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Canadian Securities > Chap 12: Financing and Listing Securities > Flashcards

Chap 12: Financing and Listing Securities Flashcards

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SIE Exam flashcards
1
Q

Governments and corporations often need to raise capital to finance their operations, which they do through the
financing process also known as ___________

A

Underwriting

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2
Q

The Canadian government issues new fixed-coupon marketable bonds and Treasury bills to the market regularly through the _________ system.

A

Competitive Tender

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3
Q

Only institutions recognized as ________________ are permitted to submit bids to the Bank of Canada

A

government securities distributors

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4
Q

_______________ may submit bids for their own accounts and on behalf of their customers.

A

Government Securities Distributors

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5
Q

These institutions include the Schedule 1 and Schedule 2 banks, investment dealers, and foreign dealers active in the distribution of gov’t securities

A

Government Securities Distributors

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6
Q

The system used to issue gov’t securities by way of an auction, whereby the amount won at the auction is based on the bids submitted.

A

Competitive Tender

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7
Q

Gov’t securities distributors that maintain a certain threshold of activity are know as_________.

A

Primary Dealers

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8
Q

Bids can also be submitted on a _______________, whereby the bid is accepted in full by the Bank of Canada and bonds are awarded at the auction average yield.

A

non-competitive tender basis

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9
Q

The government holds regularly scheduled ________ auctions for benchmark bonds of 2, 5, and 10 years, as well as __________ auctions for the benchmark 30-year bond

A

Quarterly

Semi-annual

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10
Q

2 year bonds have ________ auctions

A

Quarterly

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11
Q

5 year bonds have ________ auctions

A

Quarterly

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12
Q

10 year bonds have ______ auctions

A

Quarterly

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13
Q

30 Year bonds have _________ auctions

A

Semi-annual

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14
Q

Competitive Tender bids are submitted electronically to __________

A

The Bank of Canada

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15
Q
  • Bids are ranked from……
A

lowest yield to highest yield due to the inverse relationship between bond yields and bond prices.

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16
Q

Max amount per bidder is ____% of the whole issue

A

25

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17
Q

______% for the dealers account or ____% for the customers account. Combined accounts must be no more than ____%

A

25
25
40

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18
Q

Provinces issue either ______ bonds which are issued in the name of the province or _______ bonds which are issued in the name of a Crown Corporation

A

Direct

Guaranteed

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19
Q

Not issued on a competitive tender

A

Provincial and Municipal issues

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20
Q

New issues of provincial direct bonds and guaranteed bonds offered in Canada are usually sold at a _______ price through a_________.

A

Negotiated

Fiscal Agent

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21
Q

Under the provincial method, a provincial government appoints a group of investment dealers and banks, called a ________, to underwrite issues, offer advice, and manage the process of issuing securities.

A

Syndicate

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22
Q

The _______refers to that portion of out-standing shares that are freely available for public trading.

A

Public Float

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23
Q

___________ are backed by a specific pledge of assets, such as land or properties

A

Mortgage bonds

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24
Q

________ are back only by the general creditworthiness of the corporation

A

Debentures

25
Q

When negotiations for a new issue of securities begins between the dealer and corporate issuer, the dealer normally prepares a thorough assessment of the Corporation and its interest includes the corporation’s position within the industry, financial records, financial structure, and future prospects. As well, all risk factors associated with the industry and the company are closely observed. The resulting assessment is sometimes referred to as a…

A

due diligence report

26
Q

Once the relationship is solidified, the dealer may become the ___________ with the right of first refusal on new financing planned by the corporation

A

Broker of Record

27
Q

The dealer may also provide advice on various protective clauses of bonds called

A

Protective provisions, trust deed restrictions, or covenants.

28
Q

In a _____________, the entire issue is sold to one or several large institutional investors

A

private placement

29
Q

In a _________ underwriting agreement, the dealer acts as an agent and makes its best efforts to sell the securities to the public

A

best efforts

30
Q

In a ___________ underwriting agreement, also known as a __________, the underwriter acts as principal and commits to buy a specified number of securities at a set price, which it then resells to the public.

A

Firm commitment

Bought Deal

31
Q

A firm commitment agreement to issue bonds often involves various different groups. The issuing company sells bonds to a _____________. The _________ is the lead underwriter, also known as the managing underwriter or syndicate manager.

A

Financing group

Financing group

32
Q

In addition to the financing group, the _____________ consists of additional dealers, all of whom have previously agreed to participate on set terms and to accept liability up to their individual participation.

A

Banking group

33
Q

Protective provisions benefit the….

