Chapter 6 - New Issue Marketplace for Equities Flashcards
True or False: The SEC judges an offering’s investment merit and provides approval
False
List the securities that are exempt from registration.
- Government/Municipal Bonds
- Commercial Aaper
- Bankers’ Acceptances
- Bank Issues
- Non-profit and Small Business Issues
Though some securities are exempt from registration, nothing is exempt from the __________ provisions of the Act.
Though some securities are exempt from registration, nothing is exempt from the anti-fraud provisions of the Act.
The ________ is the disclosure document concerning a Regulation A issue.
The Offering Circular is the disclosure document concerning a Regulation A issue.
Securities issued under the intrastate exemption may not be sold outside the state until __________ have passed.
Securities issued uner the intrastate exemption may not be sold outside the state until 9 months have passed
The private placement disclosure document is the ___________.
The private placement disclosure document is the Offering Memorandum.
Indications of interest are ___________ on both the customer and BD.
Indications of interest are non-binding on both the customer and BD.
True or False: If a registration statement has not been filed with the SEC, BDs may not discuss new issue information.
True
What rules govern the registration of an issue in any state in which it will be offered?
Blue-Sky Laws
True or False: Blue-Sky Laws apply to broker-dealers and agents operating within a state.
True
In a firm commitment underwriting, unsold securities are retained by ___________.
In a firm commitment underwriting, unsold securities are retained by the syndicate.
In a best-efforts underwriting, unsold securities are retained by __________.
In a best-efforts underwriting, unsold securities are retained by the issuer
What type of underwriting is cancelled if the entire issue is not sold?
All-or-None
What type of underwriting is cancelled if a specified portion is not sold?
Mini-max
A __________ underwriting is used for shares not purchased through a rights offering.
A Stand-by underwriting is used for shares not purchased through a rights offering.
__________ is the only form of price manipulation allowed by the SEC.
Stabilization is the only form of price manipulation allowed by the SEC
True or False: Stabilization is designed to artificially raise the price of a new issue
False.
Stabilization is designed to support or keep a new issue’s price from falling
Is there a maximum number of stabilizing bids that may be placed?
Yes, one. It is usually placed by the syndicate manager.
The highest price at which a stabilizing bid may be placed is the ___________.
The highest price at which a stabilizing bid may be placed is the public offering price (POP).
The New Issue Rule covers what new issues?
All equity IPOs
True or False: BDs and their employees may buy shares of equity IPOs from the syndicate
False.
They are considered restricted
Besides BDs and their employees, who else is restricted from purchasing equity IPOs?
An employee’s immediate family if materially supported by, or sharing household with, the employee
An offering of shares of the issuer and selling shareholders (e.g., officers) is a _________ offering.
An offering of shares of the issuer and selling shareholders (e.g., officers) is a combined primary/secondary offering.
The __________ clause gives underwriters the ability to buy additional shares from the issuer to cover over-allotments.
The Green Shoe clause gives underwriters the ability to buy additional shares from the issuer to cover over-allotments.
The Green Shoe Clause allows the issuer to expand the offering by a maximum of ___%
The Green Shoe Clause allows the issuer to expand the offering by a maximum of 15%
For how long may a new issue be sold under a shelf registration?
Up to 3 years
True or False: Shelf Registration gives flexibility to the issuer by allowing delayed or continuous sales
True
The holding period for unregistered (restricted) securities under Rule 144 is _______.
The holding period for unregistered (restricted) securities under Rule 144 is 6 months
What is the maximum sale allowed under Rule 144?
1% of the outstanding shares or average trading volume over the last 4 weeks - whichever is greater
Once Form 144 is filed, owner have ________ to sell their securities.
Once Form 144 is filed, owners have 90 days to sell their securities.
Does Rule 144 require a specific holding period for control stock?
No, but the SEC must be notified when a sell order is placed and volume limitations apply
True or False: Form 144 must be filed for any sale of restricted or control stock, regardless of the size
False.
If a sale is for 5,000 shares or fewer, and has a market value of $50,000 or less, no notification is required.
QIB stands for __________
QIB stands for Qualified Institutional Buyer (QIB)
QIBs are financial institutions that have at least $____ invesetd in securities of non-affiliated issuers.
QIBs are financial institutions that have at least $100 million invested in securities of non-affiliated issuers
Rule 144A exempts sellers from the holding period and volume limitations of Rule 144 if trading is done with a _____.
Rule 144A exempts sellers from the holding period and volume limitations of Rule 144 if trading is done with a QIB
Reclassifications, merger or consolidation activities, and transfers of assets are regulated under what provision?
Rule 145
Underwriters that have made a firm commitment to an issuer are acting in a __________ capacity.
Underwriters that have made a firm commitment to an issuer are acting in a principal/dealer capacity
Underwriters operating under a best-efforts aggrement with an issuer are acting in a _________ capacity
Underwriters operating under a best-efforts agreement with an issuer are acting in a agency/broker capacity
What is the difference between a syndicate member and a firm in the selling group?
Syndicate members assume liability, while firms in the selling group do not.
According to the Equity IPO Rule, firms must update the eligibility of purchasers _________.
According to the Equity IPO Rule, firms must update the eligibility of purchasers annually.
Are immediate family members of member firm employees always restricted from purchasing equity IPOs?
Not if the individual receives no material support and is not purchasing from the firm employing their family member
What does Rule 145 of the Securities Act of 1933 cover?
Registration/prospectus requirements of any reclassification of securities (primarily from mergers or acquisitions).
Accredited investors have net worth of at least $_____ or pre-tax income in each of the last two years of $_____.
Accredited investors have net worth of at least $1,000,000 or pre-tax income in each of the last two years of $200,000
A new company created from an existing division of a publicly traded parent company is known as a _______.
A new company created from an existing division of a publicly traded parent company is known as a spin-off
True or False: Receiving shares of a new entity created from a publicly traded company is done through stock dividends.
False.
Receiving shares of a newly created entity is done through a spin-off
What are the requirements to qualify for a Tier 1 exemption under Regulation A+?
A maximum offering $20 million over 12 months, with no more than $6 million being offered by selling shareholders
A Regulation A+ Tier 1 exemption is permitted for issuers that raise no more than $_____ over 12 months
A Regulation A+ Tier 1 exemption is permitted for issuers that raise no more than $20 million over 12 months
What are the requirements to qualify for a Tier 2 exemption under Regulation A+?
A maximum offering of $50 million over 12 months, with no more than $15 million being offered by selling shareholders
A Regulation A+ Tier 2 exemption is permitted for issuers that raise no more than $_____ over 12 months
A Regulation A+ Tier 2 exemption is permitted for issuers that raise no more than $50 million over 12 months
True or False: Canadian companies are not eligible to use the Regulation A+ exemption
False.
Both U.S. and Canadian companies are eligible to use the Regulation A+ exemption
True or False: 100% of investors must be state residents to qualify for the Rule 147 intrastate exemption.
True
May a preliminary prospectus (red herring) be sent during the cooling-off period?
Yes.
The red herring is used to obtain indications of interest from potential purchasers
During the registration cooling-off period, what should an agent do if a client sends a check to purchase securities?
Return the check to the customer
The final _______ _______ will not appear in a red herring.
The final offering price will not appear in a red herring.
Under Reg. D private placement, ____ is the maximum number of non-accredited investors allowed.
Under Reg. D private placement, 35 is the maximum number of non-accredited investors allowed.
What must issuers have to qualify for the Rule 147 intrastate exemption?
The issuer must have its principal place of business in that state
