Rule 8 of 14 in this unit2.1.1

2.1.1 Equity Securities

SIE outline 2.1.1

Preferred Is Equity, Written as a Contract

DGCL §151(c): preferred holders receive "dividends at such rates, on such conditions and at such times as shall be stated in the certificate of incorporation", payable "in preference to" the common. §151(d): their rights "upon the dissolution of, or upon any distribution of the assets of, the corporation" are likewise "as shall be stated in the certificate of incorporation." NOT "preferred stock pays a fixed dividend and ranks above common, by law." It does both because the certificate of incorporation says so. Change the certificate and you change the instrument.

The method for this kind of question
  1. 1h45m ÷ 80 items = 78.75 seconds per item. A classification item here should cost about 40.
  2. Stop hunting for a rule. Every fact in this lesson is a term in a document, so the stem must hand it to you.
  3. Arrears: count the missed years, then ADD the year now due. Dropping that last step is the classic error.
  4. Rights vs warrants: either axis classifies it. Weeks and below-market → right. Years and above-market → warrant.
  5. "Attached to the bonds" is a warrant, every time.
  6. An ADR trading in dollars does NOT remove currency risk: the dollar price is the foreign price after the exchange rate.
  7. Next: SIE Practice Quiz #5: Equity Securities, every answer explained.

Now answer

1 question 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

The same investor instead buys restricted shares of a company that does not file reports under the Exchange Act. How long must she hold them before reselling under Rule 144?

How sure are you?

Correct: A. Rule 144(d) sets a one-year holding period where the issuer is not a reporting company.
B. Six months is the shorter period that applies only to a reporting issuer's securities.
C. Ninety days appears nowhere in Rule 144's holding-period text.
D. A non-reporting issuer's restricted shares carry the longer period, not an absent one.

Unit: SIE outline 2.1.1

Next ruleArrears Are a Gate, Not a Debt

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