Series 79 Outline 0
Series 79 Outline 0
Series 79 Outline 0
Qualification Examination
(Series 7 9)
Content Outline
© 2015 FINRA
Table of Contents
INTRODUCTION .............................................................................................................................................................. 2
THE PURPOSE OF THE SERIES 79 EXAM .......................................................................................................................2
ELIGIBILITY REQUIREMENTS .........................................................................................................................................2
APPLICATION PROCEDURES .........................................................................................................................................2
DEVELOPMENT OF THE SERIES 79 CONTENT OUTLINE AND EXAM ..............................................................................2
DEVELOPMENT OF THE SERIES 79 CONTENT OUTLINE ........................................................................................................2
ORGANIZATION OF THE SERIES 79 CONTENT OUTLINE ........................................................................................................2
EXAMINATION DEVELOPMENT AND MAINTENANCE ..............................................................................................................3
ORGANIZATION AND ADMINISTRATION OF THE SERIES 79 EXAM ................................................................................4
ADMINISTRATION OF THE SERIES 79 EXAM AND SCORING ....................................................................................................4
CANDIDATES’ EXAM RESULTS ........................................................................................................................................4
INDEX OF RULES AND REGULATIONS, SAMPLE TEST ITEMS, REFERENCES ..............................................................................5
THE SERIES 79 CONTENT OUTLINE ............................................................................................................................... 6
1. COLLECTION, ANALYSIS AND EVALUATION OF DATA ...................................................................................................... 6
1.1 COLLECTION OF DATA .................................................................................................................................................... 6
1.2 ANALYSIS AND EVALUATION OF DATA .............................................................................................................................. 7
1.3 DUE DILIGENCE ACTIVITIES............................................................................................................................................. 9
2. UNDERWRITING/NEW FINANCING TRANSACTIONS, TYPES OF OFFERINGS AND REGISTRATION OF SECURITIES
................................................................................................................................................................................................ 11
2.1 PUBLIC OFFERINGS ...................................................................................................................................................... 11
2.2 ACTIVITIES OF THE UNDERWRITING SYNDICATE.............................................................................................................. 13
2.3 EXECUTION AND DISTRIBUTION ..................................................................................................................................... 14
2.4 POST-EXECUTION ACTIVITIES FOR FINANCING DEALS .................................................................................................... 15
2. SECURITIES EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 .................................. 16
2.6 TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 ................................... 16
2.7 PRINCIPAL TRADING MARKETS ...................................................................................................................................... 17
3. MERGERS AND ACQUISITIONS, TENDER OFFERS AND FINANCIAL RESTRUCTURING TRANSACTIONS ............... 17
3.1 MERGERS AND ACQUISITIONS – SELL SIDE TRANSACTIONS ............................................................................................ 17
3.2 MERGERS AND ACQUISITIONS – BUY SIDE TRANSACTIONS ............................................................................................. 19
3.3 FAIRNESS OPINIONS (APPLICABLE FOR BOTH BUY SIDE AND SELL SIDE TRANSACTIONS) .................................................... 20
3.4 SIGNING TO CLOSING (APPLICABLE FOR BOTH BUY SIDE AND SELL SIDE TRANSACTION) .................................................... 20
3.5 SEC RULES APPLICABLE TO MERGERS AND ACQUISITIONS ............................................................................................ 20
3.6 TENDER OFFER REGULATIONS...................................................................................................................................... 21
3.7 FINANCIAL RESTRUCTURING/ BANKRUPTCY ................................................................................................................... 21
4. GENERAL SECURITIES INDUSTRY REGULATIONS ........................................................................................................... 22
4.1 REQUIREMENTS FOR REGISTRATION OF INDIVIDUALS...................................................................................................... 22
4.2 BUSINESS CONDUCT .................................................................................................................................................... 22
SAMPLE EXAMINATION ITEM FORMATS AND ORIENTATION ....................................................................................... 25
REFERENCES ............................................................................................................................................................... 27
INTRODUCTION
This content outline provides a comprehensive guide to the topics covered on the Series 79 exam. The
outline is intended to familiarize examination candidates with the range of subjects covered on the
examination, as well as the depth of knowledge required. Sample items are also included to acquaint
candidates with the principal formats of multiple-choice items used on the examination. It is recommended
that candidates refer to the content outline as part of their preparatory studies. Candidates are responsible
for planning their course of study in preparation for the examination.
