Ch 3 Deck 8

Question 1

FINRA rule 5150 addresses the concern that fairness opinions might not be

Answer 1

completely objective (because paid product)

Question 2

FINRA rule 5150 requires firms to have written procedures that identify the type of

Answer 2

the types of transactions (e.g., mergers, acquisitions) in which the firm will use a fairness committee to approve or issue a fairness opinion

Question 3

FINRA rule 5150 requires firms to have written procedures that describe the processes for selecting

Answer 3

fairness committee members

Question 4

FINRA rule 5150 requires firms to have written procedures that describe the necessary qualifications of

Answer 4

fairness committee members

Question 5

FINRA rule 5150 requires firms to have written procedures that describe the process for promoting

Answer 5

a balanced review by the fairness committee

Question 6

FINRA rule 5150 requires firms to have written procedures for determining if the valuation analysis

Answer 6

used for fairness opinions was appropriate

Question 7

FINRA rule 5150 does not require a member firm to have

Answer 7

a fairness committee

Question 8

If the fairness opinion will be provided by the company to public shareholders, then

Answer 8

certain disclosure may be required.

Question 9

A fairness opinion of a merger or acquisition states that

Answer 9

the transaction is fair from a strictly financial perspective

Question 10

A fairness opinion is not

Answer 10

an evaluation of the strategic rationale for the acquisition
a legal opinion
a recommendation that the board should accept the offer

Question 11

A deal is deemed to be fair if

Answer 11

the price falls within a range of values based on standard valuation processes and previous transactions

Question 12

Fairness opinions help a board demonstrate

Answer 12

that they have fulfilled their fiduciary duty to the shareholders.

Question 13

With respect to disclosing significant payment or compensation related to a fairness opinion, FINRA does not

Answer 13

assign a particular dollar amount or percentage

Question 14

With respect to disclosing significant payment or compensation related to a fairness opinion, FINRA does

Answer 14

apply the reasonable person rule to the fairness opinion

Question 15

the reasonable person rule with respect to the fairness opinion states

Answer 15

reasonable person believes that the payment or compensation should be disclosed, then it should be disclosed.

Question 16

NASD Rule 2290 states that when investment bankers are giving a fairness opinion, they must disclose

Answer 16

any possible conflicts of interest

Question 17

Fairness opinion rules require disclosure by advisor of conflicts of interest, but they do not

Answer 17

prevent the conflict of interest

Question 18

FINRA Rule 5150 states that an IB that serves as a financial adviser on a M/A may write a fairness opinion, but it must disclose

Answer 18

• that it was an adviser
• if it will receive compensation contingent on success
• any material relationship within the last 2 years

Question 19

Steps to closing an acquisition

Answer 19

1. Review proxy statement disclosure
2. Verify approvals from DOJ and FTC under HSR
3. Verify Due diligence complete

Question 20

SEC rule 145 states that investors who acquire (or exchange) securities by way of a merger, consolidation or reclassification

Answer 20

do not need to register those securities before selling them

Question 21

Under SEC rule 145, securities obtained through mergers, transfer of assets, or classifications that were authorized via a shareholder vote are

Answer 21

considered “sales” of securities

Question 22

Under SEC rule 145, non-affiliate acquirers of (securities obtained through mergers, transfer of assets, or classifications that were authorized via a shareholder vote) are not considered

Answer 22

underwriters and are therefore not subject to resale restrictions

Question 23

Under SEC rule 145, non-affiliate acquirers of (securities obtained through mergers, transfer of assets, or classifications that were authorized via a shareholder vote) are considered underwriters if

Answer 23

the transaction involves a shell company

Question 24

Under SEC rule 145, if the transaction does involve a shell company,

Answer 24

the acquirer is subject to resale restrictions