Chapter 11 Flashcards
What issuers should register with the SEC? What are their filing obligations?
issuer with > 2000 shareholders or > $10M assets must register, file proxy with SEC, 10K/10Q
How long can the SEC suspend trading for?
Can suspend trading in a security for max 10 biz days, or in a whole market for 90 days (if POTUS agrees)
What are the regulations surrounding the re-purchase of shares by the issuer? (timing, intermediaries used, price, form if going private)
issuer can’t buy on opening print or < 30mn prior of close (or < 10mn for actively traded secs w/ ADTV >$1M or float >$150M)
issuer limited to 1 BD or MM in a day
issuer can’t enter bid or buy at price > best independent bid
Nasdaq Capital Market & OTC: issuer can’t enter bid or buy at price > worst independent bid
Form 13e-3: going private
What forms should be filed in the context of a tender offer? And large investment?
Offeror files form TO prior
If > 5% of shares purchased, form 13D is filed too (<10d of reaching 5%)
13G: IC that acquires >5% of issuer
13F: RIA >$100M AUM must disclose all assets < 45 d of EoQ
13H : Large Trader must file form 13H < 45 d EoY
How long does the tender offer period last? What happens if the terms are changed?
Must be open for 20 biz days (+10 biz days if terms are changed)
What are the purchasing limitations for the offeror during the tender term?
Offeror can’t purchase stock or convertible securities during tender term
What needs to happen if the tender term is extended?
If Duration extended, announcement before market open (or 9am if unlisted) on biz day following old expiration date
What conditions must the shareholders fulfill to tender?
Shareholders can only tender if they
- own shares
- entered in unconditional contract to acquire shares
- own a convertible bond, preferred stock or warrant
- are long call options & issued exercise instructions
What is a Dutch auction?
Dutch auction: issuer announces range to repurchase their own shares. Issuer then sets final price. All shares tendered at or below final price are purchased by issuer
What is a large trader? What are the regulations surrounding large traders?
- executes trades in sec >2M shares or >$20M in single day
- > 20M, $200M in single quarter
- options whose underlying shares meet above limits
Executing BD required to record all transactions executed for large traders, the LTID number and time.
Form 13H
What are Forms 3 & 4?
Form 3: D&Os initial purchase or reception of shares
Form 4: subsequent purchases. < 2 d
What are FINRA’s four major bylaws?
Rules of Fair Practice
-commissions, markups, communications, recommendations, claims
Uniform Practice Code
-settlements, delivery, confirmations
Code of Procedure
-complaints, violations
Code of Arbitration
What are the different components to becoming a member of Finra?
Inspection: FINRA inspects each BD < 6m of SEC registration (SEC rules), then again <12m (other rules)
Requirements: meet NC requirement, 2 principals, BP, interview
Fees: basic, RR & Principal, based on gross income, branch fee
failure to pay => membership canceled 15 d notice
What are the requirements surrounding foreign broker dealers?
if execute unsolicited orders or research reports distributed by US BD => no need to register
if no US office and deal with institutional clients => no need to register
employee in US to speak to clients & prospects => chaperoned by US RR
What are the requirements surrounding compensation pay to unregistered persons?
No commissions, concessions, discounts, fees to unregistered person or entity
Can pay foreign entity or person a finders fee for intro of foreign entities or persons. Contract must be made available for FINRA
Who must be fingerprinted?
anyone selling securities
access to cash & securities
access or preparation of records of original entry
supervision of aforementioned
Can a retired registered representative receive compensation?
can receive fees on old business if pre-retirement contract
beneficiary can receive if dead
What is considered retail communication?
> 25 retail investors < 30 d
What are the requirements surrounding retail communications? (approval, maintenance, filing, exemptions, tools)
approved by principal, maintained 3y, 2y readily accessible
if BD < 1 y o, retail coms filed w/ FINRA < 10 d before first use ; > 1 y o, < 10 d after
free writing prospectus is included in retail coms procedures
Exempt: if no investment advice, simple list of products, template previously filed, MIC profiles, press releases, correspondence
Software tool to investors provided by BD: must be reviewed by FINRA < 10 d of first use
What are the requirements surrounding institutional communication? What is an institutional investor?
-marked “for institutional use only”
-no principal approval or filing requirement
-II: BDs, RIAs, banks, insurance, ICs, govs, entities/persons >$50M, employment benefit plan > 100 participants