Ch 2 Deck 16 Flashcards
Agent at broker-dealer is restricted person unless only associated with
Limited Broker Dealer
A Limited Broker Dealer is only authorized to engage in 2 types of securities
sale of investment company/variable contracts
direct participation
FINRA 5110 defines Participating Member as
FINRA Member
Affiliate of member
Associated persons
Immediate family members of AP’s
One or more exchange listed DPP’s are reorganized into one or more exchange listed entities
DPP rollup
A transaction is only a DPP rollup if investors in any of the involved DPP’s are:
- subject of an adverse change in the terms of their investment
- not provided with a way to keep their original terms
A DPP rollup is usually done to turn a
previously illiquid DPP into a liquid investment
DPP rollups are usually subject to
an investor vote
Prior to a proposed DPP rollup vote, proper
disclosure documents should be presented to investors
DPP rollup disclosure documents must include
- Risk Factors
- GP’s belief in fairness of transaction
- any reports or opinions on fairness
FINRA restrictions on DPP rollups are designed to keep members from pressuring
investors to vote yes on a vote to implement a DPP rollup
In a DPP rollup, FINRA member firms are prohibited from receiving compensation for
soliciting votes or tenders from participants (unless specific conditions are met)
In a DPP rollup, FINRA members can receive compensation for soliciting votes or tenders from participants if three conditions are met:
- Payable and equal in amount regardless of how participant ends up voting
- does not exceed in the aggregate 2% of exchange value of securities
- is paid regardless of whether participants reject rollup
SEC can suspend trading on any national exchange for
up to 90 calendar days
Market makers can enter on the OTCBB three types of bid/offers:
- priced bid and/or offer
- unpriced indication of interest
- bid accompanied by modifier
2 types of unpriced indications of interest a market maker can enter on OTCBB
“bid wanted”
“offer wanted”
Market makers on OTCBB enter a bid or offer accompanied by a modifier to
reflect unsolicited customer interest
Rule 135A states that generic advertising will not be deemed
an offer for sale if it meets certain requirements
Rule 135A generic advertisements can be in the form of
letters, advertisements, notices, signs, or other communications
Rule 135A generic advertisements are not offers for sale if they do not mention
- a specific security for sale
2. name of a specific investment company
Rule 135A generic advertisements must include
name and address of registered broker dealer responsible for communication
Rule 5121 restricts the sale of securities in a distribution of a new issue to
discretionary accounts of broker dealers
Rule 5121 only allows distribution of securities in a new issue to discretionary accounts of the distributing broker dealer if
they receive prior written authorization from the account holder
Under securities act of 1933 it is necessary to register a security if
any channel of interstate commerce will be used to sell the issue
A person may not sell an equity security short (both rules) between:
- Initial filing of registration statement to pricing
2. Five business days before pricing to pricing