BLAW Module 7

Term
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The ____ can liquidate failing brokerage firms.
a. Securities and Exchange Commission
b. Financial Industry Regulatory Authority
c. Federal Reserve Board
d. Securities Investor Protection Corporation
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Terms in this set (40)
The ____ can liquidate failing brokerage firms.
a. Securities and Exchange Commission
b. Financial Industry Regulatory Authority
c. Federal Reserve Board
d. Securities Investor Protection Corporation
d. Securities Investor Protection Corporation
After a target firm is acquired, the acquirer may sell off divisions of the target that are not compatible with the
acquirer's business. This process is known as
a. bridging.
b. asset stripping.
c. greenmail.
d. none of the above.
b. asset stripping.
The SEC's Regulation Fair Disclosure (FD):
a. requires firms to disclose any significant information to the SEC before making public announcements.
b. requires firms to disclose any significant information to the Federal Reserve before releasing it to the public.
c. requires firms to disclose any significant information simultaneously to all market participants.
d. prohibits insiders at firms from trading on significant inside information
c. requires firms to disclose any significant information simultaneously to all market participants.
During the credit crisis, many commercial banks were forced to convert to securities firms.
a. True
b. False
b. False
The ____ determines margin requirements on securities purchased.
a. Securities and Exchange Commission
b. Financial Industry Regulatory Authority
c. Federal Reserve Board
d. Securities Investor Protection Corporation
c. Federal Reserve Board
Unlike the standardized provisions of a publicly placed issue, the provisions of a privately placed bond issue can be
tailored to the desires of the purchaser.
a. True
b. False
a. True
Securities firms serve as an intermediary for each of the following, except
a. stock offerings.
b. debt offerings.
c. IPOs.
d. They serve as intermediary for all of the above.
d. They serve as intermediary for all of the above.
The price of newly issued stock should be ____ the market price of the firm's outstanding stock.
a. about the same as
b. much more than
c. much less than
d. B or C, depending on the amount of stock to be issued
a. about the same as
____ is not a service that a securities firm provides in placing bonds.
a. Origination
b. Underwriting
c. Distribution
d. Advising
e. All of the above are services that securities firms provide in placing bonds
a. Origination
The value of a securities firm is typically ____ related to interest rate movements
a. positively
b. not
c. inversely
d. A or B
c. inversely
Many of the fees that securities firms charge for advising clients on a possible merger are typically dependent on whether the merger takes place. a. True b. Falsea. TrueCompetitive bidding by securities firms for underwriting the issue of new bonds is primarily used for a. federal government bonds. b. bonds issued by banks. c. public utility bonds. d. bonds issued by non banking financial institutionc. public utility bonds.Which of the following is not a service that is commonly performed by a securities firm? a. setting regulatory rules for stock exchanges b. origination c. underwriting d. distributiona. setting regulatory rules for stock exchangesWhen securities firms help corporations issue bonds, their primary role is as a(n) a. intermediary. b. lender (creditor). c. investor. d. B and Ca. intermediary.The Securities and Exchange Commission's approval of a registration statement guarantees the quality and safety of the securities to be issued. a. True b. Falseb. FalseWhen an IPO is planned, all information relevant to the security, as well as the agreement between the issuer and the securities firm, must be included in the ___________ that is submitted to the Securities and Exchange Commission. a. origination b. registration statement c. best-efforts agreement d. none of the aboveb. registration statementIn a ____ of stock, all of the shares issued may be held by a small number of institutional investors. a. market placement b. public placement c. shelf placement d. private placementd. private placement____ are not included in flotation costs a. Issue costs b. Fees paid to the underwriters c. Taxes paid on income earned from the stock offering d. Registration expensesc. Taxes paid on income earned from the stock offeringInstitutional investors that are willing to hold stock for only a very short period of time are prime candidates for participating in a private placement a. True