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Private Securities Offerings Representative
Practice Exam Latest Version: 6.0
Question 1
A registered representative is discussing a private placement
investment opportunity with a potential client who has a net
worth
of 1.5million(excludingprimaryresidence)andannualincomeof1.5m
illion(excludingprimaryresidence)andannualincomeof250,000. The
client expresses concern about the lack of liquidity. Which
statement represents the representative's proper response?
A) "Private placements are typically illiquid, and you should be
prepared to hold this investment for an extended period, as
there is no public market for these securities."
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B) "Don't worry - we can always find a buyer if you need to sell
before the holding period ends."
C) "The liquidity concerns are minimal because this security will
be listed on the OTC markets within six months."
D) "Since you meet the accredited investor threshold, liquidity
restrictions do not apply to your purchase."
Answer: A
Rationale: Private placement securities are typically restricted
securities that cannot be resold without registration or an
applicable exemption. Representatives must be honest about
liquidity risks and cannot guarantee that a buyer will be found
or that the security will become publicly traded. Accredited
investor status relates to suitability and exemption availability,
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not liquidity restrictions. FINRA Rule 2210 requires
communications to be fair, balanced, and not misleading
regarding risks such as illiquidity.
Question 2
Under Rule 506(c) of Regulation D, which of the following is
required for an issuer to engage in general solicitation?
A) The issuer may only solicit from pre-existing, substantive
relationships
B) The issuer must take reasonable steps to verify that all
purchasers are accredited investors
C) The offering is limited to a maximum of 35 non-accredited
investors
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D) The issuer must register the offering with the SEC prior to any
solicitation
Answer: B
Rationale: Rule 506(c) permits general solicitation and
advertising, but all purchasers must be accredited investors, and
the issuer must take reasonable steps to verify their accredited
status. Unlike Rule 506(b), there is no allowance for non-
accredited investors in Rule 506(c) offerings. Verification steps
may include review of tax returns, W-2s, credit reports, or third-
party verifications.
Question 3
Private Securities Offerings Representative
Practice Exam Latest Version: 6.0
Question 1
A registered representative is discussing a private placement
investment opportunity with a potential client who has a net
worth
of 1.5million(excludingprimaryresidence)andannualincomeof1.5m
illion(excludingprimaryresidence)andannualincomeof250,000. The
client expresses concern about the lack of liquidity. Which
statement represents the representative's proper response?
A) "Private placements are typically illiquid, and you should be
prepared to hold this investment for an extended period, as
there is no public market for these securities."
,Page 2 of 511
B) "Don't worry - we can always find a buyer if you need to sell
before the holding period ends."
C) "The liquidity concerns are minimal because this security will
be listed on the OTC markets within six months."
D) "Since you meet the accredited investor threshold, liquidity
restrictions do not apply to your purchase."
Answer: A
Rationale: Private placement securities are typically restricted
securities that cannot be resold without registration or an
applicable exemption. Representatives must be honest about
liquidity risks and cannot guarantee that a buyer will be found
or that the security will become publicly traded. Accredited
investor status relates to suitability and exemption availability,
,Page 3 of 511
not liquidity restrictions. FINRA Rule 2210 requires
communications to be fair, balanced, and not misleading
regarding risks such as illiquidity.
Question 2
Under Rule 506(c) of Regulation D, which of the following is
required for an issuer to engage in general solicitation?
A) The issuer may only solicit from pre-existing, substantive
relationships
B) The issuer must take reasonable steps to verify that all
purchasers are accredited investors
C) The offering is limited to a maximum of 35 non-accredited
investors
, Page 4 of 511
D) The issuer must register the offering with the SEC prior to any
solicitation
Answer: B
Rationale: Rule 506(c) permits general solicitation and
advertising, but all purchasers must be accredited investors, and
the issuer must take reasonable steps to verify their accredited
status. Unlike Rule 506(b), there is no allowance for non-
accredited investors in Rule 506(c) offerings. Verification steps
may include review of tax returns, W-2s, credit reports, or third-
party verifications.
Question 3
