1. In the registration and sales of new securities issues, the SECRegistration of New Secu...

1. In the registration and sales of new securities issues, the SEC

Registration of New Securities [CMA Adapted]

Select the correct answer for each of the following questions.

a. Endorses the investment merit of a security by allowing its registration to “go effective.”

b. Provides a rating of the investment quality of the security.

c. May not allow the registration to “go effective” if it judges the security’s investment risk to be too great.

d. Allows all registrations to “go effective” if the issuing company’s external accountant is satisfied that disclosures and representations are not misleading.

e. Does not make any guarantees regarding the material accuracy of the registration statement.

2. The 1933 Securities Act provides for a 20-day waiting period between the filing and the effective date of the registration. During this waiting period the registrant is prohibited from

a. Preparing any amendments to the registration statement.

b. Announcing the prospective issue of the securities being registered.

c. Accepting offers to purchase the securities being registered from potential investors.

d. Placing an advertisement indicating by whom orders for the securities being registered will be accepted.

e. Issuing a prospectus in preliminary form.

3. Before turning over the proceeds of a securities offering to a registrant, the underwriters frequently require a “comfort letter” from the public accountant. The purpose of the comfort letter is to

a. Remove the public distrust of a red herring by converting the letter into a prospectus.

b. Find out if the public accountant found any adverse financial change between the date of audit and the effective date of the securities offering.

c. Gain comfort from the public accountant’s audit of the stub-period financial statements contained in the registration statement.

d. Meet SEC regulations requiring the public accountant to give an opinion as an expert on the financial statements of the registrant.

e. Conform to New York Stock Exchange (NYSE) member requirements that a comfort letter from a public accountant be obtained before public sale of securities.