Introduction

The series 57 exam is administered by FINRA and qualifies a person to trade equity and debt securities on an agency or principal basis for a broker dealer. The Series 57 exam will be presented in a 125-question multiple-choice format. Each candidate will have three hours 45 minutes to complete the exam. A score of 70% or higher is required to pass. A candidate is not required to have been passed any other exam prior to taking the series 57 exam. It is recommended that candidates spend at least 50 hours preparing for the exam . The series 57 material has been provided by The Securities Institute to help Investopedia visitors prepare for the exam. In order to successfully complete the exam it is recommended that you read the following material in addition to reading a full textbook and doing as many practice exams as you can. This first chapter will build the foundation upon which the rest of this text is built.

The Securities Act of 1933 was the first major piece of securities industry regulation that was brought about largely as a result of the stock market crash of 1929. Other major laws were also enacted to help prevent another meltdown of the nation’s financial system such as The Securities Exchange Act of 1934, but we will start our review with the Securities Act of 1933 as it regulates the issuance of corporate securities.

The Securities Act of 1933 was the first major piece of securities industry legislation and it regulates the primary market. The primary market consists exclusively of transactions between issuers of securities and investors. In a primary market transaction, the issuer of the securities receives the proceeds from the sale of the securities. The Securities Act of 1933 requires non-exempt issuers (typically corporate issuers) to file a registration state- ment with the Securities Exchange Commission (SEC). The Registration statement formally known as an S-1 is the issuer’s full disclosure document for the Government. The registration statement must contain detailed information relating to the issuer’s operations and financial condition and must include:

  • A balance sheet dated within 90 days of the filing of the registration statement.
  • Profit and loss statements for the last 3 years
  • Company’s capitalization
  • Use of proceeds
  • Shareholders owning more than 10% of the company’s securities
  • Biographical information on the Officers and Directors

The registration statement will be under review by the SEC for a minimum of 20 days. During this time, known as the “cooling off” period, no sales of securities may take place. If the SEC requires additional information regarding the offering, the SEC may issue a deficiency letter or a stop order that will extend the cooling off period beyond the original 20 days. The cooling off period will continue until the SEC has received all of the information it had requested. A Registered Representative may only begin to discuss the potential offering with customers after the filing date.



The Prospectus

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