Chapter 1 Practice Questions
- 1. Offerings of securities are categorized by who receives the proceeds of the offering. In a primary offering, the proceeds go to the:
- A. Issuing corporation
- B. Major stockholders
- C. Underwriting broker-dealer
- D. Issuing corporation, major stockholders, and principal underwriter
- 2. Rule 147 permits a public offering without registration under the Securities Act of 1933, provided the corporate issuer only does business intrastate. To qualify for an intrastate offering, which of the following conditions are necessary?
- A. The corporate issuer must have its principal place of doing business in any state where the securities are sold.
- B. A total of 50% of its assets must be located in the state.
- C. A total of 80% of the purchasers must reside in the state.
- D. A total of 80% of the proceeds must be used in-state.
- 3. In a best-efforts offering, the escrow agent must promptly deposit the funds into an escrow account. The escrow agent is only allowed to invest these funds into certain specified investments under SEC Rule 15c2-4. Which investment would be allowed under SEC interpretation of the rule?
- A. Money market fund
- B. Commercial paper
- C. Money market bank account
- D. Municipal securities
- 4. Ace Broker-Dealer has created an advertisement for Strong Investment Company, which they consider to be classified as “generic advertising.” The ad does not specifically refer by name to the securities of Strong Investment Company or to the name of Strong Investment Company. It does describe the use of balanced funds, specialty funds, and variable funds in investment planning. The advertisement also invites the reader to inquire about additional information, and it gives the name and address of Ace Broker-Dealer. Based on SEC Rule 135A, is Ace Broker-Dealer correct in considering its advertisement to be generic?
- A.&