ELIGIBILITY REQUIREMENTS
The candidate must be sponsored by a FINRA member firm to be eligible to take the Series 79 exam. For
more information on eligibility requirements, please see NASD Rule 1032(i), which is viewable in the FINRA
Manual through the following web link:
http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=3585
APPLICATION PROCEDURES
The member organization that employs the applicant must file a Form U4, Uniform Application for
Securities Industry Registration or Transfer (“Form U4”) in the Central Registration Depository (Web CRD®)
and request the Investment Banking position on the Form U4.
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task statements and topics denoted by two-digit numbers such as 1.1 “Collection of Data” and 1.2 “Analysis
and Evaluation of Data.” In many instances, the task statements and topics are expanded to subheadings
(e.g., 1.1.3 “Engages in permissible communications with clients and other departments within the firm and
coordinates when necessary with legal and compliance”). The tasks and main topics and their subheadings
cover the subject matter associated with the major functions of investment bankers.
The exam items are maintained in an electronic exam item bank. The bank of exam items changes
constantly as a result of amendments to, or the introduction of, government and industry rules and
regulations, changes in practice and the introduction of new products. It is the candidate’s responsibility to
keep abreast of such changes when preparing to take the exam.
Exam items and their statistical performance are analyzed routinely by FINRA staff and the Committee to
ensure that test items continue to be relevant to the functions of an investment banker. Exam items are
updated when necessary to reflect current industry practices and regulations. Items on new rules are added
to the bank of items within a reasonable time period after their effective dates, and items on rescinded rules
will be removed from the bank of items.
Please Note: Candidates are responsible for keeping abreast of changes made to the applicable
rules and regulations, as the exam is updated when new rules are introduced and when the rules
are amended.
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ORGANIZATION AND ADMINISTRATION OF THE SERIES 79 EXAM
The exam consists of 175 multiple-choice items, which are distributed among the four major job functions of
an investment banker. Detail on the content of each of these four major job functions, the tasks associated
with the job functions and the knowledge necessary to perform the tasks is included in the text of the
content outline that follows. The allocation of test items for each major function is listed below in Table 1:
Some test items involve calculations or require the use of charts, graphs, tables or scenarios. Candidates
are not permitted to bring any reference materials into the testing session. White boards/dry erase markers
and basic electronic calculators will be provided to the candidates by the test administrator. Only
calculators provided by the test administrators are allowed and must be returned to the test administrator at
the end of the testing session. Severe penalties are imposed on candidates who cheat on FINRA-
administered exams.
The exam results are final, and there are no adjustments or special considerations made to the passing
score and/or the candidates’ test scores. For security reasons, the exam and/or individual test items are not
available for review before or after taking the examination.
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Index of Rules and Regulations, Sample Test Items, References
The index of rules and regulations provides a quick reference of the rules and regulations covered on the
examination. Again, it is the responsibility of the candidate to keep abreast of changes made to the
applicable rules and regulations.
Several sample items are presented at the end of this booklet. The sample items are included to illustrate
the basic formats of multiple-choice items used on the exam. The sample items do not reflect the type of
content covered on the exam, or difficulty level of test items. Candidates who familiarize themselves with
these formats should be able to improve their test-taking skills so that their performance on the exam will
better reflect their knowledge in the areas tested.
A list of links to self-regulatory organizations’ (SROs’) websites is provided as reference. The information
provided on the websites may be used by candidates in preparation to take the exam. However, the list is
not all-inclusive and is just a sample of the types of references that a candidate may wish to use as part of
his/her preparatory studies.
This content outline and additional information regarding FINRA qualification exams are available on the
FINRA Web Site at www.finra.org.
