Free FINRA Series 79 (Investment Banking Representative) Mergers and Acquisitions, Tender Offers and Financial Restructuring Practice Questions
Mergers and acquisitions, tender offers and financial restructuring on the FINRA Series 79 exam covers sell-side and buy-side M&A processes, accretion and dilution analysis, fairness opinions, the Williams Act tender offer rules (Regulations 14D and 14E), proxy solicitation, and Chapter 11 and Chapter 7 bankruptcy (FINRA).
Sample Questions
Question 1
Easy
Under the Securities Act, Rule 425 addresses which aspect of a business combination?
Solution
B is correct. Rule 425 governs the filing of prospectuses and written communications made in connection with a business combination, allowing parties to make permitted Rule 165/Rule 135 communications provided each is filed with the SEC on the date of first use. It is a communications-filing rule, not a registration, proxy, or timing rule.
Question 2
Medium
Which statement best describes how a flip-in shareholder rights plan (poison pill) operates as a takeover defense?
Solution
B is correct. A flip-in poison pill is triggered when a hostile acquirer accumulates shares beyond a specified threshold (often 10% to 20%). Upon triggering, all shareholders except the acquirer gain the right to purchase additional shares at a steep discount. The resulting issuance massively dilutes the acquirer's ownership stake and economic interest, making the takeover prohibitively expensive and forcing the bidder to negotiate with the board.
Question 3
Hard
A public acquirer launches a hostile exchange offer, offering its own newly issued common stock directly to the target's shareholders in exchange for their shares. Which regulatory framework governs this transaction?
Solution
C is correct. An exchange offer is simultaneously an offer of the acquirer's securities and a tender offer. Because new shares are being offered to the public, the acquirer must register them under the Securities Act, typically on Form S-4, and its offering communications fall under Rules 165 and 425. Because shareholders are being solicited to tender, the transaction is also subject to the Williams Act tender-offer regime—Regulations 14D and 14E and the Schedule TO filing—so both frameworks apply together.