1 - Capital Market Activities: Securities Registration, Underwriting, and Exemptions Flashcards
This deck focuses on capital market activities, including the SEC registration process, exemptions from registration, underwriting, and SEC filing requirements.
Quiet period for a syndicate manager’s research analyst to initiate research following an IPO
10 days after the effective date
Quiet period for a syndicate member’s research analyst following an IPO
10 days after the effective date
Quiet period for a syndicate manager’s research analyst following an additional offering
3 days after the effective date
SEC Form S-1
Long form registration statement, typically for IPOs
SEC Form S-3
Short form registration statement, typically for follow-on offerings
SEC Form S-4
Exchange offer registration statement, for mergers, acquisitions or refinancings
SEC Form F-6
American Depository Receipt (ADR) registration statement
SEC Form S-8
Registration statement for securities issued to employees through employee benefit plans
SEC Form S-11
Registration statement for REITs
Automatic Shelf Registration
Available only for Well-Known Seasoned Issuers (WKSIs). Effective immediately without SEC review.
Definition of a shelf registration
Allows an issuer to sell securities on a delayed or continuous basis at various times and prices
Definition of a Well Known Seasoned Issuer (WKSI)
Either has $700mm non-affiliate market cap or has issued $1bn in non-convertible debt over the last three years. Also must be an SEC filer for at least the previous year.
Definition of a Seasoned Issuer
Minimum of $75mm non-affiliate market cap and must be an SEC filer for at least the previous year
Definition of a Unseasoned Issuer
Has less than a $75mm non-affiliate market cap or has not been an SEC filer for at least one year
Definition of a Non-Reporting Issuer
Issuer not required to file financial reports with the SEC. Example would be a private company registering an IPO.
Definition of an Ineligible Issuer
Company which has been in bankruptcy within the last three years or is not current with their SEC filings; also blank check companies; shell companies and penny stock issuers
Definition of a Blank Check Company
A company with no business plan and no immediate intention to use the proceeds, other than a potential future acquisition. Examples include Special Purpose Acquisition Companies (SPACs) and Business Development Companies (BDCs).
Filing deadline for a schedule 8K
Within four business days of the event for all issuers
Sarbanes-Oxley requirements for a public company Board of Directors
Majority of a company’s Board of Directors must be independent directors
Sarbanes-Oxley requirements for a public company Audit Committee
All directors on a company’s audit committee must be independent directors, and the company must disclose if there is a financial expert on the audit committee
Requirements for favorable tax treatment for REITs
Real Estate Investment Trusts must invest 75% of their assets in real estate and must pass through 90% of net income to investors to qualify for favorable tax treatment.
General Partner in a Limited Partnership
Manages day-to-day operations, potentially has unlimited liability
Limited Partner in a Limited Partnership
Silent partner, has limited liability
Percentage of net investment income that a REIT must distribute to avoid corporate taxation
90%
The minimum percentage of investment assets that a REIT must invest in real estate
75%
The minimum percentage of gross income that a REIT must derive from rents or mortgage interest
75%
Pools of real estate assets that pass through real estate income but not losses
REIT (Real Estate Investment Trust)
Requires registration of new issues; regulates primary market activity
Securities Act of 1933
Regulates secondary market activity; requires registration of broker-dealers
Securities Exchange Act of 1934
Created the SEC
Securities Exchange Act of 1934
Requires corporate bond issuers to appoint trustees to protect the interests of bondholders
Trust Indenture Act of 1939
Protects customers from the bankruptcy or financial failure of broker-dealers
Securities Investor Protection Act
Amends the Act of 1934 and specifies penalties for the use of non-public material information
Insider Trading and Fraud Enforcement Act of 1988
Authorizes the regulation of credit to the Federal Reserve Board
Securities Act of 1934
Prohibited the use of inside information in trading activity
Securities Act of 1934
Regulates the exchanges and over-the-counter market
Securities Act of 1934
Exempts U.S. government securities from registration requirements
Securities Act of 1933
Requires the delivery of prospectuses for full and fair disclosure
Securities Act of 1933
Prohibits fraudulent activity in underwriting and distributing new securities
Securities Act of 1933
Disclosure document used to gather indications of interest during the cooling off period
Preliminary prospectus (red herring)
The day that the SEC releases a new issue for sale
Effective date
Securities that are exempt from the filing requirements of the Act of 1933
U.S. government, municipal bonds, fixed insurance products, national and state bank securities, non-profit securities, commercial paper and bankers acceptances with maturity of less than 270 days
Exemption from registration requirements for corporate offerings of less than $5 million in a 12 month period
Regulation A
Also known as a private placement exemption
Regulation D
Exemption from registration requirements for securities that are sold only within the home state of the issuer
Rule 147 (Intrastate offering)
The disclosure document that must be provided to investors in a Reg A offering
