Chapter 9 Practice Question Answers
1. Answer: A. Bank CDs are not considered securities, and thus when they are offered to customers, it is not considered an issuance of securities. However, a bank selling shares of ownership that will trade in the open market is considered an issuance of securities that is subject to regulation. Likewise, a corporation raising money through the sale of bonds and a small business (regardless of the size) raising money by selling ownership to the public are both considered a transaction in which securities are issued and are subject to regulation.
2. Answer: D. Commodities futures are not considered securities. Publicly traded stocks and bonds are considered securities. The same is true of variable annuities; however, keep in mind that fixed annuities are not considered securities.
3. Answer: D. Registration statements contain all the relevant information regarding an issued security, including the type of security (stock, bond, etc.), the quantity, a description of the issuer’s business, and the appropriate contact information.
4. Answer: B. When a security issuer has no previous information on file about a specific security, it must start from scratch and provide a large amount of info to a state’s administrator. Registration by coordination offers a streamlined process for an issuer to follow when it issues its securities simultaneously in more than one state, while a notice filing simply lets an administrator know that a security that is not required to otherwise register is transacting in their state.
5. Answer: C. Financial statements, balance sheets, regulatory and legal history, and a sample security must all be provided as part of a registration by qualification. Additionally, a list of anyone owning 10% or more of an issuer’s securities, and not 1% or more, must be provided.
6. Answer: A. While many foreign entities may be exempt from registration, a domestic company that only invests in forei