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6. Series 57 NewIssu

FINRA Series 57 Exam - New-Issue Market

QuestionAnswer
Definition of a locked market A market where the bid equals the ofer.
submit a locking or crosing quote? A client wishes to submit an order that will lock or Be executed.
to What types of stocks are alowed wider bands under Lower priced and les liquid stocks.
Under SEC rules, the defifinition of a block trade is At least 10,0 shares OR a market value of at least $20,0.
for FINRA's defifinition of a block trade, is Is a series of trades executed at or around the same Yes, multiple trades can be agregated to become a block.
shares at $12.49. If the opening cros price is $12.39, the order will Limit-on-close orders (LOC) must always have A size and price.
XYZ stock was delisted from a national securities Form 21 is not required to be filed if the stock was delisted from a national securities exchange that day or the
normal proces for re-opening trading is If the SEC halts trading in ABC Co. stock to protect 10 days.
An outlier trade is how many times more eroneous 3 times
does the impacted party have to notify the exchange? For an outlier trade, how long does the impacted party 60 minutes
trade must be fifiled no later than What type of broker-dealer is responsible for locating The introducing broker-dealer.
During one trading day, a broker-dealer continuously Neting is required continuously throughout the trading day.
interest reports? The last trading day of February fals on Wednesday. Friday, two busines days after the last trading day.
A fifinancial firm that performs a suite of bundled prime broker
services for hedge funds and other large institutional clients is caled a In determining a net position (long or short) in a Independent trading unit agregation.
agregation alow? To qualify for independent agregation, a firm must Traders are asigned to only one unit, and traders from one unit do not cordinate trades with other units.
organize its traders so that What four requirements must be met for a firm to 1) The broker-dealer must have a writen plan to identify each trading unit. 2) Each unit must determine its
raise a self-help alert is Once a self-help flflag is raised, a broker-dealer is The exchange experiencing technical dificulties.
permited to trade through the protected quotes shown on By giving notice to the President of the US, the SEC 90 calendar days.
XYZ stock at $14.18 per share. The market price curently is $14.42. What will hapen if the market price drops to $14.18? Can a stop order be activated and executed on two Yes, if it is a god-til-cancel order. It would be activated in the closing cros and executed during the folowing
ahead protections of the Maning Rule? Which type(s) of customers canot opt out of the Al regular retail customers.
When is a supervisor required to sign and date each Promptly after trade execution.
policy? Are mutual fund purchases subject to the 5% policy? No, because mutual funds are new isues.
Does the 5% policy aply to investment advisory No.
When traders manipulate and coordinate prices or bids, it is called Collusion.
representative must disclose When customers must sign and return a peny stock Before their first peny stock trade.
The time of order entry is defifined as The time when the firm transmits the order or instruction for execution.
reported? The reporting facility for stocks listed on the New The Consolidated Tape.
outside normal market hours and reported in a timely fashion? What trade modififier is used when a trade is executed .U
times? Without an exemption, how son after trades are Within 10 seconds.
coling-of period? In an ofering, the date on which it is permisible to The efective date.
begin seling securities to the public is caled What information does the lead underwriter report to Indications of interest (along with share alocations) for each institutional investor and also an estimate of
the securities isuer during the coling-of period? In an IPO, what does the post-setlement report from agregate retail demand for shares. Actual alocations to each institutional investor, along with the total shares sold to retail investors.
grenshoe when the stock price has increased or decreased folowing an IPO? What does an underwriter achieve by exercising the Increase the number of shares ofered by up to 15% to met high demand.
ofering? An IPO becomes efective with 10 milion shares 1.5 milion, 15% of deal size.
ofered to the public. If the lead underwriter exercises the maximum grenshoe option posible, how many shares will it ad to the deal? What is the purpose of having a lock-up period in an A lock-up period reduces seling presure and avoids negative perception of the deal.
underwriting agrement? What usualy is required during an IPO lockup Designated shareholders (usualy executives and employes of the isuer) may not sel their shares until the
period? What notice does a lead underwriter provide lock-up period ends. The underwriter must notify the isuer and the public two days prior to expiration of a lock-up period.
regarding the termination of a lockup period for an IPO? Under Nasdaq listing requirements, companies are $1.0
on Nasdaq? The price at which an IPO stock opens for public IPO cros proces.
trading on Nasdaq is determined by the An investor is alocated IPO shares in ABC Co., Yes, the shares may be traded OTC until midnight on the day of alocation, prior to the start of exchange
other than Nasdaq) in an IPO of a stock listed on Nasdaq? When can market making firms begin quoting a newly After the IPO cros on the primary exchange.
listed stock? The purpose of Regulation M is to Prevent manipulation of a new securities ofering or the market for an ofered security.
