Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 7 Rep Level > Chapter 2: Issuing - Primary Market > Flashcards

Chapter 2: Issuing - Primary Market Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q

The ______ was designed to provide purchasers of new securities with information regarding the issuer. It was also designed to prevent ______ in the sale of securities.

A
  1. Securities Act of 1933

2. Fraud

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

The ______ is responsible for the enforcement of the Securities Act of 1933. It oversees the registration of securities but does not pass approval on the investment merits of any issue.

A

Securities & Exchange Commission (SEC)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

The ______ governs new issues of nonexempt securities, which are generally corporate securities.

A

Securities Act of 1933

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

We sometimes call the Securities Act of 1933 the “______” as it deals with the paper elements involving the issuance of securities. These elements include the ______, which is filed by the issuing corporation with the SEC. Another paper element is the ______, a disclosure document which must be sent to each investor purchasing the securities from the issuer in the primary market.

A
  1. Paper Act
  2. Registration Statement
  3. Prospectus
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

A way to remember that the 1933 Act addresses “new issues” is that it was the “______” securities act. The “primary act” addresses the “______”.

A
  1. First

2. Primary Market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

The 1933 Act contains ______. This rule addresses resale in the secondary market of previously unregistered shares and also shares sold by insider or control persons of an issuing corporation.

A

Rule 144

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

When a company, or ______, decides to raise capital from the public by issuing securities, it is first required to file a(n) ______ with the ______. In this document (known as a(n) ______), the company must provide the following information:

  1. A description of the issuer’s business.
  2. The shareholdings of issuer stock by officers, directors, and underwriters.
  3. Identification of all control persons (individuals holding at least ______ of the company’s securities).
  4. Biographical data on officers and directors.
  5. The company’s capitalization, supported with certified financial statements.
  6. Proposed usage of the issue’s proceeds.
A
  1. Issuer
  2. Registration Statement
  3. SEC
  4. S-1
  5. 10%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

The information listed on the registration statement is ultimately included in the ______ (also called the ______), a disclosure document given to investors when the offering becomes effective and the security is available for sale to the public.

A
  1. Final Prospectus

2. Statutory Prospectus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A broker/dealer who assists a corporation with the SEC filings is called a(n) ______, or ______.

A
  1. Investment Banker

2. Underwriter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

If the issue is an add-on offering (meaning the issuer already has publicly trading shares), the issuer may qualify to file a(n) ______, known as a(n) ______.

A
  1. Abbreviated Registration Statement

2. S-3

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

From the SEC registration statement, the issuer and underwriter will pull pertinent information and put it in a disclosure document for potential investors. This disclosure document is called the ______, or ______.

A
  1. Preliminary Prospectus

2. Red Herring

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

If the registration statement has material deficiencies, the ______ can issue a(n) ______ to postpone the issue until additional information is provided, or a(n) ______ to prohibit the sale of the security until the deficiency is cleared up.

A
  1. SEC
  2. Deficiency Letter
  3. Stop Order
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The ______ does not approve the merits of the investment; its function is to ensure that the investor receives full and fair disclosure of all material facts concerning the issue. It is unlawful to suggest that the ______ has given such approval.

A

Securities & Exchange Commission (SEC)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

When the issuer files the registration statement with the SEC, the ______ begins.

A

Cooling-Off Period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

During the cooling-off period, the underwriter prepares the ______. This ______ has a red border around the cover page, which informs the investors that a registration statement has been filed with the SEC but has not yet become effective. Therefore, the securities are not yet available for public sale.

A
  1. Red Herring

2. Preliminary Prospectus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

The red herring is not a complete prospectus. It does not contain a(n) ______ for the issue, but may contain a(n) ______ ($15-$20 per share, for example). Nor does the red herring contain the ______, or date when the securities will be publicly available.

A
  1. Offering Price
  2. Price Range
  3. Effective Date
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

The red herring is distributed during the ______ to generate ______ only. This is NOT a binding sale. It is simply an indication that the investor might have interest when the securities are available. Neither offers nor sales may be made during this period.

A
  1. Cooling-Off Period

2. Indications of Interest (IOI)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

During the cooling-off period, the issuer may publish a very limited announcement, known as a(n) ______. This announcement shows important facts concerning the offering, such as probable ______, ______ of the issue, and members of the ______.

A
  1. Tombstone
  2. Price Range
  3. Description
  4. Syndicate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

In addition to SEC registration tat the federal level, new issues must be “______” in states where they are offered for sale. That is, they must be registered under ______.

