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ABOUT THIS BOOK XIII
ABOUT THE TEST BANK XV
ABOUT THE SECURITIES INSTITUTE OF AMERICA XVII
CHAPTER 1 ISSUING CORPORATE SECURITIES 1
The Prospectus 2
The Final Prospectus 3
Prospectus to Be Provided to Aftermarket Purchasers 3
SEC Disclaimer 4
Misrepresentations 4
Tombstone Ads 4
Free Riding and Withholding/FINRA Rule 5130 5
Underwriting Corporate Securities 6
Types of Underwriting Commitments 6
Market Out Clause 7
Types of Offerings 7
Awarding the Issue 8
The Underwriting Syndicate 8
Exempt Securities 8
Exempt Transactions 9
Rule 137 Nonparticipants 14
Rule 138 Nonequivalent Securities 14
Rule 139 Issuing Research Reports 14
Rule 415 Shelf Registration 15
Pretest 17
CHAPTER 2 THE SECURITIES MARKETPLACE 21
Types of Orders 21
The Exchanges 25
The Role of The Specialist/Designated Market Maker (DMM) 25
Short Sales 29
Reading the Consolidated Tape 34
Pretest 37
CHAPTER 3 TRADING OVER THE COUNTER AND NASDAQ SECURITIES 39
Market Makers 39
Nasdaq Subscription Levels 40
Registering as a Market Maker 41
Registering as a Market Maker in an OTC BB Security 41
Piggybacking a Quote 43
Nasdaq Quotes 44
Locked and Crossed Markets 45
Nominal Nasdaq Quotes 45
Payments for Market Making 45
Nasdaq Execution Systems 46
Order Entry Parameters 49
The Order Routing Process 50
Pegged Orders 51
The Alternative Display Facility (ADF) 51
Trade Reporting and Comparison Service (TRACS) 52
Advanced Computerized Execution System (ACES) 52
Electronic Communication Networks (ECNs) 53
Unlisted Trading Privileges 54
Market Centers 54
NonNasdaq OTC BB 57
Pink Sheets 58
Third Market 58
Nasdaq Market Center For Listed Securities 59
Fourth Market 59
Pretest 61
CHAPTER 4 MARKET MAKER RESPONSIBILITIES AND TRADE REPORTING 65
Times for Entering a Quote 65
Withdrawing Quotes 68
Handling and Displaying Customer Limit Orders 69
Interpositioning 73
Automated Confirmation System (ACT) Market Center Trade Reporting Facility 73
Nasdaq Trade Reporting Facility (TRF) 79
Step Out Trades 79
Trading Halts 80
Market Making During Syndication 81
Syndicate Short Positions 86
Pricing of IPOs 86
Trade Reporting and Compliance Engine (TRACE) 87
Pretest 91
CHAPTER 5 COMMISSIONS AND TRADE COMPLAINTS 95
Broker vs. Dealer 95
FINRA 5% Markup Policy 96
Markups/Markdowns When Acting as a Principal 97
Riskless Principal Transactions 98
Proceeds Transactions 98
Dominated and Controlled Markets 98
Net Transactions with Customers 99
Protection of Customer Orders 100
Firm Quote Rule 100
Trade Complaints between Members 102
The Order Audit Trail System (OATS) 102
Electronic Blue Sheets 103
Pretest 105
CHAPTER 6 SECURITIES INDUSTRY RULES AND REGULATIONS 107
The Securities Exchange Act of 1934 107
The Securities Exchange Commission (SEC) 108
Trading Suspensions 109
Issuers Repurchasing Their Own Securities 109
Tender Offers 110
The Insider Trading and Securities Fraud Enforcement Act of 1988 112
Firewall 113
Nasdaq Listing Standards 113
The Penny Stock Cold Call Rule 113
Fair Dealings with Clients 115
The Uniform Practice Code 119
Prime Brokerage Accounts 123
Investment Advisors Act of 1940 125
Brochure Delivery 125
Wrap Accounts 125
Securities Investor Protection Corporation Act of 1970 126
Pretest 127
ANSWER KEYS 131
GLOSSARY OF EXAM TERMS 135
INDEX 201
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