he correct answer for each question is indicated by a

1 INCORRECT

What is the first step in the issuance of new securities? A) B) C) D) forming an underwriting syndicate filing a registration statement with the SEC obtaining approval of the board of directors obtaining approval under Regulation A

negotiating an underwriting contract E) Feedback: The first step is obtaining the approval of the board of directors. Review section 19.1.

2 INCORRECT

Which of the following issues are exempt from filing a registration statement with the SEC? I. issues that involve less than 5,000 shares of stock II. loans that mature within nine months III. issues less than $5.0 million IV. issues that involve less than 1,000 shareholders A) B) C) D) I and III only II and IV only I and IV only II and III only

I and II only E) Feedback: Issues less than $5 million and loans that mature within nine months are exempt. Review section 19.1.

3 INCORRECT

How many days does it take before a registration statement becomes effective assuming that the statement is acceptable to the SEC? A) B) C) D) 10 15 20 25

30 E) Feedback: The waiting period is 20 days. Review section 19.1.

4 INCORRECT

The document that is circulated to potential investors during the registration period is called a: Regulation A statement.

A) B) C) D) sales confirmation. final prospectus. tombstone.

red herring. E) Feedback: The preliminary prospectus that is circulated is called a red herring. Review section 19.1.

5 INCORRECT

Which of the following items are generally found in a tombstone advertisement? I. type of security offered II. names of underwriters III. number of shares offered IV. offer price per share A) B) C) D) I and II only III and IV only I, II, and III only II, III, and IV only

I, II, III, and IV E) Feedback: All the options listed are generally included in a tombstone advertisement. Review section 19.1.

6 INCORRECT

What governs the security issues which qualify for the small-issues exemption? A) B) C) D) final prospectus SEC registration statement Regulation A Regulation Z

There is no regulation which governs issues that qualify for the smallE) issues exemption. Feedback: Regulation A governs issues that qualify for the small-issues exemption. Review section 19.1.

7 INCORRECT

The price at which new securities will be offered is normally set: A) B) when the registration statement is filed with the SEC. when the board of directors approves the offering. when the sales order is received for the last unsold security in the

C) offering. D) shortly after the last day of the registration period.

on the 10th day of the registration period. E) Feedback: The offer price is generally set shortly after the last day of the registration period. Review section 19.1.

8 INCORRECT

Which of the following occur during the preunderwriting conference period? I. formation of the underwriting syndicate II. distribution of the preliminary prospectus III. determination of the offering price IV. negotiation of the underwriting contract A) B) C) D) I and II only III and IV only II and III only I and IV only

I, II, and IV only E) Feedback: The preliminary prospectus is distributed during the waiting period. Review section 19.1.

9 INCORRECT

What is the maximum number of shareholders that can purchase a private issue of securities? A) B) C) D) 20 25 30 35

40 E) Feedback: The maximum number of investors for a private issue is 35. Review section 19.2.

10 INCORRECT

Which one of the following involves selling new securities only to existing shareholders? A) B) IPO rights offer