There are a number of questions related to the Securities Act of 1933 on the Series 7 exam and other broker registration tests. This area of the test is basically memorization and good for flash cards to study.
Some important lines to remember that are most asked areas:
The Act of 1933 only regulates new offerings of securities. The registration of people and the secondary market are later acts.
The "cooling off" period is 20 days after the registration statement is filed. SEC will review the registration during this time. If SEC needs a clarification or a correction is needed, a "deficiency letter" is sent. The registration becomes effective after the cooling off period.
A Prospectus is any notice, advertisement, letter or other communication that offers any security for sale or confirms a sale. This is not the same as the Tombstone.
Tombstone advertisements are allowed but have strict guidelines. Generally the contents will include:
Where the Prospectus can be obtained
Price range of securities offered
Naming of the issuer
Underwriter is basically the broker dealer bringing the issue to market. The underwriter is also responsible for making sure the issue complies with the Securities Act of 1933
Accredited Investors are institutions and larger net worth investors. These Include:
Banks
Insurance Companies
Investment Companies - Mutual Fund Managers, Portfolio Managers
Retirement Plan managers of these institutions
Regulation A is for smaller companies and are exempt from the registration requirements of the Securities Act of 1933. Reg A states that an issuer may raise up to 1.5 mil within 1 year. A notice of sale must be included and an offering circular may be used vs. a defined Prospectus.
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