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SIE > Ch. 11 Offerings > Flashcards

Ch. 11 Offerings Flashcards

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1
Q

May an RR modify a prospectus?

A

No. The underlining, photocopying, or highlighting of a prospectus is prohibited.

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2
Q

All securities sold in the primary market must be sold with a _______________.

A

All securities sold in the primary market must be sold with a final prospectus.

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3
Q

To issue securities under Rule 147, an issuer must satisfy how many of the four “doing business” requirement?

A

It must satisfy only one of the four “doing business” requirements.

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4
Q

The holding period for unregistered (restricted) securities under Rule 144 is __________.

A

6 months

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5
Q

What stipulation in the registration statement relieves underwriters of their contractual obligations?

A

Market out clause

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6
Q

Shelf Registration is valid for up to _____ years.

A

3 years

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7
Q

True or False: The Syndicate Letter is also referred to as the Agreement Among Underwriters.

A

True

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8
Q

True or False: A prospectus is not required to be delivered if a buyer received the red herring.

A

False. All purchasers of a new issue must receive a copy of the final prospectus.

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9
Q

What type of underwriting is cancelled if a specified portion is not sold?

A

Mini-max

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10
Q

What is the difference between a syndicate member and a firm in the selling group?

A

Syndicate members assume liability, while firms in the selling group do not.

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11
Q

What is unique about the new Rule 147A Exemption?

A

An issuer organized in State A, but with its principal office in State B, may offer securities to residents of State B.

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12
Q

For how long must a prospectus be provided in the after-market for the IPO of a stock to be listed on an exchange?

A

25 days

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13
Q

What is the difference between what the syndicate pays the issuer for the new issue and the public offering price?

A

Underwriting spread

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14
Q

Who is expected to apply for a CUSIP number on a new municipal bond?

A

Underwriters

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15
Q

Identify the acronym: PIPE

A

Private investment in public equity

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16
Q

In a firm commitment underwriting, unsold securities are retained by ________________.

A

In a firm commitment underwriting, unsold securities are retained by the syndicate.

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17
Q

The Securities Act of 1933 regulates ____________.

A

New issues

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18
Q

True or False: Securities issued by the U.S. Treasury and U.S. agencies are deemed exempt securities under the USA.

A

True

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19
Q

Rule 144 allows for the sale of __________ stock and _______ stock.

A

Restricted and control stock

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20
Q

What type of municipal bond requires a feasibility study?

A

Revenue bonds. Feasibility studies are conducted to determine whether a project is financially viable.

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21
Q

QIBs are financial institutions that have at least $_________________ invested in securities of non-affiliated issuers.

A

QIBs are financial institutions that have at least $100 million invested in securities of non-affiliated issuers.

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22
Q

True or False: A research report that includes information about a new offering could be a violation of the Act of 1933.

A

True

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23
Q

True or False: The legal opinion addresses the creditworthiness of an issue.

A

False. Legal opinions address the legality (authority/validity) of the issue and the tax exemption of the interest.

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24
Q

For how long may a new issue be sold under a shelf registration?

A

3 years

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25
Q

What is the primary purpose of the Securities Act of 1933?

A

Provide investors with full and fair disclosure regarding new issues (prospectus)

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26
Q

May a preliminary prospectus (red herring) be sent during the cooling-off period?

A

Yes. The red herring is used to obtain indications of interest from potential purchasers.

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27
Q

Securities received from a private placement are called ___________ securities.

A

Restricted securities

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28
Q

What type of underwriting is cancelled if the entire issue is not sold?

A

All-or-none

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29
Q

True or False: A new issue is required to be registered in all 50 U.S. states.

A

False. A new issue is only required to be registered in any state(s) in which it will be offered or sold.

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30
Q

What is the maximum sale allowed under Rule 144?

A

1% of the outstanding shares or average trading volume over the last 4 weeks - whichever is greater

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31
Q

How is the underwriter determined for a Competitive Sale?

A

The issuer invites syndicates to bid on the issue, with the best bid (lowest interest cost) winning the competition.

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32
Q

Public offerings of securities require the delivery of a ___________.

A

Prospectus

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33
Q

Where can investors get access to official statements for new municipal bond issues?

A

Electronic Municipal Market Access (EMMA), a database that’s run by the MSRB.

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34
Q

Control and ___________ securities have legends placed on them to limit their transfer.

A

Restricted

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35
Q

In the after-market, a prospectus must be provided for ____ days following a non-exchange follow-on offering.

A

40 days

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36
Q

May a preliminary prospectus (red herring) be sent during the cooling-off period?

A

Yes, so potential purchasers can provide indications of interest.

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37
Q

An offering of shares of the issuer and selling shareholders (e.g., officers) is a _____________________ offering.

