Rule 3 of 7 in this unit1.2.1

1.2.1 Types of Markets

SIE outline 1.2.1

Secondary: Where It Trades After That

Existing securities among investors: electronic, OTC, physical. Exchange Act ยงยง12 and 15 govern it. NOT proceeds to the issuer.

The trick

Common trap: A secondary distribution is just a secondary-market trade. Correct: It's a large holder's fixed-price offering of registered shares. Distribution means offering, not routine trading.

The method for this kind of question
  1. Count to four: no fifth market type

Now answer

2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Exam level

Under FINRA Rule 2269, when must a member give written notification of its interest in a primary or secondary distribution?

How sure are you?

Correct: A. Rule 2269's own words require written notification at or before completion of the transaction.
B. The rule requires notification on its own terms, not only after an SEC request.
C. No thirty-day advance window appears in the rule; the deadline runs to completion, not before it begins.
D. The rule applies to both primary and secondary distributions.

Unit: SIE outline 1.2.1

Question 2Harder

A company that has traded on the NYSE for ten years issues 5 million new shares in a follow-on offering and receives the cash. Which market is this?

How sure are you?

Correct: A. The issuer receives the proceeds of the new shares, which is the whole test for primary, regardless of how long the company has already been trading.
B. A trading history has no bearing on the test; the issuer receiving the money is what matters, and it does here.
C. Being listed only matters for third-market trades, which require a dealer trading the security off the exchange; this is a new issue, not a secondary trade.
D. Fourth market requires no dealer and no issuer involvement; here the issuer itself is selling.

Unit: SIE outline 1.2.1

Next ruleThird: Listed, but Traded OTC

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