SIE Regulatory Framework 3 — Questions and Answers
Question 1: Under SEC Rule 144, how long must an affiliate hold restricted securities before selling them in the public market?
- 30 days
- 6 months (Correct answer)
- 1 year
- 2 years
Correct answer: 6 months
SEC Rule 144 requires affiliates to hold restricted securities for at least six months before selling them publicly.
Question 2: The Securities Act of 1933 primarily regulates:
- Secondary market trading
- The issuance of new securities (Correct answer)
- Broker-dealer conduct
- Exchange operations
Correct answer: The issuance of new securities
The Securities Act of 1933 governs the primary market by requiring full disclosure in connection with the offer and sale of new securities.
Question 3: A firm commitment underwriting arrangement means the underwriter:
- Sells shares only on a best-efforts basis
- Guarantees the sale price to retail investors
- Purchases all unsold shares from the issuer (Correct answer)
- Shares profits equally with the issuer
Correct answer: Purchases all unsold shares from the issuer
In a firm commitment underwriting, the underwriter buys all securities from the issuer and assumes the risk of selling them to the public.
Question 4: Which of the following transactions would be exempt from SEC registration under Regulation D?
- An IPO on the NYSE
- A private placement to accredited investors (Correct answer)
- A secondary offering on NASDAQ
- A rights offering to existing shareholders
Correct answer: A private placement to accredited investors
Regulation D provides a safe harbor exemption from SEC registration for private placements sold to accredited investors.
Question 5: The 'cooling off' period after filing a registration statement with the SEC typically lasts at least:
- 10 days
- 20 days (Correct answer)
- 30 days
- 60 days
Correct answer: 20 days
The SEC has a 20-day review period after an S-1 registration statement is filed before securities can be sold to the public.
Question 6: An investor buys a Treasury bond in the secondary market from another investor. This transaction occurs on the:
- Primary market
- New issue market
- Secondary market (Correct answer)
- Third market
Correct answer: Secondary market
When securities trade between investors after the initial offering, those transactions occur on the secondary market.
Question 7: Under the Investment Company Act of 1940, a mutual fund must redeem shares at:
- The prior day's closing price
- Net Asset Value (NAV) (Correct answer)
- A premium to NAV
- A discount set by the fund
Correct answer: Net Asset Value (NAV)
Open-end investment companies (mutual funds) must redeem shares at the current NAV, calculated after receipt of a redemption request.
SIE Regulatory Framework 3
Under SEC Rule 144, how long must an affiliate hold restricted securities before selling them in the public market?