tests wrong questions 2

Question 1

Which of the following securities is issued at par?

A)
Treasury STRIPS

B)
Treasury bills

C)
Treasury notes

D)
Zero-coupon bonds

Answer 1

C) Treasury notes

Explanation
“Issued at par” means a security is sold at its face value (typically $1,000) and makes periodic interest (coupon) payments to the investor.

Treasury notes are interest-bearing securities. They pay a fixed coupon to the investor semiannually and are issued at or very close to their par value.

Why the Other Options Are Incorrect
The other three options are all examples of zero-coupon securities, which are, by definition, issued at a discount to their par value. Their return comes from the difference between the discounted purchase price and the par value received at maturity.

Treasury bills (T-bills)

Treasury STRIPS

Zero-coupon bonds

How the Question Tries to Trick You
The trick is to test if you can distinguish between the fundamental structure of different debt securities. It hides the one standard coupon-paying bond (Treasury note) among three different types of zero-coupon or discount-issued securities. You have to know that if a bond doesn’t pay a coupon, it must be issued at a discount, not at par.

Question 2

Which of the following would you provide a customer interested in a new municipal bond issue?

A)
Final prospectus

B)
Official statement

C)
Preliminary prospectus

D)
Offering circular

Answer 2

B) Official statement

Explanation
While a prospectus is the standard disclosure document for corporate securities (like stocks and corporate bonds), municipal securities are exempt from the registration requirements of the Securities Act of 1933.

However, municipal issuers are still required to provide a disclosure document to investors. For a new municipal bond issue, this document is called an Official Statement. It serves the same purpose as a prospectus, providing investors with the detailed information needed to make an informed decision.
However, municipal issuers are still required to provide a disclosure document to investors. For a new municipal bond issue, this document is called an Official Statement. It serves the same purpose as a prospectus, providing investors with the detailed information needed to make an informed decision.

How the Question Tries to Trick You
The trick is a test of precise terminology. The question requires you to know that the disclosure document for a municipal security has a different legal name than the one for a corporate security. You must be able to distinguish that “prospectus” applies to corporate issues, while “Official Statement” applies to municipal issues.

Question 3

Each of the following is a defined contribution plan except

A)
a profit-sharing plan (qualified).

B)
a money purchase plan.

C)
a 401(k) plan.

D)
a stock option plan.

Answer 3

D) a stock option plan.

Explanation
A defined contribution plan is a specific type of retirement plan where the amount of the contribution is defined (e.g., as a percentage of salary), but the final retirement benefit is variable. A, B, and C are all classic examples of defined contribution retirement plans:

A 401(k) plan

A profit-sharing plan

A money purchase plan

A stock option plan, however, is not a retirement plan at all. It is a form of employee compensation that gives an employee the right to purchase company stock at a predetermined price. While it’s a valuable benefit, it doesn’t fall under the category of a defined contribution plan.

How the Question Tries to Trick You
The trick is to include a common employee benefit that is related to securities (a stock option plan) but is not a retirement plan. The question tests if you can distinguish between the specific types of qualified retirement plans and other forms of employee compensation.

Question 4

An electric company issued mortgage senior lien bonds, with an 8⅞ coupon, priced at 96. Each bond pays annual interest of

A)
$96.35.

B)
$85.00.

C)
$88.75.

D)

Answer 4

C) $88.75.

Explanation
A bond’s annual interest payment is always calculated by multiplying its coupon rate by its par value (which you should assume is $1,000 unless stated otherwise).

The bond’s market price (96) is irrelevant for calculating the fixed dollar amount of the interest payment.

Here’s the calculation:

Convert the coupon rate: 8⅞% is the same as 8.875%, or 0.08875 as a decimal.

Calculate the interest: $1,000 (Par Value) × 0.08875 (Coupon Rate) = $88.75

How the Question Tries to Trick You
The trick is the inclusion of the bond’s market price (“priced at 96”). This information is a distractor. The question tests whether you know that the fixed coupon payment is always based on the par value, not the current market price. Someone might mistakenly try to calculate the current yield ($88.75 / $960 = 9.24%) or multiply the coupon rate by the market price, both of which are incorrect for finding the annual interest payment.

Question 5

Which of the following statements about FINRA are true?

