Chapter 1 pt 2 series 7 Flashcards
Securities act of 1933 requires
issuers of new securities to file registration statements with the SEC in order to provide investors with complete and accurate information in the form of a printed document. Think of this as the paper act.
The following securities are exempt from the securities act of 1933
commercial paper- MAT less than 270 days
Bankers acceptance- MAT less than 270 days
securities acquired in private placements- restricted stock
Blue sky laws require
registration of securities, broker/dealers and registered representatives
An issuer or investment banker may blue sky an issue by one of the following methods
qualification
coordination
notice filing
due diligence
preliminary studies, investigations, research, meetings, and compilation of information about a corporation and a proposed new issue that go on during underwriting.
The issuer knows a lot about
they don’t know a lot
they will do what to attract who
manufacturing or accounting or software or whatever it is they do
about what it takes to sell securities to the public
they will place a notice in order to attract an underwriter.
underwriter
is any party that evaluates and assumes another party’s risk for a fee.
underwriting manager or syndicate manager
the investment banker who negotiates with the issuer
investment bankers help
issuers raise money through the sales of securities
do investment bankers loan money
no
investment bankers are also called
underwriters
all underwriters of corporate securities must be
FINRA member firms
syndicate agreement/ letter
describes the participants responsibilities and allocation of syndicate profits
negotiated underwriting
the issuer and the investment banker negotiate the offering terms.
competitive bid underwriting arrangements are the standard for
underwriting most municipal securities and are often required by state law
syndicates are usually formed to
spread the risk among several underwriters instead of one underwriter taking all the risk of an offering
*Selling group members
act as agent with no commitment to buy securities
*Syndicate members take
on the financial liability and act in principal capacity
*Do selling group members take on financial liability
no
firm commitment
most commonly used type of underwriting contract.
under its terms the underwriter(investment bank) commits to buy the securities from the issuer and resell them to the public
*In a firm commitment underwriting who takes risk and why
the manager underwriter takes on the financial risk because he purchases the securities from the issuer. Because he purchases and resells the shares, he is acting in a principal(dealer) capacity.
*By engaging a standby underwriter
an issuer is assured of selling all the shares being offered.
Best efforts arrangement
underwriter acts as agent from the issuing corporation
the underwriter sells as much as possible without liability for what cannot be sold
all or none underwriting
The issuing corporation has determined that it wants an agreement outlining that the underwriter must either sell all of the shares or cancel the underwriting.