Chapter 7 Practice Question Answers
1. Answer: C. Choices III and IV both describe requirements for WKSI status. Choice I is mostly but not quite right: a WKSI must have worldwide public float of at least $700 million in common equity or have issued at least $1 billion in nonconvertible securities other than common equity in prior three years. Choice II is entirely wrong: a WKSI may be a subsidiary of another company if it qualifies as a WKSI on its own account.
2. Answer: B. The underwriting spread—the difference between the public offering price and the price at which the issuer will sell shares to underwriters—is typically specified in the underwriting agreement, which is an agreement between the issuer and the lead underwriter.
3. Answer: A. The safe harbor for certain communications made more than 30 days before a registration statement is filed only applies to communications by issuers. Statements by underwriters that participate in the offering are not covered.
4. Answer: D. A shelf registration expires either two or three years after the effective date. The timeframe is three years for shelf registrations submitted through Form S-3, which only WKSIs and other seasoned issuers may use. A shelf registration submitted through the regular Form S-1 lasts only two years.
5. Answer: D. Generally, an exchange’s continuing listing requirements are less stringent than its initial listing requirements. Since the company only bought back a small number of shares, it is very likely to still meet the continuing listing requirement for number of shares outstanding.
6. Answer: A. When an investment bank begins working with a company, or for any reason believes that it has material, nonpublic information about a company, it must put that company’s securities on a restricted list that prevents both the investment bank and its bankers from trading in those securities for their own accounts.
7. Answer: B. Nasdaq has three market tiers, each w