Chapter 1 Flashcards
A corporation is organized in Delaware, but the company’s managers control and coordinate all of the corporate activities from North Carolina. Which of the following statements is TRUE regarding the corporation’s ability to raise capital without registering its securities with the SEC
Under Rule 147 and Rule 147A, if a company is conducting an offering and selling its securities only to its state residents, the offering is exempt from registration. Rule 147A allows for multi-state offers (not sales), which means that issuers are permitted to use general solicitation and publicly available websites to locate potential in-state investors.
Although offers are able to be made outside of the state, all sales must still be limited to in-state residents. This differs from Rule 147 which dictates that all offers and sales must be limited to residents of one state.
When an issuer is testing the waters under a Regulation A offering, there must be a minimum of how many days between the use of a solicitation statement and the first sale of securities?
20 days
Although general solicitation and advertising may be used prior to filing an offering statement with the SEC, there must be no fewer than 20 days between the use of solicitation material and the first sale of securities.
Difference between Rule 147 and 147a?
Rule 147A allows for multi-state offers (not sales), which means that issuers are permitted to use general solicitation and publicly available websites to locate potential in-state investors. Although offers are able to be made outside of the state, all sales must still be limited to in-state residents.
This differs from Rule 147 which dictates that all offers and sales must be limited to residents of one state.
Normally, documents on file with the SEC for longer than___________ may not be incorporated by reference into a registration statement, unless the company is subject to SEC reporting requirements, or can specify the physical location and file reference number of the document. (
five years
Well-known seasoned issuers WKSI, may use the FWP
before, or after the SEC filing and creation of statutory prospectus.
Unseasoned issuers and non-reporting issuers may only use the FWP
if it’s accompanied by a statutory prospectus
A seasoned issuer may use the FWP ________the SEC filing and ________the statutory prospectus.
after
without
An ineligible issuer is ____________ to use an FWP at any time
not permitted
An investor must generally pass a three-part test in order to be considered a qualified institutional buyer (QIB).
(1) Only certain types of institutions are eligible, including insurance companies, registered investment companies, pension plans, corporations, and registered investment advisers.
(2) The buyer must be purchasing for its own account or the account of other QIBs.
(3) The buyer must own and invest at least $100 million of securities of issuers that are not affiliated with the buyer.
Regulation S reselling timelines:
An overseas investor who acquires securities through a Regulation S offering may immediately sell the securities overseas through a designated offshore securities market.
If an investor wants to resell equity securities in the U.S, there’s a distribution compliance period (holding period) of one-year if the issuer is a non-reporting U.S. company
However, if the U.S. issuer is an SEC-reporting company, the holding period is shortened to six months.
Non-convertible debt offerings being sold under Regulation S are subject to a 40-day holding period. In this question, the securities are convertible debt and Regulation S treats convertible debt as equity securities (i.e., there’s a one-year holding period).
A company is planning to issue securities under a Rule 506 Regulation D offering:
Securities that are issued under Regulation D are not registered under the Securities Act of 1933.
They may only be sold under an exemption provided by the Act or, once the securities become REGISTERED.
The issuer is required to PLACE a legend on the certificates which indicates that the securities are unregistered and must obtain a written statement from purchasers that they will sell the securities only if they’re registered or sold under an exemption.
The issuer must also issue stop transfer instructions to the transfer agent to ensure that no illegal sale occurs.
an unlimited number of ACCREDITED investors may participate, but there’s a limit of 35 NON-ACCREDITED investors who may participate in the offering.
The term deficiency letter is associated with:
a registration statement for an offering that will be registered with the SEC.
If the SEC believes the registration statement or prospectus is incomplete or misleading, it will send a deficiency letter to the issuer. The issuer must then submit an amended registration statement that must be reviewed by the SEC
An issuer that wants to qualify as a well-known seasoned issuer (WKSI) must meet the following requirements:
Eligible to register on Form S-3 (the short form of the registration statement) or Form F-3 (the registration statement for certain foreign private issuers)
Within 60 days of the determination of eligibility, it must have either:
- A worldwide market value of outstanding voting and non-voting common equity held by non-affiliates of $700 million or more, or
- In the last three years, issued at least $1 billion aggregate principal amount of non-convertible securities (other than common equity). These primary offerings must be purchased for cash since exchanges of securities don’t qualify. Additionally, the offerings must be registered under the Securities Act of 1933
The issuer cannot be an ineligible issuer
A firm is the managing underwriter of a follow-on offering of an OTC security. The aftermarket prospectus delivery rule:
Requires the firm to deliver a prospectus for 40 days
In the aftermarket, broker-dealers must continue to deliver a prospectus for 90 days if the offering involves an unlisted (OTC) IPO. However, the requirement is only 40 days in the case of a follow-on offering. If the offering involves a listed IPO, there’s a 25-day aftermarket prospectus delivery requirement.
A firm is distributing a follow-on offering involving the securities of an NYSE-listed company. In this case, a prospectus must be provided to any aftermarket purchaser for:
A firm is distributing a follow-on offering involving the securities of an NYSE-listed company. In this case, a prospectus must be provided to any aftermarket purchaser for:
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