An exchange-listed security trading over the counter rather than on its own exchange. NOT an unlisted security.
The method for this kind of question
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
Which describes a 'secondary distribution' in FINRA Rule 2269's own vocabulary?
How sure are you?
Correct: A. A secondary distribution is a large existing holder selling registered shares in bulk, at a fixed price, priced like the primary market rather than a routine secondary-market trade.
B. That describes the fourth market, a different concept entirely.
C. An ordinary retail trade is a routine secondary-market trade, not a secondary distribution.
D. An issuer's first-ever sale is an IPO, a primary-market event.
Unit: SIE outline 1.2.1
Question 2Above the exam
A private-equity sponsor registers and sells 3 million already-issued shares of a NYSE-listed portfolio company to the public at a fixed offering price with a prospectus, while ordinary investors continue trading that same stock on the NYSE throughout the same week at continuously moving prices. Are these two activities the same market category?
How sure are you?
Correct: B. The two activities sit in different vocabularies even though they involve the same stock in the same week: the sponsor's registered, fixed-price sale is a secondary distribution under FINRA Rule 2269; the ordinary continuous-price trading on the NYSE is secondary-market activity under the four-market model.
A. Collapses the offering vocabulary into the market-category vocabulary; the sponsor's sale carries a prospectus and a fixed price, which ordinary secondary-market trading does not.
C. Registration alone does not make a sale primary; the company receives none of the sponsor's proceeds, so it is not primary.
D. Ordinary NYSE trading that week is settled with a confirmation, not a prospectus; only the sponsor's registered sale carries one.