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Free SERIES 7 Exam Braindumps (page: 37)

Page 36 of 101
PDF with 400 Questions

Which of the following must be true in order for an offering to qualify as an intrastate offering under Rule 147?

  1. 80% of the proceeds of the offering must be used in that state
  2. 80% of the corporation’s assets must be located in that state
  3. 80% of the corporation’s revenue must be earned in that state
  4. all of the above are required

Answer(s): D

Explanation:

all of the above are required. An intrastate offering under Rule 147 requires qualification under all of these conditions.



Under what conditions may an FINRA member firm sell an IPO to an employee of another broker/dealer?

  1. if the amount of the purchase is small and the transaction accords with the employee’s normal investment practice
  2. if the member firm notifies the other broker/dealer of the transaction
  3. if the employing broker/dealer guarantees that resale of the securities acquired by its employee will be restricted for two years
  4. under no circumstances

Answer(s): D

Explanation:

under no circumstances. An FINRA member firm may not, under any circumstances, allocate shares to itself, any of its employees, or to any employee of a firm that underwrites securities.



A provision under which an underwriter can cancel a proposed public offering due to some unforeseen occurrence is known as a:

  1. blue sky provision
  2. contra-market clause
  3. fill or kill provision
  4. market-out clause

Answer(s): D

Explanation:

market-out clause. This is used only in the case of some unusual occurrence.



In stabilizing a new issue, the manager may make a “syndicate penalty bid”. This means that:

  1. the underwriter will be penalized his profit on any securities repurchased from his clients
  2. all stock purchased will be returned to the issuing corporation
  3. the manager will charge the syndicate the value of the shares
  4. any shares repurchased are added to the treasury stock of the issuing corporation

Answer(s): A

Explanation:

the underwriter will be penalized his profit on any securities repurchased from his clients. Since clients sell shares back to the syndicate shortly after the offering, the underwriter has not made a proper distribution. The underwriter therefore may be penalized any profit.






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