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The Series 79 Content Outline
1.1.2 Reviews and understands what information would be found in schedules, reports,
statements and forms filed pursuant to the Securities Exchange Act of 1934
1.1.2.1 Current Reports on Form 8-K (SEA Rule 13a-11, SEA Rule 15d-11)
1.1.2.2 Quarterly Reports on Form 10-Q (SEA Rule 13a-13, SEA Rule 15d-13)
1.1.2.3 Transition Reports (SEA Rule 13a-10, SEC Rule 15d-10)
1.1.2.4 Filing of Schedules 13D and 13G (SEA Rule 13d-1)
1.1.2.5 Reports by Institutional Investment Managers of information with Respect to
Accounts Over Which They Exercise Investment Discretion (SEC Rule 13f-1)
1.1.2.6 Filing Requirements (Proxy Rule 14a-6)
1.1.2.7 Definition of Terms (SEA Rule 16a-1)
1.1.3 Engages in permissible communications with clients and other departments within the firm
and coordinates when necessary with legal and compliance
1.1.3.1 Communicates with clients to gather and verify information for financial
modeling/financial statements
1.1.3.2 Communicates with industry specialists within investment banking and capital
markets to obtain information regarding business opportunities and communicates
with industry specialists to collect industry data to determine marketing strategies
best suited for the company
1.1.3.3 Communicates with the firm’s research department to obtain perspectives on the
market and particular industry sectors
1.1.3.3.1 FINRA Rule 2241– Research Analysts and Research Reports, FINRA
Rule 2241(b)(2) – Identifying and Managing Conflicts of Interest
1.1.3.4 Communicates with the syndicate desk to obtain information about deals that are
in the market place, current market demands, security pricing, structure and
covenants
1.1.3.5 Coordinates with internal departments to review data for inclusion in marketing
materials, and/or secure approval of those materials
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1.2 Analysis and Evaluation of Data
1.2.1 Conducts financial analysis of individual companies, comparable companies and particular
industry sectors using models involving basic financial accounting concepts and statistical
analyses and prepares spreadsheets, graphs and other materials based on the collected
data. Enters data into proprietary financial models.
1.2.1.1 Balance sheet [e.g., current assets, including cash and cash equivalents,
marketable securities, inventory, and accounts receivable, property, plant and
equipment (PP&E), goodwill and intangibles; deferred assets; current liabilities,
including accounts payable, short-term debt, and accruals, long-term debt;
deferred liabilities; stockholders’ equity/net worth including preferred stock,
common stock, additional paid-in capital, retained earnings and capital surplus]
1.2.1.2 Income statement (e.g., revenue/sales and cost of goods sold, including
fixed/variable costs, SG&A expenses, amortization/depreciation/depletion,
operating income/loss, interest income/expense, taxes, net income/loss)
1.2.1.3 Cash flow statement (e.g., operating cash flow, investing cash flow, financing cash
flow)
1.2.2 Uses any or all of the following valuation metrics, ratios and other types of data for any or
all of the following areas: equity and debt transactions, equity-linked transactions, mergers
and acquisitions, restructurings and general corporate or financial advisory services:
1.2.2.1 Liquidity [e.g., cash collection cycle, including receivables turnover, inventory
turnover and payables turnover, cash flow; current ratio (working capital ratio),
debt-to-capital (total and long term), debt-to-equity (total and long term), free cash
flow yield, net debt; quick ratio (acid test ratio), working capital]
1.2.2.2 Profitability [e.g., adjustments, including extraordinary items/nonrecurring items,
earnings before interest, taxes, depreciation, and amortization (EBITDA), earnings
before interest and taxes (EBIT), earnings before interest, taxes, depreciation,
amortization and rent (EBITDAR), earnings per share (EPS), earnings yield equity
turnover; profit margins including gross margin, operating margin, net margin, net
profit margin, operating profit margin, pre-tax margin, return on assets (ROA),
return on equity (ROE), return on investment (ROI), return on invested capital
(ROIC) total expense ratio (TER)]
1.2.2.3 Leverage (e.g., including interest coverage ratio, leverage net debt/EBITDA, debt
to EBITDA)
1.2.2.4 Valuation [e.g., including accretion/dilution, enterprise value (EV), adjusted
