Research Analysts and Research Reports
Definitions
For purposes of this Rule, the following terms shall be defined as provided.
(1) “Emerging Growth Company” has the same meaning as in Section 3(a)(80) of the Exchange Act.
(2) “Equity security” has the same meaning as defined in Section 3(a)(11) of the Exchange Act.
(3) “Independent third-party research report” means a third-party research report, in respect of which the person producing the report:
(A) has no affiliation or business or contractual relationship with the distributing member or that member’s affiliates that is reasonably likely to inform the content of its research reports; and
(B) makes content determinations without any input from the distributing member or that member’s affiliates.
(4) “Investment banking department” means any department or division, whether or not identified as such, that performs any investment banking service on behalf of a member.Incorrect
2241. Research Analysts and Research Reports
Definitions
For purposes of this Rule, the following terms shall be defined as provided.
(1) “Emerging Growth Company” has the same meaning as in Section 3(a)(80) of the Exchange Act.
(2) “Equity security” has the same meaning as defined in Section 3(a)(11) of the Exchange Act.
(3) “Independent third-party research report” means a third-party research report, in respect of which the person producing the report:
(A) has no affiliation or business or contractual relationship with the distributing member or that member’s affiliates that is reasonably likely to inform the content of its research reports; and
(B) makes content determinations without any input from the distributing member or that member’s affiliates.
(4) “Investment banking department” means any department or division, whether or not identified as such, that performs any investment banking service on behalf of a member.