Stop Order

Kesterly Materials completed a securities registration in State N that became effective on May 12. No amendment is filed, no stop order is entered, and the underwriter completes the distribution promptly. Under the Uniform Securities Act, the registration statement remains effective until:

1. A.One year from its effective dateCorrect. A securities registration statement under the Act is effective for one year from the date it became effective.
2. B.December 31 of the year in which it became effectiveThis is the annual expiration for persons such as broker-dealers and agents, not for a securities registration.
3. C.Ninety days from its effective dateThere is no ninety-day expiration for an effective securities registration under the Act.
4. D.Indefinitely, unless the Administrator revokes itRegistration statements expire on their own terms. Revocation is a separate remedy, not the only way effectiveness ends.

Why: Under the Uniform Securities Act a securities registration statement is effective for one year from its effective date, so Kesterly's runs until the following May 12. Registration statements for securities are dated from effectiveness; they do not follow the calendar-year cycle that governs the registrations of broker-dealers, agents, investment advisers, and investment adviser representatives.

Rosalind Cheng bought Verrick Pharma at $52 and it now trades at $68; she wants to protect most of that gain if the stock reverses. A sell stop order is...

1. A.Guaranteed to execute exactly at the stop priceOnce triggered it becomes a market order, so the fill price is not guaranteed.
2. B.Placed below the current market and becomes a market order when the stock trades at or below the stop priceCorrect — a sell stop sits below the market and triggers into a market order.
3. C.A type of limit order that never becomes a market orderA plain stop becomes a market order when triggered.
4. D.Placed above the current market to lock in a purchase priceThat describes a buy stop, not a sell stop.

Why: A sell stop is placed below the current market price and becomes a market order once the stock trades at or below the stop price. It is often used to protect a profit or limit a loss on a long position.

An agent files a complete registration application on March 1 with no deficiencies and no stop order. The registration becomes effective...

1. A.On December 31 of that yearDecember 31 is the expiration date, not the effective date.
2. B.Only after the Administrator issues an approval orderEffectiveness occurs automatically on the 30th day; no affirmative approval order is required unless it is a qualification.
3. C.At noon of the 30th day after the filingCorrect — absent problems, registration is effective at noon of the 30th day.
4. D.Immediately on March 1Filing begins the process; effectiveness waits until the 30th day.

Why: Registration becomes effective at noon of the 30th day after a complete filing, absent a stop order or pending proceeding — here, roughly the end of March.

A buy-stop order becomes executable when:

1. A.Only at the closeThis describes a market-on-close order, not a stop. A buy stop is live throughout the session and activates the moment the stock trades at or through the stop price, whenever that happens.
2. B.Only at the exact stop priceHalf right, in that the stop price is what triggers the order, but it does not cap the fill. Once elected the order becomes a market order and can be executed above the stop price; guaranteeing the price would require a stop-limit.
3. C.It never executesA buy stop can sit unelected indefinitely if the stock never reaches the stop price, but that is a matter of market movement, not the order type. Once the stop is touched the order is elected and goes to the market for execution.
4. D.The stop price is touched, then it becomes a market orderCorrect - triggered, then market.

Why: Once the stop price is touched, the stop order activates and executes as a market order.