Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

CISI Securities > Chapter 4 Primary Markets > Flashcards

Chapter 4 Primary Markets Flashcards

1
Q

What are the stages of an IPO

A
  1. The decision
  2. The preparation of prospectus
  3. The sale of securities
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Who is in the origination team

A
  • Sponsor (listing agent)
  • Legal advisor
  • Public relations
  • Accountants
  • Corporate broker
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does origination team do

A

Range of advisors who work with lead manager to help the company place its new issu of shares/bonds

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

What does sponsor/listing agent do

A
  • assess company’s suitability for listing
  • Assess best method for bringing company to market
  • Coordinate production of prospectus
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does legal advisor do

A

Ensures all relevant matters covered in prospectus

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

What does public relations do

A

Create positive perception of company

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

What do accountants do

A

Validate financial statements in prospectus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what does corporate broker (issuing house) do

A

Advise company on current market conditions

Interface between company and market

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

difference between co-lead managers and co-managers

A

Co-lead managers when company appointed all banks in syndicate group, including the lead manager. Joint responsibility

Co-manager is appointed by lead manager in syndicate

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

What is green shoe option

A

Allow increased offering up to 15%

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

What is stabilisation

A

Lead manager purchases stock in secondary market to support issue price

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

Difference between offer for sale and offer for subscription

A

Offer for subscription- company offers shares directly

Offer for sale - company sells to issuing hose who sells to investor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Difference between fixed price offer and tender offer

A

Fixed - price is fixed just below a point at which it is believed there would be full subscription

Tender offer is book building process where minimum price is set and investors respond with prices and volumes that prepared to pay

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

What is an introduction

A

Company obtains listing without issuing new share capital

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

Examples of agency bonds

A

Student loan/ mortgage etc

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

describe municipal bonds

A

Issued in US by LA/State, usually guaranteed by third party monoline insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is shelf registration

A

Single registration covers multiple issues of bonds for up to 2 years

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

What is reverse inquiry

A

Investor requests specific type of bond (used in conjunction with MTN)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Detail stages of bond issue

A

Pitching

Indicative bid

Mandate announcement

credit rating

roadshow

listing

syndication

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

How does UK gov bond issue work

A

Issued by DMO

Competitive bids for more than £1 million nominal. Competitive means they price they bid and only GEMMS can take part in competitive auction

Non competitive auction- DMO sets weighted average price so everyone pays same price. Minimum £1000 NV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

How does US government bond issue work

A

Tender style (single price auction/dutch auction). Everyone pays same: the lowest of successful bids

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

How do french and german gov bond issues work

A

Bid pricing system

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

FCA role in listing

A

FCA assesses whether the exchange has
sufficient systems and controls to run a market. Furthermore, the FCA (through its division; the UK

Listing Authority (UKLA)) lays down the detailed rules that have to be met before companies are
admitted to the Official List that enables their shares to be traded on the exchange.