What regulation is designed to prevent manipulation Regulation M.
in post-ofering stabilizing activities and short-seling of new isues? If a broker-dealer is underwriting convertible bonds, Both the convertible bond and the underlying equity.
Regulation M aplies to Under Regulation M, the time period during which The restricted period.
and/or a public flfloat of les than $25 milion, the Regulation M restricted period begins For a company with an ADTV of at least $10,0 1 day before pricing.
and a public flfloat of at least $25 milion, the Regulation M restricted period begins The duration of the Regulation M restricted period The size of the isuer, as measured by average daily trading volume and public float.
varies, depending on Under Regulation M, what is the restricted period for There is no restricted period.
distribution participants during a regulation M restricted period? During a Regulation M restricted period, which The company (securities isuer) itself and also its executives, board members, venture capital advisors and
entities conected to the securities isuer are restricted? Which distribution participants are subject to founders. Underwriters, prospective underwriters, and broker-dealers distributing shares.
restrictions during a Regulation M restricted period? Under Regulation M, when does the restricted period When the distribution is complete.
end? In which case is it permisible for an underwriter of a Disemination of research reports is alowed if the research coverage is ongoing and not initiation of coverage.
Regulation M covered security to publish a research report on the security during a restricted period? Under Regulation M, broker-dealers who distribute Disemination of ongoing research reports, unsolicited brokerage transactions, and pasive market making.
shares of a covered security are prohibited from engaging in most activities involving the security during a restricted period. What activities are permited under the Rule 101 exceptions? A board member of the isuer of Regulation M Only for od lot transactions (purchases of les than 10 shares) or unsolicited purchases.
covered securities wants to buy shares in the ofering during a restricted period. Under which circumstances is this alowed as a Rule 102 exception? Under Regulation M Rule 103, a pasive market A pasive market maker has a daily net purchase limit of the greater of 20 shares or 30% of the ADTV. Al
is 50,0 shares. How much in net share purchases can a broker-dealer buy in a single trading day under the pasive market making exception to Regulation M, Rule 103? What hapens if a pasive market maker fifils one shares. The trade is alowed, but the market maker must withdraw its quotes in the security for the rest of that trading
trade that exceds its daily purchase limit under Regulation M, Rule 103? The ADTV in a covered stock is 20,0 shares. A day. 10 shares. The pasive market making limit is the greater of 20 shares or 30% of ADTV, which in this case
purchase in a single stabilizing bid is When can an underwriter submit an initial stabilizing At any time in the post-efective period.
bid? How many stabilization bids can be entered at one One.
time? Definition of stabilization A bid that an underwriter can chose to make to suport the price of a new, fixed-price ofering in the
The Public Ofer Price (POP) of an IPO on Nasdaq is secondary market during the post-efective period. $26.50 Regulation M caps stabilizing bids at the lower of the POP or the highest bid on the primary exchange.
$27 per share. On the fifirst day of trading, the stock increases to $3 and then declines. With the highest bid on Nasdaq at $26.50, what is the highest price at which a stabilizing bid can be made? An IPO has a Public Ofering Price (POP) of $64. The $61.20. Regulation M caps stabilizing bids at the lower of the POP or the highest bid on the primary exchange.
best bid/ofer on the primary exchange curently is $61.20-$61.45. What is the highest a stabilizing bid that can be made? An underwriter initiates stabilization when the market The prior closing price.
is closed, what is the highest permited stabilization bid? Underwriters who alocate shares to flflipers, might They will lose their seling concesion for the shares.
have a penalty bid imposed, which means Investors must be informed of the potential of Prospectus.