It has authority to regulate the OTC market in nonexempt securities.
All branch offices of a member broker-dealer must be registered with FINRA.
All broker-dealers must hold FINRA membership.
If a FINRA member firm is an exchange member at all, it may only belong to the New York Stock Exchange.

A)
II and IV

B)
III and IV

C)
I and III

D)
I and II

Answer 5

D) I and II

Analysis of Each Statement
Let’s look at the roles and rules of the Financial Industry Regulatory Authority (FINRA).

I. It has authority to regulate the OTC market in nonexempt securities.

True. This is a core function of FINRA. It is the primary Self-Regulatory Organization (SRO) for the Over-the-Counter (OTC) market and its rules govern the trading of nonexempt securities like corporate stocks and bonds.

II. All branch offices of a member broker-dealer must be registered with FINRA.

True. For supervision and oversight, FINRA requires that its member firms register all locations where securities business is conducted, including all branch offices.

III. All broker-dealers must hold FINRA membership.

False. This is an overstatement. While the vast majority of broker-dealers that do business with the public are FINRA members, it is not a requirement for firms that deal exclusively in exempt securities (like municipal-only or government-only dealers).

IV. If a FINRA member firm is an exchange member at all, it may only belong to the New York Stock Exchange.

False. There is no such rule. A firm can be a member of FINRA and simultaneously be a member of multiple exchanges, such as the NYSE, Nasdaq, CBOE, etc.

How the Question Tries to Trick You
The trick in this question is a test of absolutes. Statement III uses the word “All,” which is a very strong, absolute term. In financial regulations, there are often exceptions, and you must know them. Not every single broker-dealer is required to be a FINRA member, making the statement false. Statement IV is a completely fabricated rule designed to see if it can confuse you.

Question 6

A registered representative receives a complaint on the office’s voicemail. What is the regulatory requirement for handling this complaint?

A)
The voicemail should be played for a firm principal immediately

B)
The voicemail should be forwarded to a firm principal

C)
The representative should respond to the customer

D)
This is a verbal complaint and has no regulatory standing

Answer 6

D) This is a verbal complaint and has no regulatory standing

Explanation
For the purposes of FINRA’s formal complaint-handling rules, a complaint must be in writing. “In writing” includes letters, emails, text messages, social media posts, and any other communication that consists of written words.

A voicemail, because it is spoken, is considered a verbal (or oral) complaint. While a firm should have its own internal procedures for handling any expression of customer dissatisfaction, a verbal complaint does not have formal regulatory standing. This means it does not trigger the specific FINRA requirements for recordkeeping and quarterly reporting to the SRO.

How the Question Tries to Trick You
The trick is to confuse good business practice with a specific regulatory requirement. A well-run firm would certainly want a principal to be made aware of a complaint on a voicemail (as in options A and B). However, the question asks for the regulatory requirement. The FINRA rule is very precise: the formal process is only triggered by a written complaint.

Question 7

A holder of mutual fund shares

has the right to vote for a vacancy on the board of directors.
will be able to redeem as many of those shares as desired at the next computed public offering price.
receives regular reports on the fund’s expenses no less frequently than semiannually.
is the owner of a diversified investment company.

A)
I and III

B)
I and II

C)
III and IV

D)
II and IV

Answer 7

A) I and III

Analysis of Each Statement
Let’s break down the rights and characteristics of owning mutual fund shares.

I. …has the right to vote for a vacancy on the board of directors.

True. Just like stockholders of a corporation, mutual fund shareholders are owners and have voting rights on key issues. This includes electing the board of directors, approving the investment advisory agreement, and changing the fund’s investment objectives.

II. …will be able to redeem…shares…at the next computed public offering price.

False. This is a critical distinction. An investor buys shares at the Public Offering Price (POP) but redeems (sells) shares at the Net Asset Value (NAV).

III. …receives regular reports on the fund’s expenses no less frequently than semiannually.

True. The Investment Company Act of 1940 requires funds to send financial reports to their shareholders at least semiannually. These reports must include financial statements and details on the fund’s expenses.

IV. …is the owner of a diversified investment company.

False. While most mutual funds are diversified, a fund can legally classify itself as “non-diversified.” This allows it to take more concentrated positions in fewer securities. Because this is a choice, you cannot assume every fund is diversified.

How the Question Tries to Trick You
This question uses two common tricks to test the precision of your knowledge:

The NAV vs. POP Trap: Statement II is designed to see if you know the difference between the price at which you buy a mutual fund (POP) and the price at which you sell it (NAV).

