ABOUT THE SERIES 55 EXAM XI
ABOUT THIS BOOK XV
ABOUT THE TEST BANK XVII
ABOUT THE SECURITIES INSTITUTE OF AMERICA XIX
CHAPTER 1 ISSUING CORPORATE SECURITIES 1
The Prospectus 2
The Final Prospectus 3
Prospectus to Be Provided to Aftermarket Purchasers 4
SEC Disclaimer 4
Misrepresentations 4
Tombstone Ads 5
Free Riding and Withholding/FINRA Rule 5130 5
Underwriting Corporate Securities 7
Types of Underwriting Commitments 7
Market Out Clause 7
Types of Off erings 8
Awarding the Issue 9
The Underwriting Syndicate 9
Exempt Securities 9
Exempt Transactions 10
Private Investment in a Public Equity (PIPE) 13
Reverse Merger 14
Rule 137 Nonparticipants 15
Rule 138 Nonequivalent Securities 16
Rule 139 Issuing Research Reports 16
Rule 415 Shelf Registration 17
Securities Off ering Reform Rules 17
SEC Rule 405 18
Additional Communication Rules 19
Pretest 21
CHAPTER 2 THE SECURITIES MARKETPLACE 25
Types of Orders 25
Volume Weighted Average price (VWAP) Orders 28
The Exchanges 29
The Role of The Specialist/Designated Market Maker (DMM) 30
Short Sales 34
Reading the Consolidated Tape 39
Pretest 41
CHAPTER 3 TRADING OVER THE COUNTER AND NASDAQ SECURITIES 43
Market Makers 43
Nasdaq Subscription Levels 44
Registering as a Market Maker 45
Registering as a Market Maker in an OTC BB Security 45
Piggybacking a Quote 47
Nasdaq Quotes 48
Locked and Crossed Markets 49
Nominal Nasdaq Quotes 49
Payments for Market Making 49
Nasdaq Execution Systems 50
Order Entry Parameters 53
The Order Routing Process 54
Pegged Orders 55
The Alternative Display Facility (ADF) 55
Trade Reporting and Comparison Service (TRACS) 56
Advanced Computerized Execution System (ACES) 56
Electronic Communication Networks (ECNs) 57
Unlisted Trading Privileges 58
Market Centers 58
NonNasdaq OTC BB 61
Pink Sheets 62
Third Market 62
Nasdaq Market Center For Listed Securities 63
Fourth Market 63
Pretest 65
CHAPTER 4 MARKET MAKER RESPONSIBILITIES AND TRADE REPORTING 69
Times for Entering a Quote 69
Withdrawing Quotes 72
Handling and Displaying Customer Limit Orders 73
Interpositioning 77
Automated Confi rmation System (ACT) Market Center Trade Reporting Facility 77
Nasdaq Trade Reporting Facility (TRF) 83
Step Out Trades 83
Trading Halts 84
Market Making During Syndication 85
Syndicate Short Positions 90
Pricing of IPOs 90
Trade Reporting and Compliance Engine (TRACE) 91
Pretest 95
CHAPTER 5 COMMISSIONS AND TRADE COMPLAINTS 99
Broker vs. Dealer 99
FINRA 5% Markup Policy 100
Markups/Markdowns When Acting as a Principal 101
Riskless Principal Transactions 102
Proceeds Transactions 102
Dominated and Controlled Markets 102
Net Transactions with Customers 103
Protection of Customer Orders 104
Firm Quote Rule 104
Trade Complaints between Members 106
The Order Audit Trail System (OATS) 106
Electronic Blue Sheets 107
Pretest 109
CHAPTER 6 SECURITIES INDUSTRY RULES AND REGULATIONS 111
The Securities Exchange Act of 1934 111
The Securities Exchange Commission (SEC) 112
Trading Suspensions 113
Issuers Repurchasing Their Own Securities 113
Tender Off ers 114
Large Trader Reporting 116
Risk Management Controls 116
The Insider Trading and Securities Fraud Enforcement Act of 1988 117
Firewall 118
Nasdaq Listing Standards 118
The Penny Stock Cold Call Rule 119
Fair Dealings with Clients 120
The Uniform Practice Code 124
Prime Brokerage Accounts 128
Investment Advisors Act of 1940 130
Brochure Delivery 130
Wrap Accounts 130
Securities Investor Protection Corporation Act of 1970 131
Pretest 133
ANSWER KEYS 137
GLOSSARY OF EXAM TERMS 141
INDEX 207