stabilization in the Penalty bids must be imposed uniformly on al Prior notice to FINRA.
syndicate members and they always require what type of notice? When underwriters have a stabilization bid in efect, Underwriters must give notice to the SEC and the primary listing exchange daily, each day the bid is efective.
what is the notifification requirement? Under Regulation M, Rule 105, underwriters are not The five days preceding pricing of the folow-on ofering.
own stock under 10b-18 must be Within the 10b-18 safe harbor, how long must an Four weks.
isuer wait after its IPO to begin its fifirst share buy- back program? Who are the holders of Rule 14 control stock? Insiders of the isuer.
can raise by seling Rule 14A stock? Who is alowed to purchase or trade Rule 14A ocur. Qualified Institutional Buyers (QIBs), institutions that manage at least $10 milion in discretionary asets.
Rule 14A stock is a Qualifified Institutional Buyer (QIB)? Rule 14A oferings sold to Qualifified Institutional financial statements or an atestation. High-yield debt and pre-IPO equity shares.
Buyers comonly raise capital by seling these types of securities What is the minimum period that a tender ofer must 20 busines days.
remain in efect, from the fifiling of Schedule TO? Which investors are eligible to respond to a tender Only those that are net long the stock.
ofer by tendering their shares at the tender price? Are exercised cal options a part of an investor's long Yes
options on the stock on the last day of the tender period? How is a tender ofer formaly anounced to the By the filing of a Schedule TO by the entity that is making the tender ofer.
isuer of a stock and shareholders who own the stock? What may a company's board of directors recomend The board may recomend to 1) acept the tender ofer, 2) reject the tender ofer, or 3) remain neutral.
to shareholders, as their response to a tender ofer? In order to anounce a tender ofer, an investor must Schedule TO with the SEC.
fifile What is the purpose of a post-IPO lock-up? They help prevent negative perception of the deal by preventing insiders and employes from seling their
How long do post-IPO lock-up periods typicaly last? shares in the secondary market for a certain period of time after the IPO. 180 days
A clause in an underwriting agrement alows the Gren shoe.
can increase the size of an IPO is When can a market making firm begin quoting an A market-making firm can register and imediately begin quoting an IPO after its opening IPO cros.
IPO? Underwriters for an IPO set the public ofering price It may be above, at, or below POP. Underwriters set the POP but market forces determine public market prices.
(POP) at $78 per share. At what price will the fifirst trades on the public market ocur? When are market-making firms registered in an IPO After the opening IPO cros.
Under Rule 14, insiders are limited to how many 90 days
Who can purchase unregistered securities under Rule Qualified Institutional Buyers (QIBs). QIBs include institutions with discretionary asets of at least $10
A tender ofer in which exercised cal options are asets of at least $10 milion. A partial tender.
included as part of an investor's long position is caled An investor is alocated IPO shares by her broker, Hold the shares at least 30 days from the efective date.
who tels her she should not flflip the shares. To comply, she must An IPO has a POP of $38. It opens trading at $42.50 $36.26 or les. The maximizing stabilizing bid that may be entered when the market is closed is the prior
and closes the fifirst day of trading at $36.26. After the market closes, an underwriter enters a stabilizing bid. It must be Under Regulation M Rule 103, the maximum bid that closing price. The highest independent bid, which is the highest bid by a market maker that is not an underwriter.
(ADTV) of $60,0 and a public flfloat of $120 milion. Its Regulation M restricted period is A company has an average daily trading volume and $1 milion; and public float betwen $25 milion and $150 milion. Large (actively traded) company withno restricted period. These companies have ADTV of at least $1 milion
(ADTV) of $25 milion and a public flfloat of $1 bilion. For Regulation M purposes, what type of company is it and what is its restricted period? Under Regulation M's short-sale rule, the latest time and public float of at least $150 milion. 30 minutes prior to the close on the busines day prior to the day of pricing. This is an exception to the rule.
sector retirement plans is caled Until what time can OC options contracts be 5:30 p.m. on the third Friday of the expiration month.
margin? How many euros are represented by fifive curency 50,0, as each contract represents 10,0 units of curency.
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