The “Absolute Statement” Trap: Statement IV makes an absolute claim that isn’t always true. It tests if you are aware that “non-diversified” funds exist as a specific category.

Question 8

Which of the following statements regarding the withdrawals from a qualified retirement plan are true?

The employee will be taxed at the ordinary income tax rate on his cost basis.
Funds may be withdrawn after retirement (as defined) with no tax on the withdrawn amount.
Funds may be withdrawn early by the beneficiary if the covered person dies.
All qualified plan provisions must be in written form.

A)
III and IV

B)
II and III

C)
I and IV

D)
I and II

Answer 8

A) III and IV

Analysis of Each Statement

This question tests your knowledge of the rules governing qualified retirement plans, which are established under the Employee Retirement Income Security Act (ERISA).

• I. The employee will be taxed at the ordinary income tax rate on his cost basis.
  
  • False. Because qualified plans are funded with pre-tax dollars, the entire withdrawal (both contributions and growth) is taxed as ordinary income. The concept of a non-taxable cost basis applies to non-qualified plans.
• II. Funds may be withdrawn after retirement…with no tax on the withdrawn amount.
  
  • False. This describes a Roth account. For a traditional qualified plan, withdrawals are always subject to ordinary income tax. Withdrawing after retirement age simply avoids the 10% early withdrawal penalty.
• III. Funds may be withdrawn early by the beneficiary if the covered person dies.
  
  • True. The death of the plan participant is a specific event that allows the beneficiary to access the funds without incurring the 10% early withdrawal penalty, regardless of their age. (The withdrawal is still taxable as ordinary income.)
• IV. All qualified plan provisions must be in written form.
  
  • True. A fundamental requirement of ERISA is that a qualified plan must be established and maintained according to a formal written plan document.

How the Question Tries to Trick You

The trick is to confuse the specific rules for qualified plans with the rules for other types of accounts.
* It tempts you with rules from non-qualified plans (like the cost basis in statement I).
* It tempts you with rules from Roth accounts (like the tax-free withdrawals in statement II).

You have to know the specific tax treatment and structural requirements for a traditional, pre-tax qualified plan to identify the correct statements.

Question 8

The over-the-counter market could be characterized as what type of market?

A)
First

B)
Primary

C)
Dealer

D)
Auction

Answer 8

C) Dealer

Explanation
The Over-the-Counter (OTC) market is fundamentally a dealer market (also known as a negotiated market).

Unlike an auction market (like the NYSE) where buyers and sellers are matched in a central location, the OTC market is a decentralized network of firms. These firms, known as dealers or market makers, buy and sell securities for their own inventory, posting the prices at which they are willing to trade. Transactions are then executed through negotiation between parties.

Why the Other Options Are Incorrect
D) Auction: This describes a centralized exchange, like the NYSE, which is the opposite of the OTC market’s structure.

B) Primary: This describes the market for new issues. While some new issues are sold OTC, the OTC market itself is the largest component of the secondary market, where existing securities are traded.

A) First: This is an industry term for an exchange, not the OTC market.

Question 9

There are retention requirements for certain records of a broker-dealer. One of those is the firm’s retail communications files. Under FINRA rules, copies of retail communications must be retained for

A)
6 years after last use.

B)
6 years after first use.

C)
3 years after last use.

D)
3 years after first use.

Answer 9

C) 3 years after last use.

Explanation

According to FINRA’s recordkeeping rules, a member firm must maintain a separate file containing all of its retail communications (such as advertisements, sales literature, and websites).

This file must be retained for a period of three years from the date of last use.

The “last use” provision is important because an advertisement might be used for several months or years. The three-year retention clock does not start until the firm officially stops using the communication.

How the Question Tries to Trick You

This question is a test of two specific details: the time period and the starting point.
* It tries to see if you will confuse the 3-year rule for communications with the 6-year rule that applies to other records (like customer account statements).
* It also tests if you know the correct starting point is from the last use of the material, not the first.

Question 10

At age 65, your customer purchased an immediate variable annuity contract. He made a lump-sum $100,000 initial payment and selected a life income with 10-year period certain payment option. The customer lived until age 88. The insurance company made payments to him

A)
at a fixed rate for 10 years and at a variable rate up until his death.

B)
until his initial payment of $100,000 was exhausted.

