Chapter 10 Practice Question Answers
1. Answer: B. FINRA defines a research report as any written (including electronic) communication analyzing a security or issuer and containing information reasonably sufficient to base an investment decision on. A firm’s internal communications are never considered research reports, as long as they are not distributed outside the firm. Likewise, a communication is not a research report if it is distributed to fewer than 15 people, such as a summary analysis of a customer’s portfolio intended to be shared only with the customer. Commentaries on economic, political, or market conditions are not research reports, as long as they don’t analyze specific securities.
2. Answer: C. After a public offering begins, research analysts who work for firms that are participating in the offering may not publish research reports about the issuer, or make any public appearances related to the issuer, for a certain period of time, called a quiet period. There is no quiet period if the issuer is an emerging growth company (EGC), which is an early-stage company meeting several criteria, the most important of which is that it cannot have ended any fiscal year with annual gross revenues of $1.235 billion or more.
3. Answer: A. After a public offering begins, research analysts who work for firms that are participating in the offering may not publish research reports about the issuer, or make any public appearances related to the issuer, for a certain period of time, referred to as a quiet period. For IPOs, the quiet period lasts 10 calendar days and applies to analysts working for any firm that participates in the offering (underwriters and selling group members). For other offerings, the quiet period lasts 3 calendar days and applies only to analysts working for a manager or co-manager of the underwriting syndicate.
4. Answer: C. If a broker-dealer publishes a research report while the subject company is conducting or preparing to co