Ch 2 Deck 3

Question 1

Prior to agreement, the issuer and lead manager will usually enter into

Answer 1

a nonbinding LOI to allow lead manager to conduct due diligence

Question 2

Outlines the duties and rights of each member of the syndicate

Answer 2

Syndicate agreement

Question 3

AAU states the liability for

Answer 3

unsold shares

Question 4

Western underwriting account

Answer 4

members are only responsible for paying for the shares they were allotted

Question 5

Eastern underwriting account

Answer 5

members will be responsible for paying for unsold shares

Question 6

Agreement among underwriters agreement identifies

Answer 6

lead manager and co-managers

Question 7

AAU agreement grants authority to lead underwriter for:

Answer 7

stabilizing bids

entering into underwriting agreement

Question 8

Syndicate agreement spells out compensation

Answer 8

for each underwriter and selling concessions

Question 9

syndicate spells out allocation

Answer 9

of shares and liability for each underwriter

Question 10

underwriting agreement is between

Answer 10

issuer and lead manager

Question 11

Agreement between underwriters and selling group dealers

Answer 11

Selected dealers agreement

Selling group agreement

Question 12

Selling group in an securities issue sell to

Answer 12

retail investors

Question 13

Selling group agreement compels dealers to

Answer 13

follow SRO requirements and sell securities at offering price

Question 14

Selling group agreement specifies financial

Answer 14

concessions there are and to whom

Question 15

responsible for distributing amendments about offering to selling group

Answer 15

lead manager

Question 16

distributions of information to selling group are called

Answer 16

Deal wires

Question 17

When lead manager files forms with FINRA about offering this is called a

Answer 17

Regulatory wire

Question 18

Forms which lead manager must file with FINRA include

Answer 18

Copies of Underwriting Agreement
Agreement Among Underwriters
Selected dealers agreement
Reg M Forms

Question 19

IPO spread is difference between

Answer 19

what the issuer makes and the public offering price

Question 20

IPO spread is often about

Answer 20

7% of total proceeds

Question 21

total proceeds from an underwriting are called

Answer 21

underwriting proceeds

Question 22

Underwriting spread is divided into

Answer 22

Manager’s underwriting fee
Underwriting fee
Concession

Question 23

Percentages of underwriting spread are expressed in

Answer 23

actual dollar amount of per share price (e.g., $.28 on every $20 share)

Question 24

Managing underwriter’s fee is typically

Answer 24

20% of spread

Question 25

Payment to syndicate members for assuming the risk of unsold shares

Answer 25

Underwriting fee

Question 26

Selling group bears no

Answer 26

financial risk from unsold shares (unlike syndicate)

Question 27

AAU is also called

Answer 27

syndicate agreement

Question 28

payment to syndicate members for assuming the risk of unsold shares

Answer 28

underwriting fee

Question 29

If a managing underwriter sells shares they earn

Answer 29

the entire spread (managing fee, underwriting fee, concession)

Question 30

if syndicate members sell the shares they earn

Answer 30

they earn underwriting fee plus concession