79 Flashcards
Forms 10-K and
10-Q
These financial filings are required of publicly traded firms with over $10 million in assets and 2,000 or more persons or over 500 non-accredited shareholders (there are three 10-Qs filed per year)
Form 8-K
Form 8K is filed within four business days for any material event that could affect the issuer’s share price or financial condition.
Form 3
Form 3 is filed within 10 calendar days to provide the SEC with notification of having achieved insider status. Insiders are defined as officers, directors, and owners of more than 10% of an issuer’s
voting securities.
Form 4
Form 4 is filed within two business days to provide the SEC with notification of any changes in an insider’s position
Schedule 13D
This schedule is filed by any person that acquires more than 5% of an issuer’s equity. It’s filed with the issuer, the SEC, and the exchange on which the stock trades within 10 days.
Schedule 13D is the BEST source of information for determining the identity of the most recent
largest shareholders.
Schedule
13E-3
Schedule 13E-3 is filed when an issuer or affiliate of the issuer (not a third party) plans to go private. Shareholders are required to vote (proxy) and be provided with a summary term sheet.
Schedule 13E-3 may be used for reverse stock splits or LBOs.
Schedule 13G
Schedule 13G is an alternative to 13D and is filed by an institutional investor (e.g., a mutual fund) that has no intention of exhibiting control over the issuer
Schedule 13F
Schedule 13F is filed quarterly by institutional investment managers that exercise investment discretion over at least $100 million in equity securities. It’s filed regardless of the SEC registration status of the filer.
Form 14A
Proxy Statements (used when a vote is required by shareholders)
A definitive proxy is filed with the SEC on the same day it’s sent to shareholders. In some cases (e.g., business combinations and M&As), a preliminary proxy must be filed with the SEC for prior review.
The preliminary proxy statement must be filed with the SEC at least 10 days prior to the date that the definitive proxy is sent to shareholders.
A definitive proxy must be sent to shareholders 20 days prior to meeting
Form S-1
Form S-1 is a registration form which is used for most IPOs (long-form) or for issuers that are not eligible for filing Form S-3.
Form S-3
Form S-3 is a short-form registration statement which is used by issuers that have been SEC reporting companies for at least 12 months and have $75 million public float in voting and nonvoting common equity.
Form S-4
Form S-4 is used when new securities are being offered in connection with a merger. It’s required to be filed by the acquirer and a proxy is required to be issued by the target.
The target’s shareholders vote on the approval of merger, while the acquirer’s shareholders vote on issuing shares to be used in the merger
Schedule TO
A tender offer is a solicitation by the issuer or a third party to purchase securities (usually at a premium) for a limited period. In addition to 13D, Schedule TO is filed by any person that makes a tender offer and becomes the owner of more than 5% of a company
Offers must be kept open for 20 business days.
If the terms are amended, the offer must remain open for at least 10 business days from the amendment.
No open market transactions are permitted.
− Persons making the TO cannot purchase the same security or convertible in the open market during duration of the offer.
Shareholders can tender shares ONLY if they have a net long position on the shares (options must be exercised for the underlying stock to be included).
Schedule 14D-9
Schedule 14D-9 is filed by certain persons (the issuer and other owners of the company) and includes recommendations or solicitations that relate to the TO. Essentially, it becomes the target’s official stance on the offer.
Regulation FD
According to FD, if material, non-public information is improperly disclosed, the information must be disseminated to the public. If the disclosure was intentional, issuer must file a public statement immediately. If the disclosure was unintentional, it must do so within 24 hours.
Created to protect retail investors
Trust Indenture
Act of 1939
Requires a trustee that’s appointed by the issuer to act in the bondholders’ best interest; applies only to corporate debt.
Rule 137
BDs may publish research reports when they’re not acting as underwriters
Rule 138
BDs may publish research reports when they are acting as underwriters for another class of security (e.g., if the issuer’s common stock is under registration, a BD may comment on its non-convertible debt).
Rule 139
If the issuer is a reporting company or WKSI, BDs may publish reports when they’re acting as underwriters for the underlying security, but only if they’re continuing their regular coverage.
Sarbanes-Oxley
SARBOX establishes disclosure and corporate governance rules for publicly traded companies and makes senior management more directly accountable for the company’s internal control system and its
release of financial information to the public.
Financial information must be certified by CEO and CFO (“Signing Officers”)
Rule 14d-10
In a tender offer, there’s no preferential pricing; therefore, all shareholders must be offered the same price regardless of their ownership position. Rule 14d-10, which is also referred to as the Best Price Rule, provides an exception if the compensation is approved by the compensation committee of the target
Hart-ScottRodino Antitrust
Act (HSR Act)
This federal antitrust act requires certain parties to file notice with the FTC before a merger deal may be completed.