A
  1. Blue-Skied

2. State Securities Laws

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

There are three methods to register a security at the state level:

  1. ______: the issuer simply files a notice with the state.
  2. ______: done in coordination with the issuer’s SEC registration.
  3. ______: the issuer submits a full registration statement to the state and is qualified by the state.
A
  1. Notification
  2. Coordination
  3. Qualification
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

The day when the SEC receives the registration statement is the ______.

A

Filing Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

The filing date starts with the ______, during which the SEC reviews the information. This period lasts a minimum of ______. If the SEC finds a deficiency in the registration statement, the period is frozen until the SEC receives the complete information.

A
  1. Cooling-Off Period

2. 20 Days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

The corporation’s officers and directors, the underwriter, and the syndicate members hold a(n) ______ just prior to the end of the cooling-off period. At this meeting, they review all aspects of the issue and determine if due diligence has been exercised in all areas concerning the issue.

A

Due Diligence Meeting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

The ______ is done because all offering participants are responsible for ensuring that full and fair disclosure is made to potential investors.

A

Due Diligence Meeting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

The ______ ends when the SEC releases the securities for sale to the public. This date is called the ______ and is the first date on which the securities may be sold.

A
  1. Cooling-Off Period

2. Effective Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

All purchases of the securities must be given a(n) ______ (______), even if they received a preliminary prospectus.

A
  1. Final Prospectus

2. Statutory Prospectus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

The final prospectus contains the ______ and the ______.

A
  1. Official Price

2. Effective Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Neither the final prospectus nor the preliminary prospectus may be ______ or ______ in any way by the registered representative or any other person involved in the sale. These documents must be ______ when delivered to the investor. However, the ______ may write notes, highlight, fold pages, or alter these documents in any way they choose.

A
  1. Highlighted
  2. Altered
  3. Pristine
  4. Investors
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

“______” means the proceeds of the offering go to the issuer.

A

Primary

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Primary offerings are either ______ or ______. In both of these offerings, the ______ receives the offering proceeds.

A
  1. Initial Public Offerings (IPOs)
  2. Additional Public Offerings (APOs)
  3. Issuer
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

During the pre-registration period, the cooling-off period, and in the post-registration period, the offering participants may not in any way influence the ______ of the security. This means they cannot engage in ______ trading. This time period is sometimes called the ______.

A
  1. Price
  2. Secondary Market
  3. Restricted Period
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

During the ______, research may not be published on the offering company. Other prohibited activities include public analyst appearances.

A

Quiet Period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

If the offering is an IPO, the quiet period is generally ______ after the effective date. However, if the offering is an APO, the quiet period is generally ______ after the effective date for manager/co-manager.

A
  1. 10 Days

2. 3 Days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

A(n) ______ or ______ is simply a broker/dealer that helps an issuer sell securities to the public.

A
  1. Underwriter

2. Investment Banker

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

The manager underwriting will contract with the issuer using a document called the ______. It is a contract between the issuer and the managing underwriter that specifies the terms and conditions under which the underwriter may sell the shares to the public.

A

Underwriting Agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

The ______ is responsible for keeping the due diligence file and making sure that all proper disclosures have been made by the issuer.

A

Managing Underwriter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

The managing underwriter may invite other broker/dealers to join in and form a(n) ______, a team of broker/dealers who sell the securities to the public on behalf of the issuer. ______ share the risk of executing the underwriting.

A
  1. Syndicate

2. Syndicate Members

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

______ sign an agreement among underwriters, also known as the ______. This document specifies the duties, responsibilities, and liabilities of each member.

A
  1. Syndicate Members

2. Syndicate Letter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

The ______ is between the issuer and the managing underwriter.

A

Underwriting Agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

The ______ (also known as the ______) is between the underwriters and the syndicate.

A
  1. Agreement Among Underwriters

2. Syndicate Letter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

There are two types of underwriting agreements between the issuer and the syndicate:

  1. ______: syndicate takes the risk for any unsold shares.
  2. ______: issuer takes the risk for any unsold shares.
A
  1. Firm Commitment

2. Best Efforts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

In a(n) ______ underwriting, the syndicate buys the shares from the issuer and then reoffers the shares to the public.

A

Firm Commitment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

In a firm commitment underwriting, the ______ takes the risk for any unsold shares. These unsold shares will be divided among each ______ based on its liability participation.

A
  1. Syndicate

2. Syndicate Member

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

In a(n) ______ underwriting, the syndicate applies its best effort to selling the shares on behalf of the issuer.