EV/EBITDA, price to book value (stated and tangible), compound annual growth
rate (CAGR), cost of capital, discounted cash flow, dividend discount model,
dividend payout ratio, dividend yield, earnings, economic profit, EV to EBITDA, EV
to sales, equity value, forward P/E multiple, internal rate of return (IRR), LTM P/E
multiple, market cap, net present value, normalized (operating) earnings, , price to
cash flow (P/CF), price to earnings (P/E), price to free cash flow, Price/NAV, P/E
to Growth (PEG), price to sales (P/S), price per share, sum of the parts analysis,
stock volatility, beta weighted average cost of capital (WACC)]
1.2.2.5 Asset turnover (e.g., inventory valuation methods: LIFO, FIFO)
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1.2.3.1 Understands basics of financial markets and economics
1.2.3.1.1 How the financial markets work and general knowledge of business
cycle indicators
1.2.3.1.2 Market capitalization (micro-cap, small-cap, mid-cap and large-cap;
market indices)
1.2.3.1.3 Economic indicators (leading, coincident, lagging)
1.2.3.1.4 Effect of fiscal and monetary policies on markets
1.2.3.1.5 Relative economic indicators and their effect on currencies
1.2.3.1.6 Role of the central banks
1.2.3.1.7 Supply of money and interest rates, determination of interest rate
movements and tools available to the central banks
1.2.3.1.8 Relation to level of economic activity
1.2.3.1.9 Relation to prices of, and return on, securities investments
1.2.4 Understands the characteristics of various types of securities and financial instruments
1.2.4.1 Equity securities
1.2.4.1.1 Common stock, equity, ordinary shares (e.g., ownership in a
corporation, rights of stockholders, value at issuance)
1.2.4.1.2 Preferred stock (e.g., dividend preference over common, asset
preference, classes of preferred and degree of preference, types of
preferred stock, protective provisions, hybrids)
1.2.4.1.3 Rights and warrants [e.g., rights (subscription rights, ex-rights),
warrants, stock appreciation rights (SAR) and equity equivalents, and
employee stock options]
1.2.4.1.4 Depositary Receipts and Global Depositary Shares (e.g., origin and
nature of ADRs, ADSs, GDRs and GDSs, sponsored versus non-
sponsored)
1.2.4.2 Fixed income securities
1.2.4.2.1 Types of bonds [e.g., corporate bonds, mortgage bonds, debentures,
convertible, callable, collateral trust bonds, equipment trust obligations,
guaranteed bonds, Eurobonds, variable rate (income bonds), zero
coupon bonds]
1.2.4.2.2 General characteristics of bonds [e.g., convexity, make-whole
provision, terms of payment, general terms (e.g., par value, premium,
discount, principal, conversion ratio, coupon, maturity), trust indenture
or deed of trust (Trust Indenture Act of 1939), debt retirement, ranking
in capital structure (e.g. senior, subordinated), credit ratings, yield
calculations (e.g., including current yield, yield to call, yield to maturity,
yield to worst (YTW), discount yield (bond equivalent yield), duration,
interest calculations)]
1.2.4.2.3 Government and agency securities (general characteristics)
1.2.4.2.4 Asset-backed securities (general characteristics)
1.2.4.3 Derivatives and structured products (general characteristics)
1.2.5 Reviews and analyzes precedent transactions for trends in capital raising and mergers and
acquisitions (e.g., capital restructuring, use of derivatives, share repurchase programs,
tender offers, rights offerings, debt issuance)
1.2.5.1 Registration statements
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1.2.5.2 Proxy statements
1.2.5.3 Going Private Transactions By Certain Issuers or Their Affiliates (SEA Rule 13e-3
1.2.5.4 Tender offers
Purchase of Securities By the Issuer During a Third-Party tender Offer (SEA Rule
13e-1)
Scope of and Definitions Applicable to Regulations 14D and 14E (SEA Rule 14d-
1)
Recommendation or Solicitation By the Subject Company and Others (SEA Rule
14d-9)
1.2.6 Analyzes investor and shareholder data to understand ownership and trading behavior
1.2.7 Analyzes the impact of various financing strategies for potential investors
1.2.7.1 Investment objectives [e.g., growth at a reasonable price (GARP), growth,
aggressive growth, value income, capital appreciation]
1.2.7.2 Investment strategies [e.g., distressed, value, deep value, momentum trading,
Index, quantitative (formula driven), arbitrage, risk arbitrage, long, short, special
situations, income and sector specific]
1.2.7.3 Types of investment risks (e.g., interest rate, credit , inflation, deflation, currency,
