Function 3: General Securities Industry Regulations (8% Exam Weight)

Series 79 — Function 3: General Securities Industry Regulations

Master the Series 79 — Function 3: General Securities Industry Regulations function of the Series 79 (Investment Banking Representative) exam with official regulatory rules, quantitative formulas, and targeted practice drills.

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Authoritative Series 79 Study Notes

Key Concepts & Regulatory Highlights

Covers general securities industry regulations applicable to investment bankers, including SEC Regulation M (Rules 101–105 restricted periods and stabilization), FINRA Rule 2241 research quiet periods and information barriers, and Exchange Act Section 13(d) / 13(g) beneficial ownership reporting.

📐 Essential Calculation Formulas

Regulation M Rule 101 Restricted Period Tiers

0 Days ($1M ADTV / $150M Float) | 1 Day ($100k ADTV / $25M Float) | 5 Days (Other)

Restricted period ends when the syndicate member completes its participation in the distribution.

FINRA Rule 2241 Post-Offering Research Quiet Period

IPO (Non-EGC) = 10 Calendar Days | Follow-On = 3 Calendar Days | EGC = 0 Days

Investment banking personnel may never pre-approve research reports or direct analyst compensation.

📜 Core Regulatory Rules & Requirements

✓SEC Regulation M Rule 101 (Underwriter Restricted Period): Prohibits underwriters and syndicate participants from bidding for or purchasing the subject security during the restricted period: 0 days for 'Actively Traded' securities (ADTV >= $1M and public float >= $150M), 1 business day prior to pricing if ADTV >= $100k and float >= $25M, and 5 business days prior to pricing for all other securities.

✓FINRA Rule 2241 Research Quiet Periods: For a non-Emerging Growth Company (non-EGC), managers and co-managers must observe a 10-calendar-day research quiet period following an IPO (and 3 calendar days following a secondary offering). Emerging Growth Companies (EGCs) have ZERO research quiet period.

✓Beneficial Ownership Reporting (Section 13(d)): Acquiring >5% of a public company's voting equity with activist/control intent requires filing Schedule 13D within 5 business days.

✓Regulation M Rule 104 Stabilization: Only ONE syndicate member (the lead manager) may place a stabilizing bid at any time, and the stabilizing bid can never exceed the public offering price or the highest independent bid on the principal market.

💡 High-Yield Exam Watchouts

•Under Regulation M Rule 105, an investor who sells short an equity security during the Rule 105 restricted period (generally 5 business days before pricing) is prohibited from purchasing shares in the follow-on public offering.
•Any communication between research analysts and investment bankers to verify factual accuracy in a draft research report must be chaperoned by Legal or Compliance and must strip out the rating, price target, and valuation summary.

Why Study Series 79 — Function 3: General Securities Industry Regulations?

The Series 79 — Function 3: General Securities Industry Regulations portion of the Investment Banking Representative (Series 79) exam is critical for passing on your first attempt. Understanding these concepts builds both test-day precision and practical regulatory fluency.

Our practice questions and formulas are engineered to mirror the official Series 79 blueprint and statutory complexity you'll encounter at Prometric.

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