Underwriting Securities — Review for the Series 7 Exam - dummies

Underwriting Securities — Review for the Series 7 Exam

By Steven M. Rice

When underwriting securities and preparing for the Series 7 exam, you’re expected to know which securities and transactions are exempt from Securities and Exchange Commission (SEC) registration. Review your knowledge with these practice questions.

Practice questions

  1. Which of the following securities are exempt from the full registration requirements of the Securities Act of 1933?

    A. corporate convertible bonds

    B. closed-end funds

    C. real estate limited partnerships

    D. commercial paper

    Answer: D. commercial paper

    Commercial paper is corporate debt securities that mature in 270 days or less. Debt securities with a maturity of 270 days or less are exempt from Securities and Exchange Commission (SEC) registration.

  2. A Regulation D private placement is

    A. an offering of securities to no more than 35 unaccredited investors in a 12-month period

    B. an intrastate offering

    C. an offering of securities worth no more than $5 million in a 12-month period

    D. a large offering of commercial paper

    Answer: A. an offering of securities to no more than 35 unaccredited investors in a 12-month period

    A Regulation D (Reg D; private placement) offering is a provision in the Securities Act of 1933 that exempts offerings sold to no more than 35 unaccredited (small) investors each year. Even though Regulation D offerings are limited to the number of small investors, the amount of money they can raise isn’t limited.

  3. A Regulation S exemption under the Securities Act of 1933 is for

    A. a non-U.S. issuer issuing new securities to U.S. investors

    B. a U.S. issuer issuing new securities to non-U.S. investors

    C. a U.S. issuer issuing new securities to U.S. investors

    D. a non-U.S. issuer issuing new securities to non-U.S. investors

    Answer: B. a U.S. issuer issuing new securities to non-U.S. investors

    A Regulation S registration exemption under the Securities Act of 1933 is given to U.S. issuers who are offering securities to non-U.S. investors.