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

What is a follow on offering/ secondary offer

A

An already listed company looking to raise more capital can choose to go through a follow-on offering.
A follow-on offering is alternatively referred to as a secondary offer. Issuing more shares in a follow-on
offering will only be considered if the equity markets are sufficiently robust.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What needs to be included in prospectus
The prospectus has to fully disclose all the pertinent details regarding the offering, - including a detailed business plan, -an explanation of how the proceeds from the offering will be used, -details of all owners/directors of the entity, -and most importantly a comprehensive disclosure of all of the risks associated with the investment
26
Stages of convertible/exchangeable offer
1. the decision 2. the preparation of prospectus 3. the sale of securities
27
What role does the listing agent fulfill in terms of AIM
Nominated advisor
28
What are continuing obligations of listed companies
- Issue annual accounts and half yearly report - Notify the market of any new price sensitive info
29
What is alternative way of stabilizing the price after an IPO
Greenshoe option
30
What is the Main Market in the Uk
The Main Market in the UK is is for securities included within the Official List and the criteria for admission to the Official List are set out in the Listing Rules – a rule book is maintained by the UK regulator – the FCA
31
What are the requirements to be on the official list
- Must be represented by a sponsor - The expected market capitalisation of the company should be at least £30 million for the company’s shares to be listed. * The company should have a trading record of at least three years. * At least 10% of the company’s shares should be in public hands, or be available for public purchase. The term ‘public’ excludes directors and their associates and anyone who holds 5% or more of the shares The company and its advisers must publish a prospectus, a detailed document providing potential investors with the information required to make an informed decision on the company and its shares. * The company must restrict its ability to issue warrants to no more than 20% of the issued share capital. * Listing is not free, and a further requirement before a company’s shares can be admitted is that the appropriate fee has been paid
32
Difference between standard and premium listing
The UKLA actually has two sets of requirements that may be met by an applicant to be admitted to the Official List. The first is the so-called Standard Listing, with the requirements derived from the EU, and the second is the so-called Premium Listing, which has further requirements over and above the European minimum. Only equity shares are eligible for Premium Listing, so issuers of other securities, such as bonds, can only seek a Standard Listing
33
What is requirement for standard listing
Aggregate market value of the debt securities should be at least £200,000.
34
Difference between Main market official list and Alternative Investment Market (AIM)
In the UK, the LSE has established two markets for company securities: the Main Market and AIM (which originally stood for ‘Alternative Investment Market’). The Main Market is the more senior market for securities that have been admitted to the Financial Conduct Authority’s (FCA’s) Official List. Entry rules are stringent, ensuring that only companies of a high quality can be involved. AIM was created with less stringent admission requirements to provide a market for smaller, less well established companies. For example, there is no restriction on market value, percentage of shares in public hands or trading history
35
What are AIM requirements
The main requirements for a company’s shares to be admitted to the AIM are twofold: 1. That there is no restriction on the transferability of the shares. 2. That the AIM company appoints two experts to assist it: a. the nominated adviser – as seen, the nomad can be thought of as an exchange expert, advising the company on all aspects of AIM Listing Rules and compliance b. the broker – AIM companies’ shares are usually less liquid than those of fully listed companies; it is the broker’s job to ensure that there is a market in the company’s shares, to facilitate trading in those shares and to provide ongoing information about the company to interested parties. As with the Official List, the LSE imposes similar continuing obligations on AIM companies. There are also certain other aspects in relation to AIM companies and their broker and nominated adviser: * The broker and adviser can be the same firm; they are often firms of stockbrokers or accountants. * If a company ceases, at any time, to have a broker or adviser, then the firm’s shares are suspended from trading. * If the company is without a broker or adviser for a period of one month it is removed from AIM
36
Look at pg 134 for Frankfurt Stock Exchange
37
Who decides whether a company is appropriate to apply for a quotation on an exchange?
Listing agent
38
In which type of investment may a reverse inquiry be used?
Medium term notes
39
A company is seeking a dual listing in both the UK and USA for which a syndicate has been formed. The UK firm handling the UK listing would have which role within the syndicate?
Co-lead manager
40
Who would take on the role of assessing the market conditions for an issue of equity on the exchange?
Corporate broker
41
Which of the following would an underwriter least like to occur?
Since the underwriter has a potential obligation to buy any new shares that are not taken-up at a fixed price, they would least like to see a fall in the market value of the shares.
42
A listed company must adhere to which of the following?
A listed company adheres to International Financial Reporting Standards. IFRS
43
Which of the following best describes a national listing authority's role with regard to primary and secondary markets?
The listing authority writes and enforces the rules on the primary market; the exchange writes and enforces the rules on the secondary market
44
If the market were to assess the free float of a company, it would calculate the number of shares in the hands of:
The public
45
A company wishes to issue shares on an exchange. Which of the following takes a central role for the company in advising the directors of their responsibilities?
Listing agent
46
Claire is asked if she would like to participate in the purchase of shares of a company in a selective marketing process. Who would have most likely made this approach?
A financial intermediary
47
Commission on an underwritten issue is calculated on the:
Value of shares underwritten by the underwriter
48
Which of the following is not normally underwritten?
Placing
49
hen are the rate and intervals of interest payments determined for corporate bonds?
At the issuance of the bond
50
The process of issuing US T-bonds is through a:
Single priced auction
51
MTNs are normally issued with a maturity of:
Between 2 and 10 years
52
Who has the ultimate responsibility for the underwriting of a new issue?
The lead manager
53
A syndicate group will primarily be formed in which of the following situations?
A new issue of shares
54
Which of the following is true of the continuing obligations for a company when quoted on an exchange?
Companies should produce accounts Not all companies must abide by the regulator's listing rules in junior markets it is just the exchange's rules they must follow. There is a need to produce accounts and interim reports where applicable. Holders of ordinary shares which hold voting rights always have the right to vote on resolutions whereas preference shareholders typically not given voting rights.
55
A medium-term note programme benefits from which of the following?
Shelf-registration
56
Payment of shares
Public limited companies' shares can be, but not must be, partly paid on issue. The company can decide when the remaining nominal value is paid
57
Corporate governance can be described as a set of rules, laws and customs which guide a company. Which roles within a company should ideally be split between different individuals?
The chair and the chief executive
58
In respect of a prospectus who is responsible for co-ordinating the due diligence process?
Listing agent
59
What happens if gilt unsold
The UK Debt Management Office will put all unsold gilts on its books at the lowest bid price
60
What is the term used for a eurobond issue where the issuer reaches a firm agreement with the lead manager to purchase the entire issue?
Bought deal
61
A company has successfully released shares into the market through an initial public offer. The members of the board of directors have personal debts which they wish to pay off. Which of the following BEST describes the method used to help achieve their objective?
A non-dilutive secondary issue
62
What is the most common issue method used by the UK Debt Management Office when issuing gilts to institutional investors?
Competitive auction
63
By what maximum percentage can an issuing company allow the underwriters to increase the size of the offering if demand is high?
15%
64
In an offer for sale to whom does the company sell its shares?
Directly to the issuing house
65
In order for a company to list equity on a junior market, what is the market capitalisation required?
There is no limit
66
Equities are being issued by tender. The minimum offer price in the prospectus is 200p. You offer 300p. The maximum price offered is 350p. The common strike price set by the company is 245p. What price will you pay?
245p the common strike price

CISI Securities (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions