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SIE Exam 2024 > Chapter 4: Types of Offering > Flashcards

Chapter 4: Types of Offering Flashcards

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SIE Exam flashcards
1
Q

Public Offerings

A

Enables a company or corporation to offer securities like stocks or bonds to the public to generate capital

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2
Q

Private Offerings (Reg. D)

A

Offered to a small pool of investors and are not open to the public

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3
Q

Underwriting Commitment

A

Liability of the underwriter

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4
Q

Firm Commitment Underwriting

A

Contractual agreement between underwriters and the issuer; mandates that the underwriters purchase all the securities directly from the issuer

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5
Q

Best Efforts Underwriting

A

Underwriter promises to try and sell most of the company’s securities to investors; underwriter is not liable for any unsold securities

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6
Q

Best Efforts All-or-None Underwriting

A

Underwriters must put their best efforts into selling all of company’s securities to investors; requires the entire offering to sell for the deal to close

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7
Q

Best Efforts Mini-Maxi Underwriting

A

Underwriter must sell the minimum required and once reached, can sell up to the maximum

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8
Q

Standby Underwriting

A

Underwriter commits to buying any shares that the public doesn’t subscribe to during an issuance

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9
Q

Shelf Registration

A

Allows a company to register many securities with the SEC and sell them whenever the economy’s condition is favorable

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10
Q

Market-Out Clause

A

Grants the underwriter freedom to terminate the agreement without facing any penalties

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11
Q

Primary Market

A

Market where securities are issued for the first time

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12
Q

Initial Public Offering (IPO)

A

Allows investors to buy securities directly from the company, facilitated by the financial institution that performed the initial underwriting

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13
Q

Who all is included in the Primary Market?

A

-Issuer
-Underwriting Manager
-Syndicate
-Selling Group

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14
Q

Issuer

A

Investment company/domestic/foreign government that creates, registers, and sells securities

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15
Q

Underwriting Manager

A

Typically investment banker who manages all underwriting activities

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16
Q

Syndicate

A

Group whose members sell shares to applicants by working with underwriters

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17
Q

Selling Group

A

Dealers and financial firms responsible for marketing or selling new or second-issued securities

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18
Q

Underwriting Spread

A

Difference between the price underwriters pay to buy securities and price at which they sell them to the public

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19
Q

Concession

A

Part of the spread paid to the selling group for their service of selling securities to the investors

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20
Q

Registration

A

When a company files required documents with the SEC before an IPO

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21
Q

Three Periods of the Registration Process

A

-Pre-Registration
-Cooling-Off
-Post-Registration

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22
Q

Pre-Registration Period

A

Time frame before the issuer submits registration documentation

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23
Q

Throughout the pre-registration period, what does the issuer do?

A

Collects data about the firm and its financial records but is prohibited from making any offers to sell securities

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24
Q

Cooling-Off Period

A

Interval from when a registration statement is lodged to its enforcement date

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25
Q

What is the minimum time frame of the cooling-off period?

A

20 days

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26
Q

Post-Registration Period

A

Date the registration has been declared effective by the SEC and the company and underwriters meet to price the offering

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27
Q

What happens after the company and underwriters meet to price the offering?

A

The issuer and managing underwriters write and execute the underwriting agreement; can last more than a year

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28
Q

After-Market Prospectus Requirements

A

Legal requirements that must be fulfilled when a company offers its securities

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29
Q

Non-Listed IPO

A

Company is not listed on the stock exchange; should be filed within 90 days of offering

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30
Q

Non-Listed, Follow-On Offering

A

Offering made by a company not on stock exchange but already made IPO and listing additional securities to raise more capital; filed within 40 days

31
Q

Security IPO on an Exchange

A

Issuing shares for the first time on the NYSE or Nasdaq; wiled within 25 days

32
Q

Follow-On Offering Listed on an Exchange

A

Offering made by a company already registered with the NYSE or Nasdaq and issuing additional securities; timeline determined by SEC

33
Q

Prospectus

A

Formal document required by SEC that provides details about an investment offering to the public and is filed for offerings of securities

34
Q

Statutory Prospectus

A

Filed with SEC before offering occurs, contains all relevant info about the company, operation, financial condition, and securities

35
Q

Preliminary Prospectus

A

Contains info about issuer’s company, made to brief prospective investors about a company’s operations and financial position

36
Q

Summary Prospectus

A

Contains pertinent info like summary of company’s background and financial information, shorter version of statutory, gives quick look

37
Q

Free-Writing Prospectus

A

Contains details not mentioned in the registration statement but must be known by potential investors

38
Q

Exempt Securities

A

Do not have to be registered with the regulatory authorities like the SEC under federal securities laws

39
Q

Who are exempt securities usually sold to?