A

An offering of shares of the issuer and selling shareholders (e.g., officers) is a combined primary/secondary offering.

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38
Q

An offering of shares with the proceeds being directed to the issuing corporation is called a ________ offering.

A

Primary

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39
Q

Are CMOs exempt from registration under the Securities Act of 1933?

A

No. CMOs are corporate securities that must be registered.

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40
Q

What is a combined offering?

A

One in which the proceeds will be split between the issuing company and selling shareholders

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41
Q

Define restricted security.

A

A security acquired directly, or indirectly, from the issuer or an affiliate, and not from a public offering

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42
Q

The _________ date is the first date on which orders for a new issue may be accepted.

A

Effective date

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43
Q

What is the purpose of providing investors with a preliminary prospectus (red herring)?

A

To disclose information and obtain indications of interest

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44
Q

The final ________ _____ will not appear in a red herring.

A

Final offering price

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45
Q

True or False: Mutual funds and ADRs are required to register their securities with the SEC.

A

True. Mutual funds and ADRs are not exempt from the SEC’s registration requirements.

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46
Q

When acting in an ________ capacity, firms assist customers, but do not assume risk.

A

Agency

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47
Q

Accredited investors have net worth of at least $_________ or pre-tax income in each of the last two years of $________.

A

Accredited investors have net worth of at least $1,000,000 or pre-tax income in each of the last two years of $200,000.

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48
Q

True or False: Stocks listed on a national exchange are exempt from registration under the Securities Act of 1933.

A

False. Exchange-listed stocks are nonexempt securities and must be registered under the Act.

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49
Q

___________ securities are acquired from the issuer or an affiliate of the issuer, but not from a public offering.

A

Restricted

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50
Q

What is the document that establishes the agreement between the issuer and the underwriter?

A

Underwriting agreement

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51
Q

A company is incorporated in OH, but does its principal business in NJ, will Rule 147A allow it to sell to NJ residents?

A

Yes, since its principal business is in NJ, it may sell to NJ residents.

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52
Q

True or False: There is no aftermarket prospectus delivery requirement for listed follow-on offerings.

A

True. No prospectus requirement applies to follow-on offerings.

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53
Q

What is the disclosure document, similar to a prospectus, that is used for municipal bonds?

A

Official Statement

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54
Q

What two types of offerings are issued in the primary market?

A

Initial public offerings (IPOs) and subsequent public offerings

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55
Q

True or False: During the pre-filing period, certain issuers may be prohibited from communicating with the public.

A

True

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56
Q

Does Rule 144 require a specific holding period for control stock?

A

No, but the SEC must be notified when a sell order is placed and volume limitations apply.

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57
Q

True or False: 100% of investors must be state residents to qualify for the Rule 147 intrastate exemption.

A

True

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58
Q

For how long must a prospectus be provided in the after-market for a non-exchange IPO?

A

90 days

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59
Q

True or False: Unless it is exempt, a security must be registered before it may be sold publicly.

A

True

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60
Q

True or False: Securities offered through a Reg D private placement are considered unregistered.

A

True. The unregistered (restricted) stock may be sold publicly only if registered or sold under a suitable exemption.

61
Q

For an unlisted IPO, how long must a prospectus be made available in the secondary market?

A

90 days

62
Q

In a best-efforts underwriting, unsold securities are retained by ______________.

A

Issuer

63
Q

A BD that is a part of the selling group (not a syndicate member) would only be entitled to the ____________________.

A

Sales concession

64
Q

What is a QIB?

A

Qualified Institutional Buyer (institutions defined under Rule 144A)

65
Q

For what offerings is there no after-market prospectus requirement?

A

For follow-on offerings of exchange-listed stocks

66
Q

The private placement disclosure document is the _____________________.

A

The private placement disclosure document is the Offering Memorandum.

67
Q

The aftermarket prospectus delivery requirement for listed IPOs is ___ days.

A

25 days

68
Q

True or False: Registration provisions apply when securities are offered through a private placement.

A

False. Private placements are exempt from registration.

69
Q

The maximum number of non-accredited investors in a Reg. D offering is _____.

A

35

70
Q

What is the name of the disclosure document used for a private placement?

A

Offering Memorandum

71
Q

Under Reg. D ____ is the maximum number of non-accredited investors allowed in a Private Placement.

A

35

72
Q

True or False: Both U.S. government and municipal securities are subject to registration provisions.

A

False U.S. government and municipal securities are exempt from registration.

73
Q

What rules govern the registration of an issue in any state in which it will be offered?

A

Blue-sky laws

74
Q

What is the name of the offering of additional shares after a company has conducted its initial public offering (IPO)?

