The Secrets of Wall St. Course – US Securities Laws

Question 1 of 19

1. Question

To conduct a securities offering in the United States, legally, you must do one of the following:

a. Produce and pre-file a registration statement with the Securities and Exchange Commission (SEC)—and up to fifty states.
b. Produce and pre-file form 1-A under Regulation A+ (Tier 1 or Tier 2) (and or CA (1001) with the state of California) with the Securities and Exchange Commission (SEC) and the state securities bureau, which allows Regulation A securities to be sold in their state.
c. Produce and pre-file form U-7 under the Small Corporate Offering Registration (SCOR) with the state(s), which allow(s) SCOR and where the securities will be solicited and sold.
d. Produce a Private Placement Memorandum (PPM aka an Offering Circular), which “claims” an exemption from registration under Regulation D 506(b) (private placement), where no general solicitation or advertising is allowed or under Regulation D, Rule 506(c) as long as you restrict the offering to accredited investors only. Third party verification of accreditation for each investor is required.
e. Pre-file an application under the Accredited Investor Exemption 4(5) to qualify, then restrict the offering to Accredited Investor only that has a pre-existing relationship to bona fide members of the company’s management team.
f. All the Above
g. None of the Above
h. Only a & b
i. Only a, c & e
j. Only a, b, c & d

Question 2 of 19

2. Question

A “Registered Offering,” such as an S-1 is very expensive.

True
False

Question 3 of 19

3. Question

California Corporations Code 25102 has a $5 million maximum limitation within a twelve-month period. You may advertise the securities—with certain content constraints.

True
False

Question 4 of 19

4. Question

Regulation D, Rule 504 allows up to $5 million to be raised in a twelve-month period and does not need to have an audited balance sheet.

True
False

Question 5 of 19

5. Question

In regards to a private placement offering, if you contact too many unaccredited investors, and/or you (or the other officers or directors or broker agents of the issuer) do not actually know them, you can void the ability to conduct a private offering and subject yourself and everyone involved in the offering to liability.

True
False

Question 6 of 19

6. Question

The private placement of securities—under Regulation D, Rules 504, 506, and/or 4(a)(5) of the Securities Act of 1933—cannot be advertised to the general public through general solicitation.

True
False

Question 7 of 19

7. Question

Regulation D, Rule 506(b) allows unlimited dollar amounts to be raised privately in a twelve-month period and does need to have an audited balance sheet, if your Company has any operating history and if you will be allowing ANY non-accredited investors in the deal. Up to thirty-five (35) non-accredited investors allowed in the deal with the audited balance sheet.

True
False

Question 8 of 19

8. Question

The vast majority of Start-Up or Early Stage Companies will do well to conduct a seed capital securities offering by:

a. Selling Seed Capital Convertible Bridge Notes.
b. Limiting the maximum dollar amount to $1 million for the first [seed capital] round.
c. Allowing thirty-five (35) on-accredited investors and an unlimited amount of accredited investors in the offering.
d. Not needing the company’s financial statements to be audited.
e. Not needing to advertise the offering to the general public.
f. Claiming Regulation D, Rule 504 as the exemption from registration to solicit privately to pre-existing contacts, then converting the Regulation D, Rule 504 (constructed to only $1,000,000) into a SCOR offering, if allowed in the state where your Company resides, to advertise the securities to the general public. Or using the disclosures afforded under Regulation D, Rule 504(constructed to only $1,000,000) to fill out Form C on a Regulated Crowdfunding Portal for general solicitation to the crowd—general public, under Title III of the Jobs Act of 2012.
g. All the Above
h. None of the Above
i. Only a & b
j. Only a, c & e
k. Only a, b, c & d

Question 9 of 19

9. Question

Regulation D, Rules 504 & Rule 506(b) are private placements.

True
False

Question 10 of 19

10. Question

Regulation D, Rule 506(c) allows public solicitation of a private placement.

True
False

Question 11 of 19

11. Question

Regulation D, Rule 506(c) requires an audited balance sheet no older than 120 days.

True
False

Question 12 of 19

12. Question

Small Corporate Offering Registration (SCOR) is a state registration and is allowed on all 50 states in the US.

True
False

Question 13 of 19

13. Question

Private placements limit solicitation of securities to the management team members’ pre-existing prospective-investor relationships only, unless its run through a broker dealer.

True
False

Question 14 of 19

14. Question

Private placements are limited to pre-existing prospective-investor relationships, of the company’s management team members, which include:

a. Team members’ personal friends.
b. Team members’ family members.
c. The Company’s Customers.
d. The Company’s Suppliers.
e. Team members’ Professional advisers.
f. Team members’ friends they made on social media but have never met personally.
g. Doctors and Dentists.
h. All the Above
i. None of the Above
j. Only a & b
k. Only a, c & e
l. Only a, b, c, d & e

Question 15 of 19

15. Question

As defined by Regulation D, Rule 502(c), among other things, general solicitation or general advertising includes:

Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media.
b. Any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
c. Any advertisement, article, notice or other communication published on Facebook or Linked In.
d. Any advertisement, article, notice or other communication published on apark bench.
e. All the Above
f. None of the Above
g. Only a & b
h. Only a, c & e
i. Only a, b, c, & d

Question 16 of 19

16. Question

The Accredited Investor Exemption 4(5) can be dangerous because no securities offering documentation is required, and hence there are no Safe Harbor provisions against claims of fraud without the proper disclosures, as provided for in most securities offering documents.

True
False

Question 17 of 19

17. Question

Regulation A Tier 1 is appropriate for start-up and early stage companies, because of its ease to solicit any number of non-accredited investors.

True
False

Question 18 of 19

18. Question

Federal law provides an issuer-employee exemption for participation in how many securities offerings per year?

a. Five, but with a maximum of $5,000,000.
b. One, but with a maximum of $5,000,000.
c. Five, but with a minimum of $1,000,000.
d. One, but with a minimum of $1,000,000.
e. As many as needed but with a maximum of $5,000,000 under Regulation D Rule 504.
f. One, with no minimum or maximum dollar amount

Question 19 of 19

19. Question

The vast majority of Start-Up, Early Stage, and Middle-Stage Companies will do well to conduct a development or expansion-capital securities offering by:

a. Claiming Regulation D, Rule 506(c) as the exemption from registration.
b. Selling convertible, participating preferred equity.
c. Not limiting the total dollar amount.
d. Not allowing any non-accredited investors and an unlimited number of accredited investors in the offering.
e. Not needing the company’s financial statements to be audited.
f. Needing to advertise the offering to the general public.
g. Willing to obtain 3rd party verification for each investor’s accreditation.
h. All the Above
i. None of the Above
j. Only a & b
k. Only a, c & e
l. Only a, b, c & d

The Secrets of Wall St. Course – US Securities Laws