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Question 1 of 10
1. Question
Which of the following statement is/are true limited partnership?
I. A limited partnership (LP)—not to be confused with a limited liability partnership (LLP)—is a partnership made up of two or more partners
II. the general partner has limited liability for the debt
III. The general partner oversees and runs the business while limited partners do not partake in managing the business
IV. There are three types of partnerships: limited partnership, general partnership, and joint ventureCorrect
Rule no 2130. Direct Participation Program
Limited partnership — an unincorporated association that is a direct participation program organized as a limited partnership whose partners are one or more general partners and one or more limited partners, which conforms to the provisions of the Revised Uniform Limited Partnership Act or the applicable statute that regulates the organization of such partnershipIncorrect
Rule no 2130. Direct Participation Program
Limited partnership — an unincorporated association that is a direct participation program organized as a limited partnership whose partners are one or more general partners and one or more limited partners, which conforms to the provisions of the Revised Uniform Limited Partnership Act or the applicable statute that regulates the organization of such partnership -
Question 2 of 10
2. Question
What are solicitation expenses?
Correct
Rule no 2130. Direct Participation Program
Solicitation expenses — direct marketing expenses incurred by a member, in connection with a limited partnership rollup transaction such as telephone calls, broker-dealer fact sheets, members’ legal and other fees related to the solicitation, as well as direct solicitation compensation to members.Incorrect
Rule no 2130. Direct Participation Program
Solicitation expenses — direct marketing expenses incurred by a member, in connection with a limited partnership rollup transaction such as telephone calls, broker-dealer fact sheets, members’ legal and other fees related to the solicitation, as well as direct solicitation compensation to members. -
Question 3 of 10
3. Question
Which of the following statement is/are true regarding transaction costs?
I. Transaction costs are important to investors because they are one of the key determinants of net returns
II. Transaction costs are expenses incurred when buying or selling a good or service
III. Transaction costs include brokers’ commissions and spreads
IV. There are also transaction costs in buying and selling real estateCorrect
Rule no 2130. Direct Participation Program
Transaction costs — costs incurred in connection with a limited partnership rollup transaction, including printing and mailing the proxy, prospectus or other documents; legal fees not related to the solicitation of votes or tenders; financial advisory fees; investment banking fees; appraisal fees; accounting fees; independent committee expenses; travel expenses; and all other fees related to the preparatory work of the transaction, but not including costs that would have otherwise been incurred by the subject limited partnerships in the ordinary course of business or solicitation expensesIncorrect
Rule no 2130. Direct Participation Program
Transaction costs — costs incurred in connection with a limited partnership rollup transaction, including printing and mailing the proxy, prospectus or other documents; legal fees not related to the solicitation of votes or tenders; financial advisory fees; investment banking fees; appraisal fees; accounting fees; independent committee expenses; travel expenses; and all other fees related to the preparatory work of the transaction, but not including costs that would have otherwise been incurred by the subject limited partnerships in the ordinary course of business or solicitation expenses -
Question 4 of 10
4. Question
Which of the following statement is/are true regarding cash flow?
I. Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business
II. Positive cash flow indicates that a company’s liquid assets are increasing, enabling it to settle debts
III. Three methods for calculation of cash flows
IV. To understand the true profitability of the business, analysts look at free cash flowCorrect
Rule no 2130. Direct Participation Program
Cash flow — cash funds provided from operations, including lease payments on net leases from builders and sellers, without deduction for depreciation, but after deducting cash funds used to pay all other expenses, debt payments, capital improvements and replacements.Incorrect
Rule no 2130. Direct Participation Program
Cash flow — cash funds provided from operations, including lease payments on net leases from builders and sellers, without deduction for depreciation, but after deducting cash funds used to pay all other expenses, debt payments, capital improvements and replacements. -
Question 5 of 10
5. Question
Which of the following statements is/are true regarding registration statement?
I. Registration statement is the initial registration form for new securities
II. Companies usually file SEC Form S-1 in anticipation of their initial public offering (IPO)
III. SEC Form S-1 is also known as the registration statement under the Securities Act of 1933
IV. Form S-1 is also as the registration statement under the HYIPCorrect
Rule no 2130. Direct Participation Programs
Registration statement — a registration statement as defined by Section 2(8) of the Securities Act, as amended, a notification on Form 1-A filed with the SEC pursuant to the provisions of Securities Act Rule 255 and, in the case of an intrastate offering, any document initiating a registration or similar process for an issue of securities which is required to be filed by the laws or regulations of any stateIncorrect
Rule no 2130. Direct Participation Programs
Registration statement — a registration statement as defined by Section 2(8) of the Securities Act, as amended, a notification on Form 1-A filed with the SEC pursuant to the provisions of Securities Act Rule 255 and, in the case of an intrastate offering, any document initiating a registration or similar process for an issue of securities which is required to be filed by the laws or regulations of any state -
Question 6 of 10
6. Question
Which of the following statement is/are true regarding dissenting limited partner?
I. Complies with an exchange or tinder offer
II. Holder of beneficial interest
III. Complies with procedures
IV. Casts a vote against transactionCorrect
Rule no 2130. Direct Participation Program
Dissenting limited partner — a person who, on the date on which soliciting material is mailed to investors, is a holder of a beneficial interest in a limited partnership that is the subject of a limited partnership rollup transaction, and who casts a vote against the transaction and complies with procedures established by FINRA, except that for purposes of an exchange or tender offer, such person shall file an objection in writing under FINRA rules during the period in which the offer is outstanding. Such objection in writing shall be filed with the party responsible for tabulating the votes or tenders.Incorrect
Rule no 2130. Direct Participation Program
Dissenting limited partner — a person who, on the date on which soliciting material is mailed to investors, is a holder of a beneficial interest in a limited partnership that is the subject of a limited partnership rollup transaction, and who casts a vote against the transaction and complies with procedures established by FINRA, except that for purposes of an exchange or tender offer, such person shall file an objection in writing under FINRA rules during the period in which the offer is outstanding. Such objection in writing shall be filed with the party responsible for tabulating the votes or tenders. -
Question 7 of 10
7. Question
Which of the following statements is/are true about SIPC?
