Series 79 || A+ Verified Solutions.
A "confidential proxy" will be kept confidential by the SEC
-Until the date of the shareholder vote
-Until the date the S-4 becomes effective
-Until the definitive proxy is filed correct answers Confidential until the definitive proxy is filed
*If a preliminary proxy is marked "confidential" and follows the rules, its information may be
kept confidential (not disclosed publicly) until the definitive proxy is filed. This can help to
prevent information from leaking until it is sent to shareholders.
An investor has an annual income of $100,000 and a net worth of $1 million. What is the annual
limit that this investor can invest in all crowdfunding offerings?
-$5,000
-$10,000
-$15,000
-$50,000 correct answers Unless both income and net worth are $107,000 or above, the limit is
the greater of $2,200 or 5% of the greater of annual income or net worth. In this case, since net
worth is higher, she could invest 5% x $1mm = $50,000.If the investor's income and net worth
had exceeded $107,000, the 5% threshold would have been 10% instead. This question reflects
rule changes as of March 15, 2021.
As part of the agreement among underwriters, which of the following is not a possible remedy if
shares that are selling at a premium to the public offering price are returned by the purchaser to a
syndicate member. correct answers The permissible remedies include:1. Offset any short
position.2. Randomly offer the shares to unfilled customers. 3. Anonymous charitable donation
Under Regulation M, any security that is being sold in a distribution or into which the security
can be converted, is known as a(n) correct answers According to the definitions of Regulation M,
a covered security is defined as any security that is the subject of a distribution, or any reference
security. The subject security is the security being sold while the reference security is anything
convertible into the subject security. Together, they are referred to as covered securities.
ABC Corp. has watched a smaller company in its industry for some time and now wishes to
acquire it. ABC believes there are significant synergies to be realized between the two
companies. To avoid a bidding war for the company, ABC wishes to make a very attractive
offer, supported by the value of perceived synergies. The hope is that the small company will
find the offer compelling enough to avoid an auction. What type of bid is this? correct answers
PREEMPTIVE
A negotiated sale is often initiated by the buyer as a way to preempt an auction. This is called a
preemptive bid. If it is based on the value of perceived synergies between the two companies,
directors of the acquiring company may be justified in paying a higher price for the target than
competitors (who lack the same synergies) would be willing to pay. It's very important to
identify synergies and include their estimated value in the valuation analysis supporting the
preemptive bid.
, The founder of ABC Corp., a public company, wants to sell 100,000 of his own shares in a
follow-on offering. For the underwriter and investor, what is an advantage of using a private
non-competitive block sale, as opposed to a competitive block trade? correct answers better
execution at a predictable price
In a competitive block trade follow-on offering, the shares will be purchased by a broker-dealer
and offered to the public market at the prevailing price. The appearance of a large supply of
shares for sale on the tape could negatively impact the share price. This can be avoided by
arranging a private non-competitive block sale at a stated price. The downside of this approach
can include more concentrated ownership of shares and more regulatory red tape related to a
private sale.
Following submission of the final bid package but prior to signing a definitive agreement, the
seller's adviser may have further communications with the remaining bidder(s) for all of the
following reasons EXCEPT
-Clarify contract items
-Encourage better deal terms
-Encourage a higher offer price
-Demand proof of regulatory and shareholder approvals correct answers NOT demand proof of
reg and shareholder approvals
The buyer does not typically receive regulatory and shareholder approvals until after a definitive
agreement is signed. Frequently, especially in a competitive process where there are multiple
strong bids, the target's financial adviser may come back to the bidder to clarify contract terms,
encourage better deal terms and/or a higher offer price.
Which of the following characteristics would likely translate into higher trading valuation
multiples?I. High growthII. High enterprise valueIII. High inventoryIV. High ROIC correct
answers 1,4
High inventory level is usually a bad financial indicator for a company as it constricts return
metrics and may indicate operational inefficiency and/or slowing sales demand for its products.
Enterprise value represents the sum of ownership interests in the company and, taken alone,
cannot be extrapolated to a trading multiple.
When describing a private placement memorandum (PPM), which statement is least accurate?
-A PPM will include cautionary language that the securities are not SEC registered.
-A PPM is allowed to include a company's financial statements, such as an income statement.
-Due diligence must be done by the issuer, and parties acting on behalf of the issuer to prepare
the PPM, to ensure all information in the PPM is accurate.
-Although the securities are not registered, the SEC will typically still review the PPM. correct
answers SEC does NOT review PPM and this must be disclosed in cover
A crowdfunding issuer wishes to solicit investment from individuals through a FINRA-registered
funding portal. In addition to the portal's identity, what other information about the portal must
be disclosed to prospective investors?