The merger may not be completed until 30 days after notice is filed (15 days if the transaction is all
cash).
HSR also requires financial investors to file and comply with a 30-day waiting period unless the purpose is for investment purposes only.
Regulation MA
This regulation is designed to facilitate communications and disclosures which are made by companies that are engaged in M&A transactions. Under this rule, summary term sheets provide shareholders with all of the pertinent information about the transaction.
Securities that
are exempt from
SEC registration
U.S. government or agency securities
Municipal bonds
Short-term debt (maturity less than 270 days) - Commercial paper
Commercial bank securities
Securities issued by non-profit organizations
Regulation A
(A+
Exempt transaction for small businesses
Offering limited to $75 million over 12 months
− No more than $22.5 million (30% of the amount offered) may be on behalf of selling shareholders
Offering circular must be filed with the SEC
“Testing the waters” is allowed
Rule 147
Intra-state exemption which is available to issuers that sell within ONE state:
Issuer must have its “principal place of business” in that state and satisfy any one of the following
four requirements:
− 80% of assets located within that state
− 80% of revenues generated within that state
− 80% of net proceeds from sale used in state; and
− A majority of the issuer’s employees are based in that state
Resale to non-state residents is permissible after six months from date of last sale (formerly nine months)
Regulation S
Provides a registration exemption to U.S. companies that issue securities for sale outside of the U.S. provided the following:
No offer is directed to a U.S. resident and
The transaction is effected through an overseas securities market
Reg S securities may be resold to a U.S. resident after 40 days for debt, or one year for equities
Private
Placements Section 4(2)
Registration exemption for securities that DO NOT involve a public offering.
Private
Placements
* Section 4(5)
Registration exemption for securities transactions that meet the conditions below:
Offering doesn’t exceed $5 million
No advertising or public solicitation can be used
Offering may be sold only to accredited investors (sophisticated)
* Reg D exemption allows for a limited number of non-accredited investors (35)
- Reg D
This registration exemption is available to issuers that conduct private placements
Rule 504 Up to $10 million
Rule 506 Unlimited No more than 35 non acredited
Accredited investors have a net worth of $1 million (excluding primary residence) OR annual income
of $200,000 ($300,000 for spouses)
Regulation D Road shows require pre-qualification of investors
506 (c) offerings allow issuers and placement agents to use general solicitation if reasonable steps are taken to verify that all potential investors are accredited
Rule 144A
Registration exemption for securities that are sold to QIBs and allows QIBs to freely trade private placements amongst themselves with no holding period
Same class of securities as listed on an exchange are ineligible
Rule 144
Permits the sale of Restricted and Control stock
Restricted Stock is unregistered (e.g., Reg D private placement, Reg S, or employee stock that’sreceived as compensation)
− Resale restrictions with regards restricted stock are:
1. The company must have publicly held available shares, and
2. The shares are subject to a six-month holding period
Control Stock (affiliated) is registered stock that’s purchased and owned by corporate insiders (i.e.,control persons) which are the company’s officers, directors, and greater than 10% shareholders
− Has no mandatory holding period
To sell either restricted or control stock:
− SEC must be notified at time the sell order is placed
− Over any 90-day period, the maximum sale allowed is the greater of 1% of outstanding shares or the average weekly trading volume over prior four weeks
− Exemption from notifying the SEC is available if the sale doesn’t exceed 5,000 shares or the dollar amount doesn’t exceed $50,000
− When shares sold under Rule 144, they become registered stock
Pre-Registration
Document preparation and due diligence begins
No communication with public unless it’s 30 days prior and there’s no mention of the offering
File Registration
Statement
Begins the 20-day “Cooling Off’ period
No sales or money may be accepted
Issuer distributes preliminary prospectus (Red Herring)
− Used to obtain indications of interest (non-binding)
− Omits final price and effective date
Blue Sky provisions
− Registration of securities (by issuer) and B/Ds, RRs, at state level
Effective Date
Determined by
the SEC
Final statutory prospectus (full disclosure document) must be delivered to all purchasers
Aftermarket prospectus delivery rules:
− 25 days for an exchange-listed IPO, including Nasdaq
− 40 days for a non-listed registered secondary
− 90 days for a non-listed IPO
Financial Statement - (Re-filing requirement)
Balance sheet for the last two years; income statement and cash flows for the last three years
Financials are required to be re-filed if they become stale:
For Large/Seasoned Filers (WKSI) – more than 129 days (130 days is considered stale)
For Unseasoned/Small Reporting Company Filers (non-WKSI) – more than 134 days (135 days is considered stale)