I. Members to the SIPC include all brokers and dealers registered under the Securities Exchange Act of 1934
II. The Securities Investor Protection Corporation (SIPC) is a profit corporation
III. SIPC is an insurance that provides brokerage customers up to $500,000 coverage for cash and securities
IV. SIPC oversees the liquidation of broker-dealers who go bankrupt, lapse into financial trouble, or if the assets of their customers go missingCorrect
Rule no 2266. SIPC Information
All members, except those members: (a) that pursuant to Section 3(a)(2)(A)(i) through (iii) of the Securities Investor Protection Act of 1970 (SIPA) are excluded from membership in the Securities Investor Protection Corporation (SIPC) and that are not SIPC members; or (b) whose business consists exclusively of the sale of investments that are ineligible for SIPC protection, shall advise all new customers, in writing, at the opening of an account, that they may obtain information about SIPC, including the SIPC brochure, by contacting SIPC, and also shall provide the Web site address and telephone number of SIPC. In addition, such members shall provide all customers with the same information, in writing, at least once each year. In cases where both an introducing firm and clearing firm service an account, the firms may assign these requirements to one of the firms.Incorrect
Rule no 2266. SIPC Information
All members, except those members: (a) that pursuant to Section 3(a)(2)(A)(i) through (iii) of the Securities Investor Protection Act of 1970 (SIPA) are excluded from membership in the Securities Investor Protection Corporation (SIPC) and that are not SIPC members; or (b) whose business consists exclusively of the sale of investments that are ineligible for SIPC protection, shall advise all new customers, in writing, at the opening of an account, that they may obtain information about SIPC, including the SIPC brochure, by contacting SIPC, and also shall provide the Web site address and telephone number of SIPC. In addition, such members shall provide all customers with the same information, in writing, at least once each year. In cases where both an introducing firm and clearing firm service an account, the firms may assign these requirements to one of the firms. -
Question 8 of 10
8. Question
Which risk is NOT associated with margin disclosure statement?
Correct
Rule no 2264. Margin Disclosure Statement
You can lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities or assets in your account(s).
• The firm can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirements, or the firm’s higher “house” requirements, the firm can sell the securities or other assets in any of your accounts held at the firm to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale.
• The firm can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to the customer.
• You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. Because the securities are collateral for the margin loan, the firm has the right to decide which security to sell in order to protect its interests.
• The firm can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause the member to liquidate or sell securities in your account(s).
• You are not entitled to an extension of time on a margin call. While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension.Incorrect
Rule no 2264. Margin Disclosure Statement
You can lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities or assets in your account(s).
• The firm can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirements, or the firm’s higher “house” requirements, the firm can sell the securities or other assets in any of your accounts held at the firm to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale.
• The firm can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to the customer.
• You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. Because the securities are collateral for the margin loan, the firm has the right to decide which security to sell in order to protect its interests.
• The firm can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause the member to liquidate or sell securities in your account(s).
• You are not entitled to an extension of time on a margin call. While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension. -
Question 9 of 10
9. Question
What is the most appropriate way to disclose a financial condition?
Correct
Rule no 2261. Disclosure of Financial Condition
A member shall make available to inspection by any bona fide regular customer, upon request, the information relative to such member’s financial condition as disclosed in its most recent balance sheet prepared either in accordance with such member’s usual practice or as required by any state or federal securities laws, or any rule or regulation thereunder. In lieu of making such balance sheet available to inspection, a member may deliver the balance sheet to the requesting bona fide regular customer in paper or electronic form; provided that, with respect to electronic delivery, the customer must consent to receive the balance sheet in electronic form.Incorrect
Rule no 2261. Disclosure of Financial Condition
A member shall make available to inspection by any bona fide regular customer, upon request, the information relative to such member’s financial condition as disclosed in its most recent balance sheet prepared either in accordance with such member’s usual practice or as required by any state or federal securities laws, or any rule or regulation thereunder. In lieu of making such balance sheet available to inspection, a member may deliver the balance sheet to the requesting bona fide regular customer in paper or electronic form; provided that, with respect to electronic delivery, the customer must consent to receive the balance sheet in electronic form. -
Question 10 of 10
10. Question
Which of the following statement is/are true about equity securities?
I. An equity security represents ownership interest held by shareholders in an entity (a company, partnership or trust), realized in the form of shares of capital stock
II. Holders of equity securities are typically not entitled to regular payments
III. Equity securities do not entitle the holder to some control of the company
IV. Although equity securities often do pay out dividends—but they are able to profit from capital gains when they sell the securitiesCorrect
Rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For an equity security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall process and forward:
(A) all proxy material, as provided in paragraph (c) of this Rule, that is furnished to the member by the issuer of the securities or a stockholder of such issuer; and
(B) all annual reports, information statements and other material sent to stockholders that are furnished to the member by the issuer of the securities.Incorrect
Rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For an equity security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall process and forward:
(A) all proxy material, as provided in paragraph (c) of this Rule, that is furnished to the member by the issuer of the securities or a stockholder of such issuer; and
(B) all annual reports, information statements and other material sent to stockholders that are furnished to the member by the issuer of the securities.