C)
for 23 years.

D)
for 10 years.

Answer 10

C) for 23 years.

Explanation

This question tests your understanding of the “Life Income with Period Certain” annuity payout option. Let’s break down its two parts:

1. Life Income: This is the primary guarantee. It ensures the annuitant receives payments for as long as they live, protecting them against the risk of outliving their money.
2. 10-Year Period Certain: This is a secondary guarantee. It promises that if the annuitant dies within the first 10 years, payments will continue to their beneficiary for the remainder of that 10-year period.

In this scenario, the customer lived from age 65 to 88, which is a total of 23 years. Because he lived longer than the 10-year period certain, the “Life Income” provision took precedence, and he received payments for his entire lifetime.

How the Question Tries to Trick You

The trick is to see if you will focus on the “10-year period certain” and incorrectly assume the payments stop after that time. You have to remember that in this type of payout option, the “Life Income” part dictates the payment duration as long as the annuitant outlives the “period certain.” The period certain is just a minimum guarantee in case of an early death.

Question 11

A bond is convertible at $25. The market value of the stock is $30. What is the parity price of the bond?

A)
$800

B)
$750

C)
$1,100

D)
$1,200

Answer 11

D) $1,200

This is a two-step calculation. To find the parity price of the bond, you first need to determine how many shares of stock the bond can be converted into.

Two-Step Calculation

Step 1: Find the Conversion Ratio
The conversion ratio tells you how many shares of stock one bond can be converted into.

• Formula: Par Value of Bond ÷ Conversion Price
• Calculation: $1,000 ÷ $25 = 40 shares

Step 2: Find the Parity Price of the Bond
The parity price is the total value of the shares the bond can be converted into.

• Formula: Conversion Ratio × Stock’s Market Price
• Calculation: 40 shares × $30 = $1,200

How the Question Tries to Trick You

The trick is that you cannot solve this problem in one step. It requires you to know the two-step process: first, calculate the conversion ratio, and then use that ratio to find the parity price. Simply multiplying or dividing the numbers given in the question will not produce the correct answer.

Question 12

All of the following would be considered either retail communications or correspondence except

A)
a letter to 10 individual investors within the past week regarding a new investment strategy.

B)
a written communication to all of the firm’s customers regarding a new mutual fund being offered.

C)
an email to several municipalities sent out in a single day offering your firm’s services for underwriting their municipal securities.

D)
an electronic communication distributed through the firm’s website regarding potential opportunities with the firm as a registered representative.

Answer 12

C) an email to several municipalities sent out in a single day offering your firm’s services for underwriting their municipal securities.

Explanation

FINRA classifies communications with the public into three categories based on the audience:

1. Retail Communication: To more than 25 retail investors.
2. Correspondence: To 25 or fewer retail investors.
3. Institutional Communication: To institutional investors only.

A municipality is a government entity and is considered an institutional investor. Because the email in option C was sent only to these institutions, it is classified as institutional communication, a separate category from retail communication and correspondence.

The other options are directed at retail investors:
* A) This is correspondence because it’s sent to 10 retail investors.
* B) This is retail communication because it’s sent to “all” customers, which is assumed to be more than 25 retail investors.
* D) A firm’s public website is available to the general public, making this retail communication.

How the Question Tries to Trick You

The trick is to test your ability to identify an institutional investor. You have to know that a municipality falls into this category, which places the communication sent to them in a different class than communications sent to individual customers, prospects, or the general public.

Question 13

You have a customer who values professional stock selection. He is willing to accept moderate risk in his investments and is interested in long-term capital gains. This client’s needs and preferences suggest which of the following funds?

A)
S&P 500 index fund

B)
International index fund

C)
Large-cap growth fund

D)
Small-cap growth fund

Answer 13

C) Large-cap growth fund

This question requires matching a fund type to a client’s specific preferences. Let’s break down the client’s three key requirements:
1. Values professional stock selection: This means they want an actively managed fund, not a passive index fund.
2. Moderate risk: This suggests larger, more stable companies rather than smaller, more volatile ones.
3. Long-term capital gains: This points to a “growth” objective.

A large-cap growth fund is the only option that meets all three criteria. It’s actively managed by a professional who selects stocks (satisfying preference #1), invests in larger companies which are generally considered less risky than small-cap stocks (satisfying #2), and has a stated objective of growth (satisfying #3).