exchange rate, counterparty, market, re-investment, systemic)
1.2.9 Evaluates the impact of various alternatives for the company, makes preliminary
recommendations with respect to transactions based on the results of the above analyses
and understands the benefits and risks associated with such recommendations
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diligence
1.3.1.2 Understands the disclosure standard that offering documents should not contain
untrue statements of material fact or omit material facts necessary to make the
statements therein not misleading
10
of control environment by management, testing and issuance of opinions
by external auditors, certification and reporting requirements apply to the
entire company, including acquisitions)
11
Time of Effectiveness
2.1.1.2.3.5 Rule 430B – Prospectus in a Registration Statement After
Effective Date
2.1.1.2.4 Exemptions / Safe harbors
2.1.1.2.4.1 Public notices excluded from the definition of prospectus
2.1.1.2.4.2 SEC Rule 134 – Communications not Deemed a Prospectus
2.1.1.2.4.3 SEC Rule 135a – Generic Advertising
2.1.1.2.4.4 SEC Rule 163A – Exemption from Section 5(c) of the Act for
Certain Communications Made by or on Behalf of Issuers
More than 30 days Before a Registration Statement is Filed
2.1.1.2.4.5 SEC Rule 163 – Exemption from Section 5(c) of the Act for
Certain Communications by or on Behalf of Well-known
Seasoned Issuers
2.1.1.2.4.6 SEC Rule 168 – Exemptions from Sections 2(a)(10) and 5(c)
of the Act for Certain Communications of Regularly Released
Factual Business Information and Forward-looking
Information
2.1.1.2.4.7 SEC Rule 169 – Exemptions from Sections 2(a)(10) and 5(c)
of the Act for Certain Communications of Regularly Released
Factual Business Information
2.1.1.2.5 Research reports and free writing prospectuses
2.1.1.2.5.1 SEC Rule 137 – Publications or Distributions of Research
Reports by Brokers or Dealers that are not Participating in an
Issuer’s Registered Distribution of Securities
2.1.1.2.5.2 SEC Rule 138 and SEC Rule 139 – Publications or
Distributions of Research Reports by Brokers or Dealers
about Securities other than those they are Distributing
2.1.1.3 Understands communication-related liabilities
2.1.1.3.1 Securities Act of 1933, Section 11 – Civil Liabilities on Account of False
Registration Statement
2.1.1.3.2 Securities Act of 1933 Section 12 – Civil Liabilities Arising in Connection
with Prospectuses and Communications
2.1.1.3.2.1 Rule 159 – Information Available to Purchaser at Time of
Contract of Sale
2.1.1.3.2.2 Rule 412 – Modified or Superseded Documents
2.1.1.3.3 Securities Act of 1933, Section 17 – Fraudulent Interstate Transactions
2.1.1.3.4 Securities Act of 1933, Section 23 – Unlawful Representations
2.1.1.3.5 SEC Rule 175 – Liability for Certain Statements by Issuers
2.1.1.3.6 SEA Rule 3b-6 – Liability for Certain Statements by Issuers
2.1.1.4 Understands regulatory requirements pertaining to a company’s ongoing reporting
obligations
2.1.1.4.1 Registration of issuer’s securities under SEA
2.1.1.4.1.1 Section 12 – Registration Requirements for Securities
2.1.1.4.1.2 Section 12(a) – Exchange-listed Securities
2.1.1.4.1.3 Section 12(f) – Unlisted Trading Privileges for Security
Originally Listed on Another National Exchange
2.1.1.4.1.4 Section 12(g) – Registration of Securities of Issuers Engaged
in Interstate Commerce
12
2.1.1.4.1.5 Section 12(j) – Suspension or Revocation of Registration of
the Issuer’s Securities
2.1.1.4.1.6 Regulation 15D – Reports of Registrants Under the Securities
Act of 1933 (Rules 15d-1 to 15g-100)
2.1.1.4.2 Regulation FD – Selective Disclosure and Insider Trading
2.1.1.5 Understands regulatory requirements pertaining to disclosure of a member firm’s
interest in distribution
2.1.1.5.1 SEC Rule 15c1-5 – Disclosure of Control
2.1.1.5.2 SEC Rule 15c1-6 – Disclosure of Interest in Distributions
2.1.1.5.3 FINRA Rule 2262 – Disclosure of Control Relationship with Issuer
2.1.1.5.4 FINRA Rule 2269 – Disclosure of Participation or Interest in Primary or
Secondary Distribution
2.2.2 Prepares and files all necessary regulatory wires (e.g., Regulation M filings)
2.2.2.1 Regulation M, Rule 101 – Activities by Distribution Participants, Rule 102 –
Activities by Issuers and Selling Security Holders During a Distribution
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2.3 Execution and Distribution
2.3.1 Assists in the education of internal sales force and marketing of the offering
2.3.1.1 Determines current trends in the market/sectors and identifies the sales points of
