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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