A

Best-Efforts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

In a(n) best-efforts underwriting, the ______ must keep any unsold shares. This means that the ______, not the ______, takes the risk for any unsold shares.

A
  1. Issuer
  2. Issuer
  3. Syndicate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

The ______ is the difference between what the public customer pays for each share of the new offering (the ______ or ______) and what the issuer receives.

A
  1. Underwriter Spread
  2. Public Offering Price
  3. POP
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

The following are components of the underwriting spread:

  1. ______: smallest portion, received by the managing underwriter.
  2. ______: divided among the syndicate members.
  3. ______: largest component, paid to the firm that actually sells the shares to the public.
A
  1. Manager’s Fee
  2. Syndicate Fee
  3. Selling Concession
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

The ______ is usually the smallest portion of the underwriting spread. The managing underwriting receives the fee for every share sold to the public.

A

Manager’s Fee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

The ______ is divided among the syndicate members based on their liability participation in the offering.

A

Syndicate Fee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

The ______ is the largest component of the underwriting spread. It is paid to the firm that actually sells the shares to the public.

A

Selling Concession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

______ members must contract with ______ members in order to receive the selling concession or a portion of the selling concession.

A
  1. Selling Group

2. Syndicate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

______ members take liability for unsold shares. When participating in an underwriting, the ______ members take no liability, and they may or may not be able to sell.

A
  1. Syndicate

2. Selling Group

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

If a broker/dealer outside of the selling group sells a portion of the new issue to the public, they may receive what’s called the ______. This is a portion of the selling concession.

A

Reallowance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

When an issuer sells shares to the public for the first time, the event is called a(n) ______. The process begins when the issue files a(n) ______ with the ______. Filing this statement starts the ______.

A
  1. Initial Public Offering (IPO)
  2. S-1 Registration Statement
  3. SEC
  4. Cooling-Off Period
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

IPOs are challenging for the underwriter to price because there is no historical data on which to base the ______.

A

Public Offering Price (POP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

IPOs are subject to FINRA Rule 5130, which states that broker/dealers and registered persons are prohibited from ______ the IPO from the ______.

A
  1. Buying

2. Syndicate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

These individuals are considered ______ when it comes to purchasing an IPO from the syndicate:

  1. Fiduciaries for the managing underwriter, such as its accountants and attorneys.
  2. Immediate family members of broker/dealer personnel, defined as spouse, siblings, children, parents, and in-laws.
A

Restricted Persons

58
Q

If a(n) ______ (or group of ______) owns a portion of an established portfolio, that portfolio may till purchase the IPO as long as the ______ do not own more than ______ of the portfolio.

A
  1. Restricted Person
  2. Restricted Persons
  3. Restricted Individuals
  4. 10%
59
Q

If restricted individuals own more than ______, the portfolio may still purchase the IPO by using the ______. This allows the restricted individuals to participate in ______ of the shares purchased through the IPO and any remaining shares would be divided among other portfolio investors.

A
  1. 10%
  2. “Carve-Out” Provision
  3. 10%
60
Q

IPO purchasers must sign a positive affirmation that they are not ______. Additionally, they must reaffirm that they are not ______ every ______.

A
  1. Restricted Persons
  2. Restricted
  3. 12 Months
61
Q

A(n) ______ can be used to reaffirm that an investor is not a restricted person. Such a letter does not require investor response; it simply states that if the investor’s status has not changed, no response is necessary.

A

Negative Consent Letter

62
Q

FINRA Rule 5121 addresses possible ______ arising when an issuer brings it own shares to market. It also applies when the broker/dealer is controlled by or controls the company whose shares are being offered.

A

Conflicts of Interest

63
Q

A broker/dealer conducting its own IPO would have difficulty objectively pricing its own shares. This broker/dealer is required to hire a qualified ______ who would serve as an impartial third party to assist in objectively pricing the IPO.

A
  1. Independent Underwriter
64
Q

To be qualified to act as an independent underwriter, this underwriter must have done at least ______ offerings of at least ______ of this size in the last ______.

A
  1. Three
  2. 50%
  3. 3 Years
65
Q

The issuing broker/dealer is not required to hire an independent underwriter for ______, where the current market value of the outstanding shares dictates the price of the offering shares. Therefore, in a(n) ______, the issuing broker/dealer may act as managing underwriter.

