CSCP Securities Laws & Regulations 3 — Questions and Answers
Question 1: Under Rule 144, what is the holding period requirement for restricted securities of a reporting company before they can be resold publicly?
- 30 days
- 6 months (Correct answer)
- 1 year
- 2 years
Correct answer: 6 months
Rule 144 requires a minimum 6-month holding period for restricted securities of reporting companies before public resale.
Question 2: Which section of the Securities Act of 1933 provides a safe harbor for forward-looking statements made by public companies?
- Section 5
- Section 11
- Section 27A (Correct answer)
- Section 12(a)(2)
Correct answer: Section 27A
Section 27A of the Securities Act provides a statutory safe harbor protecting forward-looking statements accompanied by meaningful cautionary language.
Question 3: A broker-dealer that effects transactions in securities without registration is in violation of which section of the Exchange Act?
- Section 9
- Section 10(b)
- Section 15(a) (Correct answer)
- Section 16
Correct answer: Section 15(a)
Section 15(a) of the Exchange Act makes it unlawful for any broker-dealer to effect securities transactions unless registered with the SEC.
Question 4: The Bank Secrecy Act (BSA) requires broker-dealers to file a Suspicious Activity Report (SAR) within how many days of detecting suspicious activity?
- 10 days
- 15 days
- 30 days (Correct answer)
- 60 days
Correct answer: 30 days
Broker-dealers must file a SAR within 30 days of the initial detection of suspicious activity, with a 60-day extension if no suspect is identified.
Question 5: Under Regulation FD, if a company makes an unintentional selective disclosure of material non-public information, it must make public disclosure:
- Immediately
- Within 24 hours or before the next trading day (Correct answer)
- Within 48 hours
- Within 5 business days
Correct answer: Within 24 hours or before the next trading day
For unintentional selective disclosure, Regulation FD requires public disclosure promptly, meaning within 24 hours or before the next trading day opens.
Question 6: Which exemption under the Securities Act allows companies to raise unlimited capital from accredited investors without SEC registration?
- Regulation A+
- Rule 504
- Regulation D Rule 506(b) (Correct answer)
- Section 4(a)(2)
Correct answer: Regulation D Rule 506(b)
Regulation D Rule 506(b) allows issuers to raise unlimited capital from up to 35 non-accredited sophisticated investors and unlimited accredited investors without SEC registration.
Question 7: The Jumpstart Our Business Startups (JOBS) Act of 2012 created a new category of issuer called an 'Emerging Growth Company' (EGC). What is the annual revenue threshold to qualify as an EGC?
- Less than $500 million
- Less than $1 billion
- Less than $1.07 billion (Correct answer)
- Less than $2 billion
Correct answer: Less than $1.07 billion
The JOBS Act defines an EGC as an issuer with total annual gross revenues of less than $1.07 billion (as adjusted for inflation) during its most recent fiscal year.
CSCP Securities Laws & Regulations 3
Under Rule 144, what is the holding period requirement for restricted securities of a reporting company before they can be resold publicly?