Ch 2 Deck 4 Flashcards

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1
Q

Underwriting fee is typically

A

around 20% of spread

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2
Q

Underwriting expenses are typically

A

divided among the underwriters on a pro rata basis

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3
Q

Profit to the dealer that sells to the public in an offering

A

Concession

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4
Q

Members of the selling group are compensated by

A

Concessions

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5
Q

Concessions are typically in the amount of

A

around 60% of spread

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6
Q

compensation earned by a firm that is not a member of the syndicate is called

A

Reallowance

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7
Q

Reallowance is often in the amount of

A

one half of concession

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8
Q

If selling group members sell part of their allotment to a non-syndicate-member firm, that firm must sell

A

the shares to the public at the public offering price

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9
Q

Terms if the syndicate is unable to sell all the shares in an IPO are described in

A

Agreement among underwriters

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10
Q

Western walks

A

syndicate only responsible for shares they are allotted - they can walk away after they sell those

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11
Q

Eastern eats

A

syndicate members are responsible for unsold shares on a pro-rata basis

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12
Q

Larger offerings tend to have underwriting spreads that are

A

lower than smaller offerings

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13
Q

Lower risk offerings tend to have underwriting spreads that are

A

lower than higher risk offerings

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14
Q

Firm commitment offerings tend to have underwriting spreads that are

A

higher than best efforts offerings

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15
Q

Offerings that require more marketing tend to have underwriting spreads that are

A

higher than those that require less marketing

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16
Q

Under NASD Rule 11880 syndicate accounts must be closed

A

within 90 days after the syndicate settlement date

17
Q

No later than the final settlement, each member of selling syndicate

A

must receive an itemized statement of syndicate expenses

18
Q

syndicate expenses are considered

A

underwriting expenses

19
Q

FINRA Rule 5110 says underwriter’s fees must be

A

fair and reasonable

20
Q

The following are considered underwriting compensation

A

–Discounts/commissions

–Reimbursements

–Finder’s fees

–Advisory fees

–Securities (common and preferred stock, options, warrants, debt securities)
–Fees of a Qualified Independent Underwriter

21
Q

The following are NOT considered underwriting compensation

A

Not Underwriter Compensation


  • -Expenses born by the issuer

  • -Registration fees
  • Blue Sky Fees
  • Printing fees
22
Q

When an underwriter sells more shares than it has registered and committed to purchase from the issuer it is called

A

overallotment

23
Q

Overallotment allows the underwriter to

A

have some post-issue control

make more money

24
Q

If a stock price declines, an underwriter can use an overallotment to

A

cover short position by buying shares in the market at the lower price and pocket the difference

25
Q

If a stock price rises, an underwriter can use an overallotment to

A

exercise the Green shoe option