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Series 24 > Investment Banking > Flashcards

Investment Banking Flashcards

0
Q

Activities involving the primary market or new issues are regulated by the securities act of _______________.

Activities involving the secondary market or the trading of securities are regulated by the securities exchange act of ____________.

A

1933

1934

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1
Q

Most corporate underwriting’s are done on a ______________ basis, while US government issues and many municipal issues are underwritten on a _______________ basis.

A

Corp = negotiated

Govt/Muni = competitive

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2
Q

An alternative public offering (APO) occurs when a privately held corporation goes public by purchasing a public corporation. This route to going public is often better along the lines of arduous paperwork and disclosure, however everything must be disclosed on form 8K…

A

Immediately upon completion of the merger.

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3
Q

All-or-none and Mini-Max offerings …

A

An escrow account.

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4
Q

Monies deposited into a(n) ____________ account may be held in cash, invested in a highly rated money market fund, or invested in any security guaranteed as to principal and interest by the US government.

A

Escrow account

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5
Q

The syndicate manager in a firm commitment underwriting is often referred to as the statutory or lead underwriter you may also see this person referred to as…

A

the book writer or book running manager

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6
Q

What five topics are addressed in the agreement among the underwriters?

A
  1. Participation of each member
  2. Managers fee
  3. Liability for unsold securities
  4. Over allotment provision
  5. Concession
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7
Q

All underwriters and distribution participants in an offering of a nonexempt securities must be…

A

Registered member firms

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8
Q

In addition to registering new issues with the SEC prior to the public sale, an issuer must also register the security in each state in which it is to be sold. All state registrations are good for one year from the effective date and must be renewed ____________. Renewal simply means paying the appropriate fee.

A

Annually

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9
Q

Rule 5130 prohibits member firms from selling a new issue to any account in which a restricted person are a beneficial owner. Restricted persons include… 6

A
  1. Firms
  2. Employees
  3. Finders
  4. Fiduciaries
  5. Portfolio managers
  6. Immediate family members
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10
Q

Rule 5130 prohibits members from selling new issues to restricted persons. There is an exception granted to __________ of a limited business broker/dealers.

A

Employees

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11
Q

Rule 5130 prohibits members from selling new issues to restricted persons. Prior to selling a new equity issue to an account, the firm must obtain representation that the account is eligible to purchase the new equity issue at the POP. Representation must be updated _________. Initial representation must be in the form of____________. Subsequent representation could be in the form of ___________.

A

Annually

Positive consent letter

Negative consent letter.

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12
Q

If A new issue is not selling well, a syndicate manager may allow sales to standby purchasers who would otherwise be restricted. These standby arrangements are subject to four conditions…

A
  1. Must be in writing
  2. Disclosed in the prospectus
  3. Underwriter acknowledges in writing that he was unable to find any other purchasers
  4. The securities purchased must be subject to a lock-up period of three months
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13
Q

Regulation M, rule 101 defines a three tiered classification system used to identify how easily a security can be manipulated based on its ADTV and public float. The tiers are as follows…

A

Tier 1: actively traded = ADTV $1,000,000 or greater & public float $150,000,000 or more. NO RESTRICTED PERIOD

Tier 2: ADTV $100,000 or greater & public float $25,000,000 or more. ONE DAY RESTRICTED PERIOD

Tier 3: Thinly Traded FIVE DAY RESTRICTED PERIOD

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14
Q

Under Reg M, if a restricted period applies, underwriters who are also MM must…

A

Get an excused withdrawal or act as a passive MM.

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15
Q

Under Reg M, when in the restricted period, a passive bid can be no higher than…

A

The highest independent bid unless…. It reflects a customer limit order. (Limit order display rule).

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16
Q

Under Reg M, when in the restricted period, a passive MM’s total activity with the restricted security can be no more than…

A

30% of the MM’s ADTV

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17
Q

In order to participate in a Reg M restricted offering, a MM must…

A

Put in an application for passive market making one business day before the restricted period.

18
Q

Under Reg M, passive market making can only occur…2

A
  1. If an independent market exists

2. In firm commitment underwritings

19
Q

Under Reg M, market stabilization can only be do e with a _____________ offering that has been underwritten on a ____________ basis.

A

Fixed price offering

Firm commitment basis

20
Q

Under Reg M, rule 105, regarding short selling, prohibits…

A

Shorted positions purchased w/in 5 bus days of the effective date to be covered by stock purchased at the offering price.

21
Q

An offering may be exempt under regulation A if…

A

The amount to be sold by the issuer during a 12 month period is $5 million or less.

NOTE: of the 5 million maximum, no more than $1.5 million can represent sales to affiliates.

22
Q

Because a Regulation A offering is an exempt transaction, a prospectus is not needed a _____________ however, is needed within ______________ of _______________.

A

Offering circular delivered 48 hours prior to confirmation.

23
Q

Under rule 147 only residence within the state can buy the stocks and there can be no resells outside the state with in….