A

Follow-on offering

75
Q

What is the after-market prospectus requirement for the follow-on offering of an exchange-listed stock?

A

No requirement exists for the follow-on offering of an exchange-listed stock.

76
Q

How is the total spread calculated?

A

Total Spread = Manager’s Fee + Underwriter’s Fee + Selling Concession

77
Q

Name the three components of the spread for a bond offering.

A
  1. Manager’s fee 2. Additional takedown 3. Sales concession
78
Q

True or False: Shelf Registration gives flexibility to the issuer by allowing delayed or continuous sales.

A

True

79
Q

What type of municipal bond requires voter approval?

A

General obligation (GO) bonds are subject to voter approval since they use tax dollars to pay debt service.

80
Q

May an RR summarize a prospectus?

A

No. Any prospectus summary (profile) must be produced by the fund’s sponsor.

81
Q

In the after-market, a prospectus must be provided for ____ days following a non-exchange IPO.

A

90 days

82
Q

True or False: A significant goal of the Securities Act of 1933 is to prevent fraud in the sale of new issues.

A

True

83
Q

A financial commitment is made in which type of underwriting?

A

A firm-commitment offering. In a firm-commitment, the BD is acting as a principal.

84
Q

True or False: Form 144 must be filed for any sale of restricted or control stock, regardless of the size.

A

False. If a sale is for 5,000 shares or fewer, and has a market value of $50,000 or less, no notification is required.

85
Q

Describe a Private Investment in Public Equity (PIPE) offering.

A

A private sale (i.e., exempt) by an issuer that has previously sold registered (i.e., publicly traded) securities.

86
Q

When an investor buys a municipal bond in the primary market, what’s on the confirmation?

A

The underwriting spread, agent fees, and the initial reoffering price for each maturity in the offering

87
Q

If a syndicate member sells a new issue, to what part(s) of the spread is it entitled?

A

The syndicate member is entitled to the underwriter’s fee plus the selling concession (i.e., the total takedown).

88
Q

Define control security.

A

A security received or purchased by an affiliate of the issuer, such as a director, officer, or major shareholder

89
Q

An investor has a net worth of $100,000 and had annual income of $1 million last year. Is he an accredited investor?

A

No. Although his income exceeds $200,000, it has not been at that level for the last two years.

90
Q

True or False: The SEC judges an offering’s investment merit and provides approval.

A

False

91
Q

True or False: Broker-dealers can accept payment from an issuer for making a market in the issuer’s shares.

A

False. Accepting payment for market making is prohibited.

92
Q

For how long must a prospectus be provided in the after-market for a non-exchange follow-on offering?

A

40 days

93
Q

Complete the following statement: The SEC requires a securities offering to register unless it is _______.

A

Exempt

94
Q

If a company has never issued securities before, what offering would it conduct to raise capital publicly?

A

IPO

95
Q

What is a nonexempt security?

A

A security that is subject to the registration provisions of federal law

96
Q

Is a foreign issuer that sells securities to wealthy U.S. investors and institutions required to register with the SEC?

A

No; in this instance, it is likely that the issuer will qualify for a Regulation D Rule 506 Exemption.

97
Q

For how long must a prospectus be made available in the secondary market for an exchange-listed IPO?

A

25 days

98
Q

In addition to providing a prospectus, a _________ advertisement may be published to announce an offering.

A

Tombstone

99
Q

Identify the Acronym: POP

A

Public Offering Price

100
Q

What is the purpose of a Tombstone Ad?

A

It calls attention to the new issuance of securities and members of the syndicate.

101
Q

Securities issued under the Reg. D exemption are classified as __________ securities.

A

Restricted

102
Q

Give some examples of items that may be deemed a free writing prospectus.

A

Term sheets, e-mails, press releases, and marketing material

103
Q

Securities offered publicly must satisfy all applicable _____________ requirements.

A

Registration

104
Q

In the after-market, for how long must a prospectus be provided following an IPO of a stock to be listed on an exchange?

A

25 days

105
Q

At the federal level, with whom must securities be registered?

A

SEC

106
Q

For an exchange-listed follow-on offering, how long must a prospectus be made available in the secondary market?

A

No prospectus requirement exists for an exchange-listed follow-on offering.

107
Q

True or False: The placement agent for a private placement is not required to perform due diligence.

A

False. Although private placements are exempt, the placement agent is still required to perform due diligence.

108
Q

What requirements apply to nonexempt securities?

A

Registration requirements

109
Q

Reclassifications, merger or consolidation activities, and transfers of assets are regulated under what provision?

A

Rule 145

110
Q

When acting in a ____________ capacity, a firm is assuming risk.

A

When acting in a principal capacity, a firm is assuming risk (e.g., a firm-commitment underwriting).