A

Additional Public Offerings (APOs)

66
Q

Offerings where the broker/dealer is issuing its own shares or shares of a subsidiary, or where there is a control relationship, are ______ from FINRA Rule 5130. In such cases, the broker/dealer and its associated persons are ______ to purchase its own IPO shares.

A
  1. Exempt
  2. Allowed

FINRA Rule 5130 states that broker/dealers and registered persons are prohibited from buying the IPO from the syndicate.

67
Q

When a publicly traded issuer offers more shares to the public, it is engaged in a(n) ______ or ______. It is also referred to as a(n) ______.

A
  1. Additional Public Offering (APO)
  2. “Add-On” Offering
  3. “Follow-On” Offering
68
Q

Like an IPO, an APO is done in the ______, which is typically used for corporate underwritings (stocks and bonds), with the terms of the issue negotiated between the issuer and the underwriter. The word “______” refers to the fact that the issuing corporation receives the proceeds.

A
  1. Primary Market

2. Primary

69
Q

A(n) ______, or ______, is a process authorized under SEC Rule 415. It allows firms to file one registration statement covering ______ of the same security prior to a public offering.

A
  1. Shelf Offering
  2. Shelf Registration
  3. Several Issues
70
Q

______ are primarily used for primary offerings, but may also be used for secondary offerings.

A

Shelf Offerings

71
Q

A(n) ______ begins when the issuer files a registration statement with the SEC, creating a window of time in which the issuer may offer additional shares to the public. This window may be ______, depending on the issuer’s size. This benefits the ______ because it does not have to file with the SEC each time it offers shares during the window.

A
  1. Shelf Offering
  2. 2 or 3 Years
  3. Issuer
72
Q

Shelf offerings are usually sold at the ______ of the issuer’s outstanding shares in the secondary market. These offerings are often called “______” because the shares are issued at ______.

A
  1. Current Market Price
  2. At The Market
  3. Current Market Value
73
Q

Established, or ______ and ______ use ______ to file a blanket registration statement with the SEC, for a(n) ______ shelf window.

A
  1. Seasoned Issuers (SIs)
  2. Well-Known Seasoned Issuers (WKSIs)
  3. Form S-3
  4. 3-Year
74
Q

A seasoned issuer (SI) must be public for at least ______ prior to the registration, be current in the ______ filings, and have a minimum public float of at least ______.

A well-known seasoned issuer (WKSI) is defined is an issuer with at least ______ of publicly held common equity or has issued at least ______ in noncommon, nonconvertible registered securities.

A
  1. 1 Year
  2. SEC
  3. $75 million
  4. $700 million
  5. $1 billion
75
Q

Only ______ can use shelf registration of primary offerings where the proceeds of the offering to the issuer, and not to selling shareholders.

A

Seasoned Issuers (SIs or WKSIs)

76
Q

______ are issuers who are smaller than SIs. This type of issuer must file a full Form ______ and is granted a shelf offering window of ______.

A
  1. Unseasoned Issuers
  2. S-1
  3. 2 Years
77
Q

Both seasoned and unseasoned issuers can use the ______ rule to register resales of securities for selling a secondary offering where the proceeds go to the selling shareholders.

A

Shelf Registration

78
Q

______ addresses mergers and acquisitions, substituting one security for another, and transferring assets from one person to another. This rule exempts stock splits, changes in par value, and stock dividends from the filing of a registration statement.

A

Rule 145

79
Q

A(n) ______ occurs when a publicly traded company separates one of its divisions into its own entity.

A

Spinoff

80
Q

The funding for ______ often comes from the parent company, through a debt or equity position. The new entity may issue bonds that are ______ by the parent company which enables it to lower its interest expense.

A
  1. Spinoffs

2. Guarantee

81
Q

Sometimes there is a takeover through a(n) ______, which is a formal offer to the existing shareholders to purchase their stock at a price above ______.

A
  1. Tender Offer

2. Current Market Value (CMV)

82
Q

______ are frequently hostile takeovers.

A

Tender Offers

83
Q

Once a company begins a tender offer, it must remain open for a minimum of ______. If a company changes the price of the tender offer, it must remain open for an additional ______. Also, the company is required to pay any investors who originally sold the new offer price.

A
  1. 20 days

2. 10 days

84
Q

All investors who sell into a(n) ______ must receive the same price.

A

Tender Offer

85
Q

A(n) ______ may be conditioned upon a certain minimum number or percentage of shares being ______. If a number below the minimum number of shares are ______, the company will not purchase any shares. If there is no required minimum number of shares that must be ______, the shares would be purchased by the acquiring company.

