Chapter 9 Practice Question Answers

1. 1. Answer: A. Bank CDs being offered to customers are not considered securities transactions that state regulators oversee. They would be regulated by the appropriate banking regulators. However, a bank selling shares of ownership that will trade in the open market is considered an issuance of securities that is subject to regulation. Likewise, a corporation raising money through the sale of bonds and a small business (regardless of the size) raising money by selling ownership to the public are both considered a transaction in which securities are issued and are subject to regulation.
2. 2. Answer: D. Commodities futures and insurance contracts that do not have a variable component (where a portion of the value is invested in the markets) are not considered securities. Publicly traded stocks, bonds, and options are all considered securities.
3. 3. Answer: D. Registration statements contain all the relevant information regarding a security being issued, including the type of security (stock, bond, etc.), the quantity, the amount that will be raised, and the appropriate contact info.
4. 4. Answer: B. When a security issuer has no previous information on file about a specific security, they must start from scratch and provide a large amount of info to a state’s administrator. Registration by coordination allows a streamlined process for when securities are being issued in more than one state, while a notice filing simply lets an administrator know that a security that is not required to otherwise register is transacting in their state.
5. 5. Answer: C. The list is for anyone owning 10% or more, not more than 1%. Financial statements, balance sheets, regulatory and legal history, and a sample security must all be provided.
6. 6. Answer: A. While many foreign entities may be exempt from registration, a domestic company that only invests in foreign companies must still register. Securities of an insurance company licensed