b. Falseb. FalseThe ____ offers insurance on cash and securities deposited at brokerage firms. a. Federal Reserve b. New York Stock Exchange c. Securities Investor Protection Corporation (SIPC) d. Securities and Exchange Commission (SEC)c. Securities Investor Protection Corporation (SIPC)Research indicates that securities firms tend to a. overprice IPOs. b. underprice IPOs. c. price IPOs correctly. d. none of the aboveb. underprice IPOs.When facilitating a secondary stock offering, a securities firm commonly performs all of the following functions except _____ a. origination. b. underwriting the stock. c. distribution of the stock. d. its own purchase of at least 20 percent of the offeringd. its own purchase of at least 20 percent of the offeringWhen a stock offering is based on a firm commitment, this means that the securities firm does not guarantee a price to the issuing corporation. a. True b. Falseb. FalseIf securities firms are subject to systemic risk, this means that their main source of risk is a rise in interest rates, which may cause the value of their bond holdings to decline. a. True b. Falseb. FalseUnder SEC Rule 144A, firms may engage in private placements of stock without filing the extensive registration statement that is required for public placements. a. True b. Falsea. TrueWhich of the following does not play a role in regulating securities trading? a. Financial Industry Regulatory Authority b. Resolution Trust Corporation c. New York Stock Exchange d. Federal Reserveb. Resolution TrustThe compensation paid to securities firms for helping a firm raise funds is typically in the form of interest income. a. True b. Falseb. FalseThe ____ is not involved in the regulation of the securities industry. a. Deposit Insurance Fund b. Financial Industry Regulatory Authority c. Securities and Exchange Commission d. Federal Reserve Board e. All of the above are involved in the regulation of the securities industrya. Deposit Insurance FundEven after new stock is issued, a securities firm may continue to provide advice on the timing, amount, and terms of future financing. a. True b. Falsea. TrueThe Federal Reserve intervened to help securities firms during the credit crisis in order to reduce the potential adverse effects of systemic risk. a. True b. Falsea. TrueWhich of the following is not a way that a securities firm might advise a corporation to restructure its operations? a. a stock pass-through b. a spin-off of a unit c. a carve-out d. divestiturea. a stock pass-throughThe Financial Reform Act created the Financial Stability Oversight Council, which is responsible for identifying risks to financial stability in the United States. a. True b. Falsea. TrueOne of the main functions of securities firms is helping corporations and governments raise funds. a. True b. Falsea. TrueOne reason for the financial problems of securities firms during the credit crisis was that they used a high degree of financial leverage. a. True b. Falsea. TrueA bridge loan provided by a securities firm would most likely be made to a. a corporation until the corporation raises funds in other ways. b. a commercial bank in the federal funds market. c. a mutual fund that needs to cover share redemptions. d. an investor who has received a margin call and needs to add cash to his margin accounta. a corporation until the corporation raises funds in other ways.During the credit crisis, some large securities firms were either acquired by commercial banks or converted into bank holding companies. a. True b. Falsea. TrueWhen securities firms facilitate an IPO, they attempt to price the stock: a. at a level that will enable institutional investors who invest in the IPO to earn reasonable returns. b. high enough to satisfy the issuing firm. c. at a level that will enable the securities firms to place the entire issue. d. all of the aboved. all of the aboveWhen securities firms facilitate initial public offerings, they attempt to price the stock high enough to satisfy the issuing firm. a. True b. Falsea. TrueSecurities firms engage in proprietary trading, which means that they serve as an intermediary by trading shares of stock requested by proprietorship. a. True b. Falseb. FalseSecurities firms that converted to bank holding companies during the credit crisis: a. gained more flexibility to obtain financing from the Federal Reserve. b. had to give up their traditional securities function of underwriting. c. came under greater regulatory oversight by the Securities Investor Protection Corporation. d. were prohibited from investing in or selling mortgage-backed securities.a. gained more flexibility to obtain financing from the Federal Reserve.