A
  1. Tender Offer
  2. Tendered
  3. Tendered
  4. Tendered
86
Q

Any stockholder selling into the tender must deliver the shares ______ to the tender, meaning the investor has the ability to deliver the shares. Warrants and options must be ______ first, and then the shares can be sold into the tender offer.

A
  1. “Net Long”

2. Exercised

87
Q

The final prospectus must be delivered to any customer who buys within ______ of the ______. For over-the-counter securities not listed on NASDAQ, the delivery requirement is ______ after the ______ if the corporation has not previously issued stock to the public, and ______ if stock has been previously issued.

A
  1. 25 Days
  2. Effective Date
  3. 90 Days
  4. Effective Date
  5. 40 Days
88
Q

A(n) ______ is a disclosure document issued by a well-established company distributing shares through an add-on offering, or subsequent ______. Such companies are called ______ and one requirement is that it has not missed a debt or dividend payment in the last ______.

A
  1. Free-Writing Prospectus
  2. Primary Offering
  3. Well-Known Seasoned Issuers (WKSIs)
  4. 3 Years
89
Q

______ are allowed much more freedom in their communication with the public because there is ample public information concerning them. Analysts may publish research reports and offering participants may communicate information to the public.

A

Well-Known Seasoned Issuers (WKSIs)

90
Q

______ addresses capital markets, mergers and acquisitions (M&A), and investment banking. This rule places restrictions on market participants when associated with public offerings, including IPOs, APOs, and subsequent primary offerings. The participants are restricted from manipulating the offering price of the securities.

A

Regulation M

91
Q

There must be a(n) “______” between the investment banking and underwriting function and the other functions inside the broker/dealer, such as trading and market making. This is because investment bankers deal with ______ and ______, which can influence stock prices and movements. Use of this information to make a profit or avoid a loss is punishable by ______ the loss avoided or profit made.

A
  1. Chinese Wall
  2. Sensitive Material
  3. Nonpublic Information
  4. Three Times
92
Q

Participants subject to ______ restrictions include the issuer, the underwriting syndicate, selling group members, market makers, and insiders of the issuing Corporation. An insider is a shareholder that owns ______ or more of the issuer’s stock.

A
  1. Regulation M

2. 10%

93
Q

The ______ is the period of time during which the offering participants are restricted from doing anything that may influence the price of the underwritten security.

A

Restricted Period

94
Q

For Tier 1 corporations, the average daily trading volume (ADTV) exceeds ______ and the public float is valued at ______ or more. Tier 1 issues have ______ restricted period because they are among the most actively traded companies.

For Tier 2 corporations, the restricted period is ______ prior to the effective date. Tier 2 companies have at least ______ in ADTV and at least ______ in public float.

Tier 3 companies are smaller companies that do not qualify for Tier 1 or Tier 2. For these corporations, the restricted period is ______ prior to the effective date.

A
  1. $1 million
  2. $150 million
  3. No
  4. One Day
  5. $100,000
  6. $25 million
  7. 5 Days
95
Q

Restricted Period

           Public Float             ADTV              Restricted Tier 1         \_\_\_\_\_\_               \_\_\_\_\_\_               \_\_\_\_\_\_ Tier 2        \_\_\_\_\_\_               \_\_\_\_\_\_               \_\_\_\_\_\_ Tier 3        \_\_\_\_\_\_               \_\_\_\_\_\_               \_\_\_\_\_\_
A

Tier 1: $150M or more, $1M or more, no restriction

Tier 2: at least $25M, at least $100,000, 1 day prior to effective date

Tier 3: less than $25M, less than $100,000, 5 days prior to effective date

96
Q

Suppose a primary offering with a $10 POP is partially sold. Some of those outstanding shares begin trading in the secondary market at $8, a price below the POP. In such circumstances, the managing underwriter or its designee will purchase shares in the secondary market. This is done strictly to stabilize the share price and facilitate the sale of the remaining primary offering by the syndicate. Such activity is called ______ and if the syndicate has the privilege, it must be disclosed in the ______.

A
  1. Stabilization

2. Prospectus

97
Q

A(n) ______ is charged to a syndicate or selling group member when its customer, who purchased the offering at the POP, sells those shares back to the underwriter at the stabilizing bid. In such cases, the syndicate or selling group member loses its ______.

A
  1. Penalty Bid

2. Selling Concession

98
Q

An analyst is not allowed to participate in any ______ for the offering. Analysts are also restricted from ______ on the security during the offering period.