Why the Other Options Are Less Suitable

• A) & B) Index funds: These are passively managed and simply track an index. They do not offer the “professional stock selection” the client specifically values.
• D) Small-cap growth fund: While this fund is actively managed, small-cap stocks are typically more volatile and are considered aggressive risk, which does not align with the client’s stated “moderate risk” tolerance.

How the Question Tries to Trick You

The trick is to test your ability to synthesize multiple suitability factors at once. The most important clue, “values professional stock selection,” immediately eliminates the two passive index funds. The final choice then comes down to risk, where you must correctly associate “large-cap” with “moderate risk” and “small-cap” with “aggressive risk.”

Question 14

A carrying firm must complete a transfer within how many days of validation of the transfer instructions?

A)
One business day

B)
Two business days

C)
The same business day

D)
Three business days

Answer 14

D) Three business days

The account transfer process using the Automated Customer Account Transfer Service (ACATS) has a specific two-step timeline for the carrying (old) firm:

1. Validation: The carrying firm has one business day to validate the transfer instructions.
2. Transfer: Following validation, the firm has three business days to complete the transfer of the assets to the new firm.

How the Question Tries to Trick You

The trick is to see if you will confuse the two different timeframes in the process. The question specifically asks for the timeline after validation. Option A, “One business day,” is the timeframe for the validation step itself and is a common distractor.

Question 15

A distribution from a corporate pension plan to be rolled over into an IRA must be completed within how many days to maintain its tax-deferred status?

A)
60 days

B)
30 days

C)
45 days

D)
90 days

Answer 15

A) 60 days

The 60-Day Rollover Rule

When an individual takes a distribution from a qualified retirement plan, such as a corporate pension or 401(k), they have 60 calendar days to “roll over” those funds into another qualified plan, like an IRA.

If the rollover is completed within this 60-day window, the transaction is not considered a taxable distribution, and the funds maintain their tax-deferred status. If the deadline is missed, the entire amount becomes a taxable withdrawal and may be subject to penalties.

It’s also important to note that when you take a distribution directly from an employer’s plan (an indirect rollover), the plan administrator is required to withhold 20% for taxes. You would then have to make up that 20% from other funds to roll over the full amount. This can be avoided by using a direct rollover, where the funds move from custodian to custodian without the individual ever taking possession.

Question 16

How long after termination must a member file Form U5?

A)
Within 30 days

B)
Within 60 days

C)
Within 10 days

D)
Within 120 days

Answer 16

A) Within 30 days

When a registered representative resigns or is terminated from a member firm, the firm is required to file a Form U5 (the Uniform Termination Notice) with FINRA.

This must be completed within 30 days of the official termination date. The firm must also provide a copy of the form to the former employee within this same 30-day period.

How the Question Tries to Trick You

The trick is a straightforward test of your memory for specific regulatory deadlines. The incorrect options are all valid timeframes for other FINRA rules:
* 10 days: Deadline to amend a Form U4 for a statutory disqualification.
* 60 days: The window to complete an IRA rollover.
* 120 days: The window to take an exam after a Form U4 is filed.

You have to correctly associate the 30-day deadline with the Form U5 filing.

Question 17

Which of the following would not be listed as an asset on a company’s balance sheet?

A)
Notes issued by the company

B)
Fixed assets of the company

C)
A company’s intangibles

D)
Current assets held by the company

Answer 17

A) Notes issued by the company

Assets vs. Liabilities

The balance sheet is divided into two main sides: what a company owns (Assets) and what it owes (Liabilities).

• Assets: These are resources with economic value that the company owns. This includes fixed assets (B), intangible assets (C), and current assets (D).
• Liabilities: These are the company’s financial obligations or debts to other parties.

“Notes issued by the company” are a form of debt. When a company issues a note or a bond, it is borrowing money that it is obligated to pay back. This makes it a liability, not an asset.

How the Question Tries to Trick You

The trick is in the wording “notes issued by the company.” You have to think about the direction of the transaction. If a company owns a note issued by someone else, that note would be an asset. However, when the company issues the note itself, it is the borrower, creating a liability on its balance sheet.

