Chapter 6 Practice Questions
1.Which of these types of underwriting require an escrow account?
A.Firm commitment
B.All-or-None commitment
C.Public commitment
D.Standby commitment
2.In the cooling-off period, which of the following would not be allowed?
A.Making an offer to sell a security with a preliminary prospectus
B.Publishing a tombstone ad
C.Taking orders for the security
D.Distributing a preliminary prospectus
3.In a registration statement filed with the SEC preliminary to a public offering of securities, it is understood that the SEC:
A.Approves the securities in question
B.Guarantees the accuracy of the information in the statement
C.Endorses the issuance of the securities
D.Reviews the statement for clarity
4.For how many days after the issuance date must broker-dealers provide prospectuses to investors who buy a new issue in the secondary market that will be listed on a stock exchange?
A.10
B.15
C.25
D.45
5.A Nasdaq market maker that participated in a security’s offering makes a bid for 200 shares from this offering on the open market within the restricted period. The highest current bid for the shares is $30/share. The market maker makes a bid of $29/share. The market maker notifies Nasdaq in advance of the bid. The market maker’s actions:
A.Are called passive market making and are allowed under Regulation M
B.Are called passive market making and are prohibited under Regulation M
C.Are called active market making and are allowed under Regulation M
D.Are called active market making and are prohibited under Regulation M
6.An underwriter wishes to enter a stabilizing bid on the NYSE for a new issue, whose price has been dropping from its inception. The stabilizing bid must be:
A.Higher than the public offering price
B.Lower than or equal to the highest independent bid
C.Lower than or equal to the public offering price
D.There is no necessary relationship between the