111
Q

In the sale of a new issue, what is the purpose for including a selling group?

A

To increase the number of potential purchasers

112
Q

When registering securities, what is the minimum time for the cooling-off period?

A

20 days

113
Q

True or False: In a private placement, investors are not required to be provided with information disclosure.

A

False. Investors must receive a disclosure that is similar to what is received for a registered offering.

114
Q

An investor has a net worth of $2 million and annual income of $100,000 per year. Is she an accredited investor?

A

Yes, she is accredited since her net worth exceeds $1 million.

115
Q

What does Rule 145 of the Securities Act of 1933 cover?

A

Registration/prospectus requirements of any reclassification of securities (primarily from mergers or acquisitions).

116
Q

What is a private offering?

A

An offering by a company to individuals or a small group of investors that is usually exempt from registration

117
Q

What is the dollar limit for a Rule 506 private placement?

A

Under Rule 506, an unlimited amount may be raised.

118
Q

In which state(s) is a new issue required to be registered?

A

In any state(s) in which it will be offered or sold

119
Q

True or False: Form 144 must be filed within 90 days of selling restricted or control stock.

A

False. Form 144 must be filed concurrent with the placement of a sell order.

120
Q

The ____________________ will not appear in a red herring.

A

final offering price

121
Q

What must issuers have to qualify for the Rule 147 intrastate exemption?

A

The issuer must have its principal place of business in that state

122
Q

The aftermarket prospectus delivery requirement for non-listed IPOs is ___ days.

A

90 days

123
Q

Rule 147 offerings may not be sold to an out-of-state investor for ____ months following the last sale of a new issue.

A

6 months

124
Q

A company went public five years ago. Today, it wishes to raise additional capital publicly. What offering may be used?

A

Secondary offering (subsequent offering)

125
Q

Under Reg. D, securities may be offered to an unlimited number of __________ investors.

A

Accredited

126
Q

What is an exempt security?

A

A security that is not subject to the registration provisions of the Securities Act of 1933

127
Q

What is another name for a preliminary prospectus?

A

The Red Herring. This document is distributed during the 20-day cooling-off period.

128
Q

Reg. D exempts __________________ from the registration requirements of the Securities Act of 1933.

A

Private placements

129
Q

For how long are securities restricted if received by the syndicate as compensation?

A

6 months

130
Q

Indications of interest are _______________ on both the customer and BD.

A

non-binding

131
Q

For an unlisted follow-on offering, how long must a prospectus be made available in the secondary market?

A

40 days

132
Q

Rule 144A allows for the sale of restricted stock to _____________________________________.

A

Qualified Institutional Buyers

133
Q

What advertises that municipal bonds are available and invites underwriters to bid on a new competitive issue?

A

Notice of Sale

134
Q

Underwriters that have made a firm commitment to an issuer are acting in a ________________ capacity.

A

Prinicpal

135
Q

Underwriters operating under a best-efforts agreement with an issuer are acting in a ________________ capacity.

A

Agency

136
Q

Define free writing prospectus.

A

Written communication about an offering that does not meet the requirements of a statutory prospectus

137
Q

True or False: There are no restrictions regarding the purchasers of securities that are issued privately.

A

False. Securities issued privately may be purchased only by select investors.

138
Q

What are the benefits to an issuer who conducts a private placement of its securities?

A

Private placements are less expensive and a less time consuming method of raising capital.

139
Q

Is an official statement or preliminary official statement considered retail communication?

A

No. However, a summary or abstract of an official statement is considered retail communication.

140
Q

True or False: If a registration statement has not been filed with the SEC, BDs may not discuss new issue information.

A

True

141
Q

A statutory preliminary prospectus is also referred to as a _____________.

A

Red Herring

142
Q

What is the one requirement that is common to any issuer that is relying on a Rule 147 Exemption?

A

For an issuer to offer securities under the Rule 147 Exemption, it must maintain its principal place of business in-state.

143
Q

Rule 144A exempts sellers from the holding period and volume limitations of Rule 144 if trading is done with a _____.

A

Qualified Institutional Buyer

144
Q

Though some securities are exempt from registration, nothing is exempt from the ____________ provisions of the Act.

A

Anti-fraud

145
Q

Once Form 144 is filed, owners have __________ to sell their securities.

A

90 days

146
Q

A ___________ underwriting is used for shares not purchased through a rights offering.

A

Stand-by offering

147
Q

Restricted stock has a ____ month holding period.

A

6 months

148
Q

The total spread consists of what three parts?

A

Manager’s fee, underwriter’s fee, sales concession

149
Q

To indicate that private placement securities are unregistered/restricted, a _______ is placed on the certificates.

A

Legend (legend is placed on the certificates)

SIE (20 decks)

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