FINRA Series 7 – General Securities Representative — Question 12

The registration requirements of the federal securities acts are intended to protect the public interest by providing for a prospectus on new issues and its review by the SEC.
Which of the following is the true of this process?

Answer options

• A. It provides the SEC with adequate information on which to base approval for new issues
• B. It does not imply SEC approval of the issue
• C. It guarantees purchasers against an untrue statement of material fact or an omission of material fact
• D. It relieves participating underwriters from any further responsibility for checking essential facts before recommending purchase to the customers

Correct answer: A

Explanation

Answer A is correct because the SEC needs comprehensive information to assess and approve new issues. Answer B is incorrect as the process does not imply SEC endorsement. Answer C is not accurate since the SEC's review does not guarantee protection against false statements. Answer D is wrong because underwriters still have responsibilities to verify facts before making recommendations.