each transaction
2.3.1.2 Assists in drafting materials regarding the transaction to educate the internal sales
force (e.g., internal sales memo)
2.3.1.3 Assists the issuer in preparing the road show presentation
2.3.1.4 Assists the issuer in setting up investor meetings
2.3.1.5 Reviews the current shareholders of the issuer as well as shareholders of
comparable companies to locate prospective investors
2.3.1.6 Distributes materials to potential investors as permitted by regulations
2.3.1.7 Keeps issuer apprised of the status of marketing, market conditions and time
frame for transaction
2.3.1.8 Understands marketing restrictions under industry regulations
2.3.1.8.1 SEC Rule 15c1-8 – Sales at the Market
2.3.1.8.2 “Blue Sky” and The National Securities Markets Improvement Act of
1996 (NSMIA) (Section 18 of the Securities Act of 1933 – Exemption
from State Regulation of Securities Offerings)
2.3.1.8.3 FINRA Rule 2241(a)(7) – Definition of Public Appearance
2.3.1.8.4 FINRA Rule 2241(c)(4) – Content and Disclosure in Research Reports
2.3.1.8.5 FINRA Rule 2241(b)(2)(k) – Identifying and Managing Conflicts of
Interest
2.3.1.8.6 FINRA Rule 2241(d), (f) – Disclosure in Public Appearances,
Termination of Coverage
2.3.1.8.7 FINRA Rule 2060 – Use of Information Obtained in Fiduciary Capacity
2.3.4 Allocation, syndicate short covering, stabilization and other market activities
14
2.3.4.1 Researches and summarizes the following allocation factors:
2.3.4.1.1 Retail versus institutional demand
2.3.4.1.2 Investor trading history
2.3.4.1.3 FINRA Rule 2310 – Direct Participation Programs
2.3.4.1.4 FINRA Rule 5130 – Restrictions on the Purchase and Sale of Initial
Equity Public Offerings and FINRA Rule 6130 – Transactions Related to
Initial Public Offerings
2.3.4.1.5 FINRA Rule 5190 – Notification Requirements for Offering Participants
2.3.4.1.6 SEC Regulation M Rule 105 – Short Selling in Connection with a Public
Offering
2.3.4.2 Manages stabilizing activity and syndicate short positions
2.3.4.2.1 Understands the following rules and regulations applicable to such
activities
2.3.4.2.1.1 SEC Regulation M Rule 100 – Definitions
2.3.4.2.1.2 SEC Regulation M Rule 103 – Nasdaq Passive Market
Making
2.3.4.2.1.3 SEC Regulation M Rule 104 – Stabilizing and Other
Activities in Connection with an Offering
2.3.4.2.1.4 SEC Rule 17a-2 – Recordkeeping Requirements Relating
to Stabilizing Activities
2.3.4.2.1.5 FINRA Rules 6220(a)(17) – Definition of stabilizing bid and
FINRA Rule 5190(e) – Notice of Penalty Bids and
Syndicate Covering Transactions in OTC Equity Securities
2.3.4.2.2 Assists in structuring and managing the over-allotment option (i.e.,
green shoe), determines whether to exercise the green shoe and to
what extent based upon market conditions and the short position
2.3.5 Billing and delivery
2.3.5.1 Calculates compensation of the syndicate (e.g., components of underwriter’s
spread including management fee, underwriting fee and selling concession; gross
spread; pot agreement (jump ball, fixed); free retention; designations)
2.3.5.2 Assists in ensuring that all customer orders are booked correctly
2.3.5.3 Communicates with branch office managers or designee to confirm allotments
and designations
2.3.5.4 FINRA Rule 5141 – Sale of Securities in a Fixed Price Offering
15
2.4.2.1 FINRA Rule 11880 – Settlement of Syndicate Accounts
2. Securities Exempt from the Registration Requirements of the Securities Act of 1933
2.5.1 Section 3 – Exempted securities
2.5.1.1 SEC Rule 147 – “Part of an Issue,” “Person Resident” and “Doing Business
Within” for Purposes of Section 3(a)(11)
SEC Rule 147A – Exemptions to facilitate intrastate and regional securities
offerings
2.5.1.2 SEC Regulation A – General exemptions (definitions of terms, amount of
securities exempted, filing and use of the offering circular, filing of sales
materials)
2.6 Transactions Exempt from the Registration Requirements of the Securities Act of 1933
2.6.1 Private Placements – Performs tasks similar to those associated with public offerings (e.g.,
see sections on communications and due diligence) and performs the following tasks that
are unique to private placement
2.6.1.1 Assists in drafting and executing the Placement Agent Agreement
2.6.1.2 Assists in drafting and executing of engagement documentation for private
placements
2.6.1.2.1 Understanding the obligations and liabilities to the issuer and investors
2.6.1.3 Assists in determining eligibility of interested investors