Offering circular
The maximum number of accredited investors that can participate in a Reg D offering
Unlimited
The maximum number of nonaccredited investors that can participate in a Reg D offering over $1mm
35
The net worth and income criteria for an accredited investor under Regulation D
Net worth of $1,000,000 (exclusive of residence) and annual income of $200,000 or more ($300,000 jointly with spouse) in each of the two most recent years
Regulates the sale of control and restricted securities
Rule 144
Addresses the sale of nonregistered foreign and domestic securities to institutional investors
Rule 144A
Holding period required before restricted securities can be sold
6 months
Length of time a Form 144 filing covers
90 days
When a Form 144 must be filed
Concurrent with the sale
The amount of control securities that can be sold in a 90-day period under Rule 144
Greater of 1% of the total outstanding shares, or the average weekly trading volume of the preceding four weeks
Securities owned by directors, officers, or persons who own or control 10% or more of an issuer’s voting stock
Control stock
When Rule 144 holding periods no longer apply to unaffiliated investors
After 6 months
Type of restriction that applies to sellers of control stock under Rule 144
Volume limits
Provision of the Act of 1933 and 1934 Securities Acts that applies to all securities, including those that are exempt from registration
Antifraud
Eligible for purchase of nonregistered foreign and domestic securities under Rule 144A
Qualified Institutional Buyers (QIBs)
When securities registered under Rule 147 may be sold to a non-state resident
After 6 months after the last sale in the offering (Updated from 9 months for new rule effective 4/20/2017)
Persons who are restricted from purchases of new issue securities under Rule 5130
FINRA member firms; employees of FINRA member firms, finders and fiduciaries; portfolio managers; persons owning 10% or more of member firm
The type of new issue security to which the provisions of Rule 5130 apply
Common stock
The percentage of income the issuer must receive in a state to be eligible for a Rule 147 registration
80%
Subchapter C Corporation
Does not pass through gains and loses, can have an unlimited number of shareholders (including institutions)
Subchapter S Corporation
Passes through all gains and losses to investors, can have a maximum of 100 shareholders (no institutional shareholders)
Information required on the cover of a 10K or 10Q
Current stock price, market value of voting and non-voting shares, number of outstanding shares
Information required about shareholders in a 10K
List of officers, directors, and 5% beneficial shareholders. This information is NOT required on a 10Q.
Definition of a Large Accelerated Filer
$700mm non-affiliate market cap and has been an SEC filer for at least the previous year
Definition of a Accelerated Filer
Between $75mm and $700 mm non-affiliate market cap and has been an SEC filer for at least one year
Definition of a Non-Accelerated Filer
Non-Accelerated Filer - less than a $75mm non-affiliate market cap, or HAS NOT been an SEC filer for at least one year
Definition of a Smaller Reporting Company
Less than a $75mm non-affiliate market cap or, for companies with illiquid stock, less than $50mm in annual revenues. Smaller reporting companies have fewer disclosure obligations.
10K filing deadline for a Large Accelerated Filer
60 days after fiscal year end
10K filing deadline for an Accelerated Filer
75 days after fiscal year end
10K filing deadline for a Non-Accelerated Filer or a Smaller Reporting Company
90 days after fiscal year end
10Q filing deadline for a Large Accelerated Filer
40 days after fiscal quarter end
10Q filing deadline for an Accelerated Filer
40 days after fiscal quarter end
10Q filing deadline for a Non-Accelerated Filer or a Smaller Reporting Company
45 days after fiscal quarter end
Filing deadline for a PRE14A
PRE14A is a Preliminary Proxy, it is filed with the SEC at least 10 days before the definitive proxy is mailed to shareholders
Filing deadline for a DEF14A
DEF14A is a Definitive Proxy, it is distributed to investors at least 20 days prior to the annual shareholders’ meeting
Information required about shareholders in a Proxy Statement.
List of officers, directors, and 5% beneficial shareholders; amount of shares owned by each
An offering of securities under Section 4(a)(5) of the Act of 1933 can only be sold to
Accredited investors
An offering circular in a Regulation A offering must be received by purchasers at least
48 hours prior to confirmation of sale
A Green Shoe clause allows the underwriters to request up to
15% additional shares from the issuer
Form 147 must be filed with the SEC at least
10 business days prior to sale
Under SEC Rule 501, an accredited investor is defined as an individual with net income of
$200,000 or more in each of the two most recent years; $300,000 if joint income with a spouse OR $1mm of net worth (excluding primary residence)
Under the insider trading rules, a short swing profit is defined as a buy and sell within a
6 month period; the profit must be returned to the corporation
The 6 month resale restriction applies to
Rule 147 offerings (Intrastate) (Updated from 9 months for new rule effective 4/20/2017)
No filing is required under Rule 144 as long as the amount to be sold is 5,000 shares or less worth
$50,000 or less
Access equals delivery refers to the
Electronic delivery of prospectuses
Letters of intent in underwritings are signed by
The issuer and the managing underwriter
Both all or none and mini-max offerings require that
An escrow account be set up for the deposit of customer money until the threshold is met