A

Nine months of purchase

24
Q

And accredited investor is defined as…

A
  1. An institution such as an investment company, a corporation, bank or a pension fund.
  2. An officer or director of the issuer
  3. Individuals with an income of at least 200,000 or 300,000 jointly, or net worth of $1 million or more exclusive of the primary residence
25
Q

What do the three rules under Regulation D outline?

A

504 - amount sold is less than or equal to $1 million. (no limitations)

505 - The amount sold does not exceed $5 million.

506 - The amount sold exceeds $5 million.

26
Q

One popular use of regulation D is through a PIPE (private investment and public equity) transaction. What is a PIPE transaction?

A

Investors purchase securities directly from a publicly traded issuer in a private placement. The securities purchase will be restricted and cannot be resold. After the transaction closes the issuer immediately prepares and files with the SEC. Once the SEC registration is effective public resell of the securities maybe begin.

27
Q

Under the securities act of 1933, SEC rule 145 exempts corporation from having to register reorganizations via stock split, stock dividend, or a change of par value of existing shares. Certain reorganizations do require registration. These include…3

A

Merger consolidation acquisition

*** proxies are required to inform shareholders.

28
Q

Regulation S deals with the sale of unregistered securities by US based issuers to non-US residents. A holding period of ___________ is necessary to prevent flow back into the US.

A

Six months for reporting issuers, and one year for nonreporting issuers.

** debt securities have a holding period of 40 days.

29
Q

Rule 144 defines control and restricted securities. They are…

A

Control Security = owned by an affiliate and subject to volume limitations.

Restricted Security = securities not registered with the SEC because they fall under an exemption such as regulation D or S. The securities may not be sold until they have been held fully paid for for six months.

30
Q

Under rule 144 when selling restricted or control securities, form 144 must be filed no later than at the sale of the stock in the filing will be good for 90 days. This requirement however can be waived if…

A

The intended sale during the 90 day period is small and falls under the de minimis threshold of 5000 shares or $50,000.

31
Q

When an entity publicly announces its intention to acquire, in a tender offer, shares of the target company…the entity making the offer can no longer buy…(3)

A
  1. Shares on the open market
  2. Convertible securities
    Or
  3. Options

OF THE SECURITY BEING TENDERED

32
Q

There is a rule for tender offers that states if the terms of the tender are revised for any reason it must remain open for an additional 10 business days. These 10 days are in addition to the mandatory…

A

The mandatory 20 business days all tender offers must remain open from the date the offer is first announced.

33
Q

Shareholders can only tender their offers they are long positions. Specifically the net value of their long position. That being said, if a client had 300 shares short they must have more than 300 shares long. Then what portion can be tendered?

A

The amount over 300 (the net amount)

34
Q

When an issuer wants to buy its own securities on the market they must follow SEC rule 10 B – 18. What are the 4 rules specific to this SEC ruling?

A
  1. Only one market maker each day
  2. No more than 25% ADTV each day
  3. Price no higher than current independent bid or last sale
  4. Trades can not be made on the opening or the close (safe harbor = first trade or last 30 min of the day)
35
Q

When an issuer wants to sell its own securities on the market they must follow FINRA rule 5121. What are the 4 rules specific to this FINRA ruling?

A
  1. Employees can buy - this is considered issuer directed sales
  2. And independent underwriter must be engaged to price the IPO
  3. Written permission is required for discretionary accounts
  4. Customer checks must be placed in escrow
36
Q

The corporate financing department (cfd) was created to determine…

A

If underwriting compensation paid for equity and convertible debt issues are fair.

37
Q

All information required for review by the CFD (including reimbursements, allowances, and other forms of compensation) must be submitted…

A

Within one business day of filling registration station with the SEC

38
Q 
When must the following be filled?
8K
10K
10Q
13D
13G
Form 4
Form 3
Form 13F
A

8K - w/in 4 business days of a qualifying event
10K - w/in 90 days of year end
10Q - w/in 45 days of quarter end
13D - w/in 10 days of acquiring beneficial ownership
13G - w/in 45 days year end after acquiring beneficial ownership
Form 4 (13D for insiders) - w/in 2 bus days of any change.
Form 3 (initial insider report) - w/in 10 calendar days
Form 13F (managers w/ discretion) - 45 days of quarter end.

39
Q

The civil and criminal liabilities for insider-trading are…

A

Civil penalties go up to three times the losses avoided or profits made.

Criminal penalties go up to $5 million fine for individuals and 20 years in prison, or up to 25 million fine for a firm.

***can be sued up to 5 yrs after violation.

40
Q

When creating a fairness opinion a firm must disclose the following three items…

A
  1. If the firm acted as a financial advisor or will receive compensation contingent upon the completion of the transaction
  2. If any relationships existed during the past two years with any party involved in the transaction
  3. If the information in the fairness opinion was provided by the party requesting the opinion and if the information was independently verified
41
Q

Hart Scott Rodino is an antitrust law that requires each party in a merger to file information to the FTC. Firms must wait how long after filling before they move forward?

A

30 days.

42
Q

The filling requirements of Hart Scott Rodino are only triggered if…

A

The transaction will exceed $70.9 million.

Series 24 (5 decks)

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