The official title of the Series 79 is the Investment Banking Representative Exam. It is a licensing exam for professionals who want to become investment bankers. Topics include securities underwriting, mergers and acquisitions, and other activities related to investment banking. To register as an Investment Banking Representative, candidates must also pass the SIE exam. Start your test prep now with our free Series 79 practice exam.
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Question 1 |
The term "soft dollar compensation" does not exclude:
computer hardware
| |
rent | |
computer software | |
cash compensation |
Question 1 Explanation:
Be careful with the negative wording "does not exclude." This means it does "include." Rent is paid in money and cash is money — neither is referred to as "soft dollars." And computer HARDware is a physical piece of equipment, never referred to as "soft." But SOFTware is different — and when provided by one brokerage firm to another, is "soft" and can be considered a form of compensation, soft dollar compensation.
Question 2 |
Which of the following situations would invoke FINRA’s SD (statutory disqualification) provisions?
applicant was barred from an institution | |
applicant has a misdemeanor DUI | |
applicant was ticketed for reckless driving | |
applicant was fired from previous employment due to alleged AML violations |
Question 2 Explanation:
The "institution" that a FINRA question is referring to would be a financial institution. If an agent is barred, that is serious enough to require a brokerage firm to consider them to be statutorily disqualified from membership in FINRA. Answer (D) is close, but the word "alleged" means not yet proven.
Question 3 |
Reverse convertible notes are deemed least suitable for:
Corporate executives | |
Senior investors | |
Young couples | |
Individuals who qualify for naked options |
Question 3 Explanation:
A reverse convertible security requires the customer to be eligible to engage in short put writing, which can be highly risky and least suitable for a senior, or elderly, investor.
Question 4 |
An issuer has made a willful material omission in required disclosure documents. What action would an aggrieved investor be well-advised to take in this circumstance?
Take the firm to arbitration | |
Share in any penalties levied by the SEC | |
File a civil lawsuit against the officers | |
Pursue a criminal case against the issuer |
Question 4 Explanation:
Since a new customer will have signed a pre-dispute arbitration agreement with the brokerage firm, only arbitration is an available course of action for a customer to pursue when there is a grievance against the firm.
Question 5 |
SEC Rule 10b-4 holds that it is a manipulative and deceptive act to engage in:
front running | |
spinning | |
selling away | |
short tendering |
Question 5 Explanation:
The Series 79 may require that you know 10b-4 by number. It applies in a Tender Offer when a customer attempts to engage in tendering shares they don’t own, which is known as short tendering and is prohibited.
Question 6 |
SEC Rule 10b-9 makes reference to which of the following underwritings?
firm commitment | |
stand-by | |
contingent | |
all of the above |
Question 6 Explanation:
When an underwriting is being done in a best-efforts minimum-maximum, or all or none arrangement, it is referred to as a contingent offering since the sale is contingent on some, or all, of the shares being sold. 10b-9 requires the salesperson to properly describe and disclose the contingency to the customer.
Question 7 |
When is the participation of syndicate members terminated?
when the member has sold out its allotment | |
when the managing underwriter terminates the underwriting | |
once the final order for purchase has been executed in the securities which have been allocated to the member | |
upon allocation of the allotment to the syndicate member |
Question 7 Explanation:
It is only when the Managing Underwriter terminates the work of the Underwriting Syndicate that syndicate members can consider their participation in it to be over.
Question 8 |
Which of the below receive the greatest percentage of the underwriting spread?
the manager as a result of the management fee | |
the selling group member as a result of selling shares | |
the syndicate member as a result of selling allotted shares | |
the member firms selling shares receiving the re-allowance |
Question 8 Explanation:
The syndicate member is making the Underwriter’s Concession, which will be larger than the Manager’s Fee; larger than what a selling group member will make and larger than the re-allowance a firm can earn by selling shares.
Question 9 |
Javitz Securities has been hired by Spitzer Securities as its Qualified Independent Underwriter to take Spitzer public. The Corporate Finance Department requires the underwriting compensation documents to be filed by:
Javitz | |
Spitzer | |
Both Javitz and Spitzer | |
Member firms going public are exempt from the CFD requirements |
Question 9 Explanation:
When a member firm of FINRA is going public, they will use another member firm to be their Syndicate Manager. However, though FINRA rules normally require the Syndicate Manager to file the corporate finance documents, in this case, the member firm going public will be expected to do so.
Question 10 |
A customer with a discretionary account may be sold IPO shares in which the firm is a distribution participant:
if the member firm has received affirmative written approval from the client | |
if the member firm has received client approval in the form of a negative consent letter | |
so long as the securities are suitable for the client | |
under no circumstances |
Question 10 Explanation:
The customer with a Discretionary account must furnish written approval if their firm is a member of the syndicate and wishes to sell the new shares to the customer.
Question 11 |
Short selling of the covered security under Reg. M within 5 business days of the pricing of the new issue:
is prohibited | |
is not restricted | |
requires the executing firm to be a passive market maker | |
is permitted if a member firm is acting in its capacity as a market maker |
Question 11 Explanation:
Rule 105 of Regulation M does not prohibit shorting the existing outstanding shares of the Reg. M issuer, but it does restrict it. The short sale done within the 5-business-day period of the effective date of the new shares must be closed out before the effective date in order to allow the short seller to buy the new shares at the POP.
Question 12 |
A NASDAQ-listed company is registering additional common shares which will be priced as of Friday, November 15th. A purchase of the new shares will not be deemed a violation of Rule 105 if the purchase of the new shares had shorted shares of the issuer on which of the below dates?
I. November 11th
II. November 8th
III. November 7th
IV. November 1st
IV only | |
III and IV | |
II, III and IV | |
all of these |
Question 12 Explanation:
Rule 105 restricts short sales done 5 business days prior to the effective date. Only answers III and IV are more than 5 business days prior to the effective date and therefore are not restricted by Rule 105.
Question 13 |
Under the Act of ’33, a deficiency letter will have the most immediate impact on which of the following documents?
preliminary prospectus | |
statutory prospectus | |
offering circular | |
syndicate letter |
Question 13 Explanation:
The SEC will issue a deficiency letter when the Registration Statement contains deficiencies, such as missing information. Only the preliminary prospectus would have those omissions; the other answers would not.
Question 14 |
Under what circumstance may a Research Analyst accompany Investment Banking personnel to a road-show event?
if the analyst contributed information to the S-1 | |
if FINRA approval is obtained | |
under no circumstances | |
none of the above |
Question 14 Explanation:
Research Analysts are prohibited from accompanying Investment Banking personnel to a road show event for a new issue. FINRA rules make it clear that the Investment Banking personnel shall have no contact with or influence over Research analysts or their Reports.
Question 15 |
An SEC Rule 147 offering statement shall be filed with which of the below entities for its review?
SEC office in Washington, D.C. | |
SEC regional office covering the location of the headquarters of the Issuer | |
Administrator of the state in which the Issuer’s headquarters is located | |
All of the above |
Question 15 Explanation:
Rule 147 is the intra-state offering. The registration documents to be filed are filed with the State Administrator and are exempt from filing with the SEC.
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