1.2 Important Definitions In The Securities Industry Flashcards
Before a security can be traded, it must be issued to the public through what?
THE PRIMARY MARKET
In order to sell securities to the public, issuers (companies) usually use the services of?
An investment bank, also known as an UNDERWRITER
What is a PRIMARY OFFERING?
When the investment bank purchases securities from the issuer at a discount and then sells them to investors
The difference between the price at which the investment bank purchases the securities from the issuer and the higher price at which the investment bank sells the securities to the investor
UNDERWRITING SPREAD
The UNDERWRITING SPREAD is?
The underwriters commission
INITIAL PUBLIC OFFERING (IPO)
The first time a company issues and sell stock to the public
A FOLLOW-ON OFFERING is
If a company issues more shares after an IPO
A SECONDARY OFFERING is
The sale of securities by existing holders, such as insiders, institutional investors, or venture capitalists.
Both IPOs and follow on offerings are part of the primary market because?
The issuer (Company) is receiving the proceeds from the sale of the shares.
Most issues of securities are subject to federal regulations but exempt from ________ regulations
STATE
BLUE-SKY LAWS
Subject to federal regulations but exempt from state regulations.
Offerings include securities listed on a major exchange, mutual funds and most private placements.
OTC Securities are often subject to
State regulations
Trading between investors takes place in the?
Secondary market
None of the proceeds go to the company
All of the proceeds go to the investor who sold it
“Securities Trading” refers to?
Buying and selling securities
Secondary market transactions or executed by?
Brokers and Dealers
BROKERS
Individuals or firms that act as liaisons between the buyer and seller and take a commission for doing so
DEALERS
Individuals or firms that buy and sell securities out of their own inventory of securities
A dealer is said to be a?
Principal to the trade
Because a dealer is risking its own money, and the transaction adds to or depletes the dealers own account
BROKER-DEALERS
May perform either role, depending on the situation.
Financial firms may not act as both broker and dealer on the same transaction.
All broker dealers that do business across state lines must register with the?
SECURITIES AND EXCHANGE COMMISSION (SEC)
The SECURITIES AND EXCHANGE COMMISSION (SEC)
The primary federal regulator for the securities industry.
The (SEC) oversees?
SELF REGULATORY ORGANIZATIONS (SROs)
Examples;
NASDAQ
NEW YORK STOCK EXCHANGE
FINRA
NASDAQ is a?
SELF REGULATORY ORGANIZATION
The NEW YORK STOCK EXCHANGE is a ?
SELF REGULATORY ORGANIZATION
