Answers
- 1. Answer: C. Rationale: Investors that purchase a new issue in the secondary market within 25 days of the effective date of the issue must be provided with a copy of the final prospectus.
- 2. Answer: D. Rationale: According to the SEC, a company may provide its customers electronic access to prospectuses, shareholder reports, and proxy solicitations if the electronic access satisfies three components: notice, access, and evidence of delivery. The company must obtain the customer’s written consent to receiving an electronic format, and the amount of time the prospectus must be kept available is set in the consent form. The prospectus must be made readily available for as long as the delivery rules require.
- 3. Answer: D. Rationale: Issuer and shareholder lock-up agreements prevent corporate insiders from selling any shares of stock for a certain time period, often 180 days.
- 4. Answer: A. Rationale: Regulation M, Rule 103 permits Nasdaq market makers, who participated in a securities distribution, to make bids on the security during the restricted period as long as the bid does not exceed the highest independent bid. This is called passive market making. Market makers must notify Nasdaq in advance of engaging in passive market making. On a single day of the restricted period, a passive market maker’s net purchases may not exceed the greater of 30% of the security’s average daily trading value or 200 shares of the security. A passive market maker must designate its bid as a passive market making bid.
- 5. Answer: C. Rationale: Stabilizing bids must be no higher than the lower of the public offering price or the highest independent bid. Since the price has been