A
  1. Roadshows

2. Publishing Research

99
Q

If an analyst follows the issuer on a(n) ______ and produces research on the issuer’s securities in conjunction with other companies in the same sector on a ______ and ______, the analyst may continue research as long the issuer’s security is not ______ or its ______ within the research has not changed.

A
  1. Regular Basis
  2. Regular
  3. Ongoing Basis
  4. Highlighted
  5. Placement
100
Q

If there is a stock offering and the research is on the issuer’s bonds, the analyst may publish the research without restriction because it is a(n) ______. However, if the bonds were ______, then restrictions would apply.

A
  1. Nonequivalent Security

2. Convertible Bonds

101
Q

Another restriction on an analyst’s activities prohibits the analyst from talking to the investment banking department without ______ or ______ personnel being present. Any written communication from the analyst to the investment banking department must include a copy to ______ or ______.

A
  1. Legal
  2. Compliance
  3. Legal
  4. Compliance
102
Q

According to FINRA, members cannot trade securities in their own inventory ahead of ______. Members may not use nonpublic, advance knowledge of an upcoming ______ or its content for its own benefit or that of another person. They are required to establish, maintain, and enforce policies and procedures to restrict or limit the flow of information between the ______ department and the ______ department.

A
  1. Research Reports
  2. Research Report
  3. Research
  4. Trading
103
Q

Securities that are ______ from the registration and prospectus requirements are subject to the ______ provisions of the 1933 Act. ______ securities include:

  1. U.S. government and U.S. government agency securities.
  2. Municipal securities.
  3. Issues of nonprofit organizations, such as church bonds.
  4. Commercial paper.
  5. Issues of domestic banks and trust companies (but not bank holding companies).
  6. Issues of small business investment companies.
A
  1. Exempt
  2. Antifraud
  3. Exempt
104
Q

Certain exempt ______ allow an issuer to offer nonexempt, yet unregistered securities to the public.

  1. ______: intrastate offerings.
  2. ______: small issue (two offering tiers).
  3. ______: private placement.
A
  1. Transactions
  2. Rule 147
  3. Regulation A+
  4. Regulation D
105
Q

Securities sold within the borders of one state are allowed an intrastate offering exemption under ______ of the ______, provided that one of the following conditions is met:

  1. ______ of the corporation’s gross revenues are derived from operations within one state.
  2. ______ of the corporation’s assets are held in that state.
  3. ______ of the offering’s proceeds are used to expand operations with that state.
  4. A majority of the issuer’s ______ must be based in the state.

In addition, ______ of the purchasers must be principal residents of that state and purchasers of the stock must hold it for ______ before it can be sold to an out-of-state resident.

A
  1. Rule 147
  2. Securities Act of 1933
  3. 80%
  4. 80%
  5. 80%
  6. Employees
  7. 100%
  8. 6 Months
106
Q

______ has all the same requirements of Rule 147 with the exception of:

  1. The issuer is ______ required to be organized in the state of issuance of the securities.
  2. The offering is ______ limited to in-state residents.
A
  1. Rule 147A
  2. NOT
  3. NOT
107
Q

______ is known as the small issue or small dollar exemption. It allows small companies to raise capital from the general public in an offering that is exempt from registration.

A

Regulation A+

108
Q

Per ______, small businesses, such as start-ups or emerging companies, do not have to go through a full registration, which reduces legal fees, provides for shorter preparation times for documents, and accelerates the process.

A

Regulation A+

109
Q

For Regulation A+, issuers file a(n) ______ on Form 1-A with the SEC and distribute a(n) ______ to prospective buyers. This document contains information about the offering and the securities being offered, investment risks, selling shareholders, use of proceeds, and the company’s business, management, performance, plans, and financial statements.

A
  1. Offering Statement

2. Offering Circular

110
Q

Reg A+ allows for additional types of solicitation, including “______”. This permits solicitation prior to filing the offering statement and is accompanied by a(n) ______. This enables the issuer to determine if the offering is marketable.

A
  1. Testing The Waters

2. Preliminary Offering Circular

111
Q

______ provisions disqualify the offering if the issuer, underwriter, placement agents, or the company’s directors, officers, or significant shareholders have been convicted of, or are subject to court administrative sanctions for, ______ or related violations.

A
  1. Bad Actor Disqualification

2. Securities Fraud

112
Q

Reg A+ was created under the ______. It increased the amount of money that could be raised in an exempt offering.