A

Purchaser

34
Q

is the investment contract between the investor and the corporation that is offering its securities for sale

A

Prospectus

35
Q

Each province, where securities will be offered, must approve the ________

A

Prospectus

36
Q

A red herring prospectus

A

preliminary prospectus

37
Q

Once a preliminary prospectus is filed, you then have ____ days to submit a Final Prospectus.

A

90

38
Q

What is the “Waiting Period”

A

The time between the filing of the preliminary prospectus and the final prospectus

39
Q

What is the passport system

A

gives issuers streamlined access to the capital markets in multiple jurisdictions.

40
Q

Why is it called a red herring prospectus

A

Because the preliminary prospectus must identify itself as preliminary with red ink on the front cover

41
Q

What is the ‘market out clause’

A

This permits the underwriter to cancel an offering without penalty under certain conditions.

42
Q

What is a “Short Form Prospectus”

A

The short form prospectus may be used by certain issuers on the basis that much of the information in the long form prospectus is already available and widely distributed everywhere.

43
Q

An issuer is permitted to use a short form prospectus under the following conditions:

A
  • It electronically files using the System for Electronic Document Analysis and Retrieval (SEDAR).
  • It is a reporting issuer in at least one Canadian jurisdiction (and relies on the Passport System if it files in other jurisdictions).
  • It has filed current annual financial statements and a current AIF in at least one Canadian jurisdiction in which it is a reporting issuer.
  • It is not an issuer whose operations are ceased or whose principal asset is cash, cash equivalents, or exchange listing.
  • It has equity securities listed and posted for trading or quoted on a short form eligible exchange.
44
Q

A __________ is always required for certain offerings, including an IPO, an offering by an inactive or dormant issuer, and an offering for the purpose of financing a material change in the issuer’s business.

A

Long form prospectus

45
Q

After an issue is brought to market, one of the duties of the lead dealer may be to provide _______________ of that security’s offering.

A

After-market stabilization

46
Q

What is the Greenshoe option, and what is another name for it?

A

A type of After Market Stabilization. It allows the dealer to issue 15% more shares than originally planned. If demand is high, the dealer exercises this option, allowing the dealer to leave additional shares in the market. In effect, the issuer raises more capital. If demand is low, and the price of the stock drops, the dealer buys back the additional shares to cancel them, and the purchase of the shares put upward pressure on the stock price.

47
Q

What is the ‘Penalty Bid’

A

A type of After Market Stabilization. The lead underwriter penalizes other dealers if their customers flip shares in weak issues. Flipping means selling the shares during, or shortly after, the distribution period.

48
Q

What is the Stabilizing Bid

A

A type of After Market Stabilization. The dealer posts a bid to purchase shares at a price not exceeding the offer price if the distribution of shares is not complete.

49
Q

What are Escrowed Shares

A

Escrowed shares are shares that are held by an independent trustee in trust for its owner. Used as an incentive to an underwriter to provide risk capital as principal, rather than having the underwriter merely act as an agent for the offering.

50
Q

What is a Qualifying Transaction

A

Used by a Capital Pool Company to buy an existing business or assets, called significant assets, through a qualifying transaction.

51
Q

How many months does a Capital Pool Company have to find an appropriate business to acquire?

A

24 Months

52
Q

What is the NEX Board

A

NEX is a separate board of the TSX Venture Exchange that provides a trading forum for companies that have fallen below the TSX Venture Exchange’s listing standards. Companies that have low levels of business activity, or who do not carry on active business at all, can trade on the NEX board.

53
Q

What is Crowdfunding

A

Crowdfunding is the process of raising start-up capital by soliciting contributions from the public at large, usually aided by online or Internet-based systems

54
Q

When the listing application is completed, and supporting documents are assembled, the company signs a formal _______

A

listing agreement

55
Q

Explain Delayed Opening

A

Shortly before the opening of trading, an exchange can order trading in a security to be delayed. The need for this action might arise if a heavy influx a buy or sell orders for a particular security materialize. The delay gives exchange traders time to organize the orders and to align buys with sells, to allow fair and orderly trading when the delay order is removed.

56
Q

Explain Halt In Trading

A

A temporary halt in trading of a security can be ordered or arranged at anytime to allow the reporting and communication of significant news, such as a pending merger or a substantial change in dividends or earnings.

57
Q

Explain Suspension in Trading

A

Such suspensions in trading are imposed for various reasons. For example, the company’s financial condition may not meet the exchanges requirements for continued trading, or the company fails to comply with the terms of its listing agreement. Shares can usually still be bought and sold in the OTC market

58
Q

Explain Delisiting

A

Delisting is a permanent cancellation of listing privileges.

59
Q

The dealer may also prepare an information circular, for in-house use only, called a __________. This highlights the salient features of the new issue, both pro and con, to help sales representatives solicit interest from the general public.

A

Greensheet

Canadian Securities (14 decks)

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