2.6.1.4 Assists in the preparation of the private offering documents, including but not
limited to the private placement memorandum (PPM), the confidentiality
agreement, and the teaser (i.e., an executive summary, or a one-page document
describing financing opportunities to attract interest), and security term sheets
(i.e., expected pricing)
2.6.1.5 Assists in identifying the list of potential investors and determines the types and
suitability of investors for whom private placement is appropriate
2.6.1.6 Assists in structuring appropriate private placement securities, convertibles,
preferred stock, subordinated debt, warrants
2.6.1.7 Assists in procuring nonbinding commitments from interested investors
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2.6.2.5.1 Rule 901– General statement
2.6.2.5.2 Rule 902 – Definitions
2.6.2.5.3 Rule 903 – Offers or Sales of Securities by the Issuer, a Distributor, and
of their Respective Affiliates, or Any Person Acting on Behalf of Any of
the Foregoing; Conditions Relating to Specific Securities
2.6.2.5.4 Rule 904 – Offshore Resales
2.6.2.6 FINRA Rule 5122 – Private Placements of Securities Issued by Members
17
3.1.1.4 Conducts extensive analyses of potential buyers to:
3.1.1.4.1 Assist the seller in identifying potential buyers and their strengths and
weaknesses, including capacity to pay
3.1.1.4.2 Assist in evaluating any financing requirements, including stapled
financing
3.1.1.4.3 Assess the primary competitors both general and sector-specific
3.1.1.4.4 Assess the existing growth strategy and optimization potential
3.1.1.4.5 Perform suitability assessments of specific candidates
3.1.1.4.6 Assist in evaluating credit implications of the potential transaction
3.1.1.4.7 Evaluate potential market reaction announcements concerning a
merger/acquisition
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accountants the material financial terms of the transaction as agreed to
by seller and buyer
3.1.4.4 Assists in the preparation of a fairness opinion, if warranted or requested (See
Section 3.3 – Fairness Opinion)
19
3.2.3 Executing the deal
3.2.3.1 Assists the buyer in preparing follow up due diligence requests and
communicates with target (See Section 1.3.3 – Assists in the due diligence
process – Buy side transactions)
3.2.3.2 Develops, finalizes and reviews final bid with the buyer
3.2.3.3 Assists in the preparation of a fairness opinion, if warranted or requested (See
Section 3.3 – Fairness Opinions)
3.2.3.4 Assists buyer in communicating to buyer’s legal counsel and accountants material
financial terms of the transaction as agreed to by seller and buyer
3.3 Fairness Opinions (applicable for both buy side and sell side transactions)
3.3.1 Assists the client with the determination of whether a fairness opinion is necessary
3.3.2 Prepares the financial analysis for the fairness opinion (See Section 1.2)
3.3.3 Presents the analysis to the firm’s internal approval committees, the client and the client’s
board of directors or special committee of the board
3.3.3.1 Assists in preparation of fairness opinion meeting; internal procedures for
disclosing conflicts
3.3.5 Assists client in the preparation of proxy statement/prospectus disclosure regarding any
fairness opinion that has been issued
3.4 Signing to Closing (Applicable for both buy side and sell side transaction)
3.4.1 Reviews proxy statement/prospectus disclosure regarding the transaction
3.4.4 Assists buyer in the development of external communications materials (e.g., press
releases, Investor presentations)
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3.5.2 SEA
3.5.2.1 Rule 14a-101 – Information Required in Proxy Statement, Schedule 14A – Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934; Item
14 of Schedule 14A – Mergers, Consolidations, Acquisitions and Similar Matters
3.5.2.2 Regulation M-A – Mergers and Acquisitions
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roles of creditor committees, debtor in possession, company’s board of
directors/management, and trustee]
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4.2.1.2.2 Rule 2020 – Use of Manipulative, Deceptive or other Fraudulent
Devices
4.2.1.2.3 Rule 5210 – Publication of Transactions and Quotations
4.2.1.3 NYSE Rules
4.2.1.3.1 Rule 435(5) –Miscellaneous Prohibitions – Circulation of Rumors
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4.2.3.10.2 FINRA Rule 12000 – Code of Arbitration Procedure for Customer
Disputes
4.2.3.10.3 FINRA Rule 13000 – Code of Arbitration Procedure for Industry
Disputes