Question 18

Your client is interested in some of the tax ramifications of investing in variable annuities. You could tell her that

withdrawals before age 59½ are not subject to tax penalty if the investment has been held at least five years.
partial withdrawals from nonqualified plans are taxed on a LIFO (last in, first out) basis.
choice of settlement option has no effect upon taxation of the distributions.
if she is dissatisfied with one company, Section 1035 of the Internal Revenue Code will permit her to liquidate one variable annuity and place the funds into a different one without being taxed.

A)
I and II

B)
I and III

C)
III and IV

D)
II and IV

Answer 18

D) II and IV

Analysis of Each Statement

This question tests your knowledge of several specific tax rules related to variable annuities.

• I. …withdrawals before age 59½ are not subject to tax penalty if the investment has been held at least five years.
  
  • False. This is incorrect. The 10% early withdrawal penalty applies to earnings withdrawn before age 59½, regardless of how long the annuity has been held. The five-year rule is a component of Roth IRA qualified distributions, not annuities.
• II. …partial withdrawals from nonqualified plans are taxed on a LIFO (last in, first out) basis.
  
  • True. This is the correct tax treatment. The IRS considers withdrawals from a non-qualified annuity to be from the taxable earnings first (Last-In) before the non-taxable principal contributions are returned (First-In).
• III. …choice of settlement option has no effect upon taxation of the distributions.
  
  • False. The choice of settlement option has a major effect on taxation. A lump-sum withdrawal creates an immediate taxable event on all earnings, while annuitizing the contract spreads the tax liability out over many years.
• IV. …Section 1035…will permit her to liquidate one variable annuity and place the funds into a different one without being taxed.
  
  • True (Conceptually). This statement describes the purpose of a Section 1035 exchange. This provision of the tax code allows an investor to move from one annuity to another without triggering a taxable event. While the word “liquidate” is imprecise (the funds must be transferred directly from one company to the other), the core concept that Section 1035 permits a tax-free exchange is correct.

Since statements II and IV are the only true concepts, D is the correct answer.

How the Question Tries to Trick You

The trick in this question is the imprecise wording of statement IV. It forces you to recognize the correct underlying concept (a 1035 exchange is a tax-free event) even if the description of the process (“liquidate and place”) is technically inaccurate. It also tests your ability to spot the definitively false statements that mix up rules from other products (like the 5-year rule from Roth IRAs in statement I).

Question 19

A 35-year-old client purchases a variable life insurance policy. Under current regulations, the maximum sales charge permitted over the life of the policy is

A)
8.5% of total premiums over the life of the plan.

B)
9%.

C)
9% per premium payment.

D)
8.5% per premium payment.

Answer 19

B) 9%.

Explanation

Under the Investment Company Act of 1940, the maximum sales charge for a variable life insurance policy is 9%, averaged over the life of the policy.

For regulatory purposes, the “life of the policy” is defined as a period of up to 20 years. This means that the total sales charges collected over the first 20 years of the policy cannot exceed 9% of the total premiums paid during that time. It is not a 9% charge on each individual premium payment; it’s an average over the long term.

How the Question Tries to Trick You

The primary trick in this question is to see if you will confuse the sales charge rule for variable life insurance (9%) with the rule for mutual funds (8.5%). Option A is a very common distractor for this reason. The question also tests whether you know the 9% is an average over the life of the policy and not a charge on each individual premium payment.

Question 20

All of the following activities may occur while a security is in registration except

A)
gather indications of interest.

B)
distribute the red herring.

C)
send advertising information.

D)
publish tombstone advertisements.

Answer 20

C) send advertising information.

The Cooling-Off Period Rules

The period when a security is “in registration” is also known as the cooling-off period. During this time, after the registration has been filed with the SEC but before it is declared effective, there are very strict rules about what a broker-dealer can and cannot do.

Sending any general advertising or sales literature is strictly prohibited. The SEC wants to control the flow of information to ensure potential investors are only receiving information from regulated documents.

The activities that are permitted during the cooling-off period include:
* A) Gathering indications of interest: This is a primary purpose of the period.
* B) Distributing the red herring: The “red herring” (preliminary prospectus) is the main document used to provide information and gather interest.
* D) Publishing tombstone advertisements: These are simple, factual ads that are not considered offers to sell.

How the Question Tries to Trick You

The trick is to test if you can distinguish between the very limited, permissible forms of communication and what is considered illegal “gun-jumping” or advertising. While a red herring and a tombstone ad are forms of communication, general “advertising information” is strictly forbidden until the registration is effective.