CSCP Securities Laws & Regulations 4 — Questions and Answers
Question 1: Under Section 16(b) of the Exchange Act, 'short-swing profits' recovered from corporate insiders are profits earned from purchases and sales within what time period?
- 30 days
- 60 days
- 6 months (Correct answer)
- 1 year
Correct answer: 6 months
Section 16(b) requires corporate insiders to disgorge any profits from matching purchases and sales (or sales and purchases) occurring within any 6-month period.
Question 2: Which regulation governs the offer and sale of securities outside the United States by U.S. issuers without SEC registration?
- Regulation S (Correct answer)
- Regulation D
- Regulation A+
- Regulation M
Correct answer: Regulation S
Regulation S provides a safe harbor for offers and sales of securities occurring outside the United States that are exempt from Section 5 registration requirements.
Question 3: A company conducting a tender offer must keep the offer open for at least how many business days under Rule 14e-1?
- 10 business days
- 20 business days (Correct answer)
- 30 business days
- 5 business days
Correct answer: 20 business days
Rule 14e-1 requires that a tender offer remain open for a minimum of 20 business days from the date it is first published or sent to security holders.
Question 4: Under the Investment Company Act of 1940, a company must register as an investment company if it holds what percentage of its assets in investment securities?
- More than 25%
- More than 40% (Correct answer)
- More than 50%
- More than 60%
Correct answer: More than 40%
Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed an investment company if more than 40% of its assets (excluding government securities and cash) are investment securities.
Question 5: Which SEC rule prohibits broker-dealers from trading ahead of customer orders in the same security?
- Rule 10b-5
- Rule 5320 (Manning Rule) (Correct answer)
- Rule 15c3-1
- Rule 144A
Correct answer: Rule 5320 (Manning Rule)
FINRA Rule 5320 (the Manning Rule) prohibits broker-dealers from trading a security for their own account at a price that would satisfy a customer's limit order without executing the customer's order first.
Question 6: The SEC's Whistleblower Program under Dodd-Frank Section 922 awards whistleblowers what percentage of sanctions collected in successful enforcement actions?
- 5% to 15%
- 10% to 30% (Correct answer)
- 15% to 35%
- 20% to 40%
Correct answer: 10% to 30%
The SEC's Whistleblower Program awards between 10% and 30% of sanctions collected when the SEC collects over $1 million in a successful enforcement action.
Question 7: Under Regulation NMS Rule 611 (the Order Protection Rule), trading centers must establish policies to prevent 'trade-throughs.' What is a trade-through?
- Executing a trade before market open
- Executing a trade at a price inferior to a protected quotation displayed by another trading center (Correct answer)
- Trading in securities of bankrupt companies
- Executing block trades without reporting
Correct answer: Executing a trade at a price inferior to a protected quotation displayed by another trading center
A trade-through occurs when a trading center executes a trade at a price that is inferior to a protected best bid or offer displayed by another trading center.
CSCP Securities Laws & Regulations 4
Under Section 16(b) of the Exchange Act, 'short-swing profits' recovered from corporate insiders are profits earned from purchases and sales within what time period?