4.2.3.10.4 FINRA Rule 14000 – Code of Mediation Procedure
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Sample Exam Item Formats and Orientation
The items on the exam may range from recall of facts to the drawing of conclusions from a set of
facts. Items may present job-related scenarios or problems that typically require candidates to go
beyond the simple recall of facts and may require the application of knowledge. Other items may
require the evaluation of an array of information to arrive at a decision about the “BEST” or the
“FIRST” action to take in a particular situation. Some items involve calculations. All exam items will
be presented in one of the five following multiple-choice formats: closed stem, sentence
completion, “EXCEPT,” complex multiple-choice (“Roman Numeral”) and “MOST/LEAST/BEST.”
Examples of these formats are shown below. The sample items presented below are not reflective
of the content or difficulty level of actual test items. The intent of the sample items is to simply
illustrate the various formats of test items. The items’ correct answers are identified by the double
asterisks (**).
1. Closed-Stem Format: The stem (the part that poses the question) is a complete sentence,
concluding with a question mark. The four options (answer choices) may be complete or
incomplete sentences. Below is an example of a closed-stem test item:
2. Open-Stem Format: This type of test item is an incomplete statement, followed by four
options that represent completions of the sentence. Below is an example of an open-stem test
item:
3. "Except" or “Not” Format: This format is used when the task is to select the response option
that is an exception to the principle or rule stated in the stem. The stem may be open or
closed. Below is an example of this type of test item:
All of the following are considered advantages of registered limited partnerships except:
(A) professional management
(B) limited liability
(C) diversification of risk**
(D) flow-through of income and expense
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4. Complex Multiple-Choice ("Roman Numeral") Format: The “Roman Numeral” type item
presents a question, which is followed by four statements, phrases or terms identified by
Roman numerals. The four answer choices represent combinations of these statements,
phrases or terms. The candidate must select the combination that best answers the question.
Below is an example of this type of item:
In which order, from first to last, are the following actions performed during the underwriting of
an issue of corporate securities?
I. The holding of a due diligence meeting
II. Investigation and analysis of the issuer
III. The filing of a registration statement
IV. The assignment of the effective date by the SEC
The Roman numeral format is also used is when more than one of the Roman numeral statements
is a correct response. Below is an example of this format.
5. "Most/Least/Best" Format: This type of test item requires candidates to select an option that
is either better or worse than the others. The basis on which the evaluation is to be made is
stated in the stem. Below is an example of this format.
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References
Listed below are SROs’ websites that provide information about rules and other information that
may useful in preparing for the examination. In addition to information about rules, the SROs may
publish glossaries of terms, explanations of securities products, and compliance procedures.
Candidates are encouraged to refer to the SROs’ websites for information memos or notices to
members concerning amendments to rules and/or the announcement of new rules that may be
pertinent to the exam. Copies of federal securities laws and SEC rules may be purchased through
the network of federal government printing offices. However, some of this information may be
available on the SROs’ and pertinent federal government’s (e.g., the SEC) websites. It is
recommended that candidates refer to the content outline as part of their preparatory studies.
Candidates are responsible for planning their course of study in preparation for the examination.
FINRA produces only the content outline and is not involved with, nor does it endorse, any
particular course of study.
The Financial Industry Regulatory Authority’s (FINRA’s) Content Outline for the Limited Registered
Investment Banker Examination (Series 79) is available in PDF file format on FINRA’s website:
www.finra.org
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