Chapter 4 Flashcards
What is the sale of new securities to buy an issue called?
Primary offering or primary distribution
The first time a corporation sells it’s tough to the public the primary offering is known as what?
Initial public offering or IPO
A name for a broker dealer that helps issuer sell security to the public.
Underwriter or investment banker
This document includes the underwriter face compensation public offering price the underwriting spread per-share net proceeds to be received by the issue here and a market out clause specifying any conditions in which the underwriter may terminate the contract
Underwriting agreement
Investigate the issue is industry to gain an Understanding of the business and meet with management to obtain and verify critical information needed to carry out the underwriters duties. The underwriter will also exam in the issue is current and future financial health legal issues management and operations is called what
Due diligence
The document that specifies the responsibilities of all of the selling group members
Selling group agreement
Payment to the selling group based on actual shares sold are called what?
Selling concession
Form submitted it to register securities
Form S-1 ( registration statement)
The end of the pre-registration. Which is also the date the registration statement is filed with the SEC
Filing date
During the cooling off period when reviewing the registration Statement the SEC looks to see whether the document seems clear and complete. FSEC believes changes are necessary what will it send to the issue work?
A deficiency letter describing objections
If a deficiency letter is it to an issue or what will the issue were have to do?
The issue I will need to file amendment to its registration statement which will restart the cooling off.
When is the due diligence meeting held
Just prior to the end of the cooling off period.
What securities are exempt from registration
US government and agency issues, municipal issues, money market issues, bank issues, common carrier issues, insurance company issues, and nonprofit or religious organization issues
Another reference for restricted stock
Letter stock
Private placements are sold under this regulation
Regulation d
Couples are partners that are not married but have essentially the same relationship as a married couple
Spousal equivalents
Issues that are exempt from registration must be provided for disclosure forms called
Offering circular or private placement memorandum (PPM)
Private placement under regulation D are considered
Exempt transactions
 Exempt transactions in an offering to investors and only one state
Rule 147 intrastate offerings
80% of the issuers gross revenues come from business activities in the state. 80% of the issue where his assets are located within the state. 80% of the net proceeds from the offering must be used within the state. A majority of the issue is employees must be based within the state.
Used to determine residency for rule 147
Securities purchase under rule 147 may not be sold outside of the state for how many months
6
Par value of preferred stock
$100
Stock purchased for income
Preferred stock
Stock purchased for growth or capital appreciation
Common stock
A legal agreement outlining the terms of the loan between the corporation and the bond holders
Trust indenture
Three types of secured bonds
Mortgage bond, equipment trust certificate, collateral trust certificate
Unsecured bond fact not only by the promise of the issue were to pay but also a parent company that will back the issuers promise. Like a cosigner to an automobile
Guaranty bond
Bond issued by a corporation that is under we organization and coming out of bankruptcy. These bonds have no legal obligation to make interest payments. Carry a high default risk.
Income bond or adjustment bond
Amount paid at maturity for a bond
Par value plus last interest payment due
Par value for bond
$1000
True or false. The interest income is taxable in the year received at the investors marginal tax rate on the federal level for US government securities
True
Term for a T-bill
One year or less
Term for t-note
2-10years
Term for T- bond
10 or more years
Government security that is Adjusted semiannually based on changes in the CPI. They have no inflation risk
TIPS
Government security version of a zero coupon bond purchased at a discount to par and mature at par with a difference being the interest earned.
STRIPS
Only agency security that is guaranteed by the full faith and credit and taxing power of the US government. They are often purchased by conservative income investors drawn to the products safety and monthly payment of principal and interest.
GNMA pass through certificate
Suitable recommendation for investor looking for monthly income , offer higher interest than US government securities
GNMA pass through certificate
A debt instrument issued by state and local governments are quasi-governmental agencies such as authorities or school districts. Not subject to federal taxation. Popular choice for high income investors.
Municipal bonds
True or false. Municipal bonds are subject to default risk
True
Document issued for new Municipal securities
And official statement also called offering document
MSRB electronic website
EMMA
When municipal issuers need to raise capital through a competitive underwriting they will publish a…
Official notice of sale
To be federally exempt municipal bond issues must contain what
A legal opinion signed by the bond counsel
Tax equivalent yield formula
Municipal yield / (100% - tax bracket)
Net yield formula a.k.a. tax free equivalent
Taxable yield x ( 100% - tax bracket )
Bonds that are taxable by federal and state
Corporate bond and government agency
Bond that is taxable by federal and exempt from state tax
Us government bond
Bond that is exempt from federal tax and taxable out of state tax, exempt is state of residence
Municipal debt
Short term that instruments maturing in one year or less. Highly liquid and offer Safety of principal due to the short term maturity as well as being issued by Hailee credit worthy issuers. Can be sold only buy series 7 license registered representative
Money market security
Short term unsecured debt instrument issued by a corporation as a promissory note to help finance accounts receivable and seasonal inventory overages. Issued at discount and must mature less than 270 days. Must have minimum face amount of 50,000 and be in the top three highest ratings by Moody’s or S & P
Commercial paper
Debt securities used to finance foreign trade. When money is due from foreign company the US corporation may sell this debt to the bank as a letter of credit at a discounted price.
Bankers acceptances (BA)
Bank issues that are usually purchased by large institutional investors. Minimum denomination is 100,000 guaranteed by the issuing bank maturing in one year or less. May be traded in the secondary market carry low risk due to short term maturity.
Negotiable CD ( Jumbo CD )
Negotiable CDs are money market securities true or false
True
True or false brokered CDs are money market securities
False
Option that gives the holder the right to buy 100 shares of stock at the strike price up until the expiration date of the option contract
Call option
Option contract that gives the option hold her the right to sell 100 shares of stock at the strike price
Put option
Two hedging strategies
Long stock with a long put
Short stock with a long call
Strategy used to provide income when the market is flat
Income strategies. Selling options
Income strategies generate income for the investor by selling an option what?
Short.
