Ch 2 Deck 16

Question 1

Agent at broker-dealer is restricted person unless only associated with

Answer 1

Limited Broker Dealer

Question 2

A Limited Broker Dealer is only authorized to engage in 2 types of securities

Answer 2

sale of investment company/variable contracts

direct participation

Question 3

FINRA 5110 defines Participating Member as

Answer 3

FINRA Member
Affiliate of member
Associated persons
Immediate family members of AP’s

Question 4

One or more exchange listed DPP’s are reorganized into one or more exchange listed entities

Answer 4

DPP rollup

Question 5

A transaction is only a DPP rollup if investors in any of the involved DPP’s are:

Answer 5

1. subject of an adverse change in the terms of their investment
2. not provided with a way to keep their original terms

Question 6

A DPP rollup is usually done to turn a

Answer 6

previously illiquid DPP into a liquid investment

Question 7

DPP rollups are usually subject to

Answer 7

an investor vote

Question 8

Prior to a proposed DPP rollup vote, proper

Answer 8

disclosure documents should be presented to investors

Question 9

DPP rollup disclosure documents must include

Answer 9

1. Risk Factors
2. GP’s belief in fairness of transaction
3. any reports or opinions on fairness

Question 10

FINRA restrictions on DPP rollups are designed to keep members from pressuring

Answer 10

investors to vote yes on a vote to implement a DPP rollup

Question 11

In a DPP rollup, FINRA member firms are prohibited from receiving compensation for

Answer 11

soliciting votes or tenders from participants (unless specific conditions are met)

Question 12

In a DPP rollup, FINRA members can receive compensation for soliciting votes or tenders from participants if three conditions are met:

Answer 12

1. Payable and equal in amount regardless of how participant ends up voting
2. does not exceed in the aggregate 2% of exchange value of securities
3. is paid regardless of whether participants reject rollup

Question 13

SEC can suspend trading on any national exchange for

Answer 13

up to 90 calendar days

Question 14

Market makers can enter on the OTCBB three types of bid/offers:

Answer 14

1. priced bid and/or offer
2. unpriced indication of interest
3. bid accompanied by modifier

Question 15

2 types of unpriced indications of interest a market maker can enter on OTCBB

Answer 15

“bid wanted”

“offer wanted”

Question 16

Market makers on OTCBB enter a bid or offer accompanied by a modifier to

Answer 16

reflect unsolicited customer interest

Question 17

Rule 135A states that generic advertising will not be deemed

Answer 17

an offer for sale if it meets certain requirements

Question 18

Rule 135A generic advertisements can be in the form of

Answer 18

letters, advertisements, notices, signs, or other communications

Question 19

Rule 135A generic advertisements are not offers for sale if they do not mention

Answer 19

1. a specific security for sale

2. name of a specific investment company

Question 20

Rule 135A generic advertisements must include

Answer 20

name and address of registered broker dealer responsible for communication

Question 21

Rule 5121 restricts the sale of securities in a distribution of a new issue to

Answer 21

discretionary accounts of broker dealers

Question 22

Rule 5121 only allows distribution of securities in a new issue to discretionary accounts of the distributing broker dealer if

Answer 22

they receive prior written authorization from the account holder

Question 23

Under securities act of 1933 it is necessary to register a security if

Answer 23

any channel of interstate commerce will be used to sell the issue

Question 24

A person may not sell an equity security short (both rules) between:

Answer 24

1. Initial filing of registration statement to pricing

2. Five business days before pricing to pricing