A

JOBS Act (Jumpstart Our Business Startups)

113
Q

Under Reg A+, there are two tiers of offerings:

  1. Tier 1 allows for offerings up to ______ in a(n) ______ period, including no more than ______ on behalf of affiliates.
  2. Tier 2 can raise up to ______ in a(n) ______ period, with no more than ______ on behalf of affiliates.
A
  1. $20 million
  2. 12-Month
  3. $6 million
  4. $50 million
  5. 12-Month
  6. $15 million
114
Q

Reg A+ Tier 2 issues must file ______, which is a shortened registration statement disclosing general information about the issuer and its securities.

A

Form 8-A

115
Q

Reg A+ Tier 2 has additional requirements, including limitations on the amount of money a(n) ______ may invest, requirements for audited ______, and the filing of ongoing ______.

A
  1. Non-Accredited Investor
  2. Financial Statements
  3. Reports
116
Q

Issuers filing Reg A+ ______ offerings are not required to register or qualify with state securities regulators.

A

Tier 2

117
Q

An issuer can avoid registration requirements by offering securities through a private placement under ______ of the Securities Act of 1933, provided the following conditions are met:

  1. The corporation must have adequate reason to believe the buyer is a(n) ______, meaning the buyer has enough experience to evaluate the risks involved.
  2. The buyer must be provided with the same information that would be found in a prospectus. This equivalent document is called a(n) ______.
  3. The issuer must receive assurance, by obtaining a(n) ______ from the buyer, that the buyer does not intend to make a quick sale of the offering.
  4. The securities cannot be sold to more than ______ who must be sophisticated enough to understand the investment and its constraints. An unlimited number of ______ may invest.
  5. ______ offerings cannot be advertised through the media to the general public. An investment seminar is prohibited unless attendance is limited to potential purchases who are represented by their ______.
A
  1. Regulation D
  2. Sophisticated Investor
  3. Offering Memorandum
  4. Investment Letter
  5. 35 Non-Accredited Investors
  6. Accredited Investors
  7. Regulation D
  8. Purchaser Representatives
118
Q

Private placements are referred to as ______ or ______, since the security must be held for a minimum of ______ after purchase.

A
  1. Letter Stock
  2. Restricted Stock
  3. 6 Months
119
Q

______ represent the most common method of acquiring restricted stock.

A

Private Placements

120
Q

A(n) ______ is a financial institution (bank, insurance company, registered investment company, trust, pension plan), a private business development company, director or officer of the issuer, or an individual with either a net worth of ______ or an annual income of at least ______ for the past 2 years; if married, a joint income of at least ______ for the past 2 years.

A
  1. Accredited Investor
  2. $1 million
  3. $200,000
  4. $300,000
121
Q

A(n) ______ is a financial institution (bank, insurance company, registered investment company, trust, pension plan with assets over ______), a private business development company, director or officer of the issuer, or an individual with either a net worth of ______ or an annual income of at least ______ for the past 2 years; if married, a joint income of at least ______ for the past 2 years.

A
  1. Accredited Investor
  2. $5 million
  3. $1 million
  4. $200,000
  5. $300,000
122
Q

Under Reg D, Rule 504 allows for a private placement that can raise up to ______ within ______. Limited disclosure documents are required as well as a signed ______.

A
  1. $5 million
  2. 12 Consecutive Months
  3. Subscription Agreement
123
Q

Under Reg D, ______, there is a limit of ______ non-accredited investors. Nonqualified investors must be sophisticated enough to understand the investment and its constraints. They are allowed to use a(n) ______, but this individual cannot be associated with the issuer unless related to the purchaser by blood, marriage, or adoption. There is no limit to the number of ______.

A
  1. 506b
  2. 35
  3. Purchaser’s Representative
  4. Accredited Investors
124
Q

Under Reg D ______, an unlimited amount of money can be raised.

A

Rule 506

125
Q

Under a Reg D ______, all investors must be accredited investors, and the issuer must verify that they are accredited in order to qualify for the ______ exemption.

A

506c

126
Q

The benefit under a(n) Reg D ______ is that the issuer is allowed to advertise the offering, which under other private placements is normally not allowed. Also, neither the issuer nor the placement agent is allowed to have any ______ (disqualified persons) associated.

A
  1. 506c

2. Bad Actors

127
Q

Although companies that comply with the requirements of Regulation D do not have to register their offering with the SEC, they must file a(n) ______, or ______, electronically with the SEC after they sell their securities. This document includes the names and addresses of the company’s promoters, executive officers and directors, and some details about the offering. It does not contain much information about the company.