A

Private agencies

40
Q

Government and Agency Securities

A

Loan investors make to government agencies or federally backed private corporations

41
Q

Municipal Securities

A

Launched by state or local administrations or their established bodies, like agencies or special districts

42
Q

Are banks and insurance agencies required to file with the SEC?

A

No because they have their own regulations and the SEC is meant to protect uninformed investors

43
Q

Are nonprofit organizations required to file with the SEC?

A

No, because they are not in business to make a profit but and are typically endorsed by local/federal government

44
Q

How are debt securities exempt from filing with the SEC?

A

If they have a maturity of no more than 270 days

45
Q

Small businesses can be exempt from SEC filing when?

A

Private investment companies issue securities to help them finance

46
Q

Exempt Transaction

A

Not required to be registered with any regulatory body, provided the number of securities issued is negligible compared to the issuer’s perations

47
Q

Regulation D

A

States that any offer to sell securities must be registered with a regulatory body, usually the SEC

48
Q

Private Placement

A

Offerings exempt from the SEC’s regulation requirements under Regulation D

49
Q

Who are private placement offers typically for?

A

Friends, family, accredited investors, and institutional investors

50
Q

Rule 504

A

Allows certain issuers to offer and sell up to $10 million of securities in 12 months

51
Q

Rule 506(b)

A

Securities offered can only be bought by accredited investors and up to 35 unaccredited investors to qualify for registration exemption

52
Q

Rule 506(c)

A

Allows the issuer to offer securities to unlimited accredited investors, provided their accredited status is verified

53
Q

General Obligation (GO) Bond

A

Municipal bond supported by the issuer’s reliability and ability to collect taxes from the residents

54
Q

GO Bonds are often used to fund what?

A

Highways, public spaces, apparatus, and overpasses

55
Q

Revenue Bonds

A

Project-specific and are not financed by tax dollars

56
Q

Competitive Sale

A

Multiple underwriters submit bids and securities are awarded to the best offer

57
Q

Negotiated Sale

A

Underwriter is chosen by the issuer and demands/needs are negotiated

58
Q

Presale

A

When final security pricing is established after seeking customer interest

59
Q

Municipal Documents

A

Convey legal information during the issue of municipal securities

60
Q

Pieces of Municipal Documents

A

-Official Statement
-Legal Opinion
-New Issue Confirmation
-Committee on Uniform Securities Identification Procedures

61
Q

Official Statement

A

Provides details on company’s securities, financial condition, and risks involved

62
Q

Legal Opinion

A

Written by lawyer or law firm in which the issuer’s securities are legally analyzed to be valid

63
Q

New Issue Confirmation

A

Written summary of the transaction details of the purchase/sale of new securities delivered to investors

64
Q

Committee on Uniform Securities Identification Procedures (CUSIP)

A

9-character alphanumeric code that identities and tracks North American securities through their life cycle

65
Q

Electronic Municipal Market Access (EMMA)

A

Source of municipal securities details and related financial data

66
Q

Rule 144

A

Provides exemption and permits the sale of restricted or controlled securities to the public if several conditions are fulfilled

67
Q

Rule 144A

A

SEC regulation that permits the resale of privately placed securities to Qualified Institutional Buyers (QIB)

68
Q

Rule 506

A

Allows the issuing of large quantities of securities in private placements

69
Q

Rule 145

A

Deems that exchanges of securities in certain business combinations involve an offer and sale that would require registration under the Securities Act unless an exemption is available

70
Q

Reclassification

A

Replacing one security with another

71
Q

Merger/Consolidation

A

Securities are transformed into or swapped for securities of another company

72
Q

Rule 147

A

Allows a company to raise funds without registering with the SEC

73
Q

Rule 147A

A

Allows offering of securities to out-of-state residents

SIE Exam 2024 (20 decks)

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