A
  1. Notice of Sale

2. Form D

128
Q

Even if a company is exempt from registration under Regulation D, it is still subject to the ______ provisions of the securities laws. In order to avoid violating these laws, the company must provide sufficient information that does not contain ______ or ______ statements.

A
  1. Antifraud
  2. False
  3. Misleading
129
Q

______ are those that are purchased in unregistered, private sales from the issuer. They are usually acquired through private placement offerings, Regulation D offerings, employee stock benefit plans, or in exchange for providing start-up capital to a company.

A

Restricted Securities

130
Q

______ allows public resale of restricted and control securities under certain conditions.

  1. ______: Before restricted securities may be sold in the marketplace, they must be held for a specified period of time. If a selling company is subject to SEC reporting requirements, the securities must be held at least ______; otherwise, at least ______. The holding period begins when the securities are bought and fully paid for.
  2. ______: Prior to the sale, there must be *______ about the issuer of the securities, and the issuer must comply with the periodic reporting requirements of the Exchange Act.
  3. ______: The volume limit is either ______ of outstanding shares or trading volume for the last ______, whichever is greater.
  4. ______: The sale must be handled as a routine trading transaction, with the broker receiving standard commission. Neither the seller nor the broker is allowed to solicit orders to buy the securities.
  5. ______: If the sale involves more than ______ shares or if the aggregate dollar amount is greater than ______ in any 90-day period, affiliates must file a notice with the SEC no later than the date of sale. If the security is not sold within 90 days of filing the notice, the affiliate must file an amended notice.
A
  1. Rule 144
  2. Holding Period
  3. 6 Months
  4. 1 Year
  5. Adequate Current Information
  6. Trading Volume Formula
  7. 1%
  8. 4 Weeks
  9. Ordinary Brokerage Transactions
  10. Filing a Notice of Proposed Sale with the SEC
  11. 5,000
  12. $50,000
131
Q

______ has nothing to do with the insider issuer. It is important to remember that has to do with the resale in the secondary market of previously unregistered securities and/or the sale of stock by control persons.

A

Rule 144

132
Q

If the unregistered security is issued through a private placement from a reporting company, the investor must hold the securities for a period of ______ before they can resell them in the secondary market. However, if the private placement is issued by a nonreporting company, the holding period is ______.

A
  1. 6 Months

2. 12 Months

133
Q

Once the unregistered security holding period has been met, if the investor is not affiliated with the issuer, they may resell after the holding period by filing ______concurrently with the sale. It does not matter whether the control person has registered or unregistered stock. They are required to file ______ concurrent with the sale in both cases. The only difference would be that the unregistered stock has the holding period.

A
  1. Form 144

2. Form 144

134
Q

Once a Form 144 is filed, the control person may sell their unregistered security at any time during the ______ period. During this period, the volume limitation is the greater of ______ of the outstanding shares or the average trading volume for the previous ______.

A
  1. 90-Day
  2. 1%
  3. 4 Weeks
135
Q

______ allows purchases of restricted (unregistered) stock by Qualified Institutional Buyers (QIBs). It allows a QIB to purchase unregistered securities outside the U.S. and import them if they buy from broker/dealers.

A

Rule 144A

136
Q

A(n) ______ has at least $100 million in assets under discretionary management.

A

Qualified Institutional Buyer (QIB)

137
Q

______ addresses off-shore sales of previously unregistered securities. The investor must reside outside the U.S. in order to qualify for the purchase of a(n) ______ offering. The reason an issuer likes to do a(n) ______ offering is that it is less expensive because no registration is required with the SEC. The limitation on the resale to U.S. residents is ______ for equities and ______ for debt offerings.

A
  1. Regulation S
  2. Regulation S
  3. Reg S
  4. 1 Year
  5. 40 Days
138
Q

______:

  1. State registration: required
  2. 9 months’ time restriction
  3. 100% residence
A

Rule 147

139
Q

______:

  1. No state registration
  2. 90 days’ time restriction
  3. No residence requirement
A

Rule 144

140
Q

______:

  1. State registration: required
  2. No time restriction
  3. No residence requirement
  4. Dollar amount: $5 million / $1.5 million
A

Reg A

141
Q

______:

  1. No state registration
  2. 6 months’ time restriction
  3. No residence requirement
  4. Number of non-accredited investors: 35
A

Reg D

Series 7 Rep Level (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions