Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 7 > Issuing - Primary Market > Flashcards

Issuing - Primary Market Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q
  • Addresses new issue securities and primary market
  • Provides issuer info to customers
  • Prevent securities sales fraud
  • Oversees registration and exemptions of securities
A

Securities Act of 1933

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q
  • Another name for Securities Act of 1933

- Focuses on paper elements including REGISTRATION and PROSPECTUS

A

Paper Act

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

Form S1, Company wants to raise capital by issuing securities for first time

Must include:

  • Description of issuer’s business
  • Shareholders of issuer stock including officers, underwriters and directors, control persons (10% shareholders)
  • Biographical data on officers and directors
  • Company’s Capitalization
  • Proposed usage of issuer’s proceeds
A

Securities Registration Process

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

Disclosure document that ensures investors have enough information to make an informed investment decision

A

Prospectus

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

SEC issues deficiency letter to postpone issue or stop order to prohibit sale until fixed

A

Material Deficiencies in Registration Statement

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

If issue is an add-on offering, issuer qualifies for abbreviated registration statement

A

S3

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q
  • When issuer files registration statement with SEC
  • Underwriter prepares red herring (preliminary prospectus) which is distributed to generate Indication of Interest (IOI’s)
  • Distribute tombstone ads
  • Sales cannot be made during this time
  • Ends when SEC releases securities for sale to the public
A

Cooling-Off Period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q
  • Issued during cooling-off period
  • Also called Red Herring
  • Has red border to indicate registration has been filed but not effective
  • Not complete, no offering price, effective date, or date available to public
  • Could have price range
  • Cannot be marked on, must be pristine
A

Preliminary Prospectus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q
  • Indication that investor might be interested in securities

- IOI is NOT a binding sale

A

Indication of Interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q
  • Limited announcement distributed during cooling-off period

- Contains price range, description of issue, members of syndicate

A

Tombstone Ad

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

New issues must be registered under state securities laws

Registration methods

  • Notification (notice with the state)
  • Coordination (in coordination with issuer’s SEC registration)
  • Qualification (issuer submits full registration statement and is qualified by the state)
A

Blue Skied

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q
  • Starts the cooling-off period when SEC reviews information
  • Lasts minimum of 20 days
  • If SEC finds deficiency in registration statement, period is frozen until fixed
A

Filing Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q
  • Ensures full and fair disclosure to potential investors
  • Officers, directors, underwriter, syndicate members meet to review aspects of issue
  • Determine if due diligence was exercised in all areas
A

Due Diligence

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

First date on which securities may be sold

A

Effective Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q
  • Must be given to all purchasers, even if they received a Red Herring
  • Contains official price and effective date
A

Final Prospectus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q
  • Proceeds of offering go to issuer

- Either IPO or APO

A

Primary Offering

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q
  • Includes pre-registration period, cooling-off period, and post-registration period
  • Offering participants may not influence price of security
  • No secondary market trading of security
A

Restricted Period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q
  • Research cannot be published on offering company
  • No public due diligence meetings or public analyst appearances
  • 40 day period for IPO
  • 10 day period for APO
A

Quiet Period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q
  • Broker/Dealer that helps issuer sell securities to the public
  • Also known as investment banker
A

Underwriter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q
  • Contract with the issuer using document called underwriting agreement
  • Responsible for keeping due diligence file
  • Makes sure that proper disclosures have been made by the issuer
  • Can invite broker/dealers to join in and form syndicate
A

Managing Underwriter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q
  • Contract between issuer and managing underwriter

- Specifies terms and conditions under which underwriter may sell shares to public

A

Underwriting Agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q
  • Team of broker dealers who sell securities to public on behalf of the issuer
  • Sign agreement among underwriters (syndicate letter)
A

Syndicate

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

Syndicate Letter (Agreement Among Underwriters)

A

Syndicate Letter (Agreement Among Underwriters)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q
  • Syndicate buys shares from issuer then reoffers to public
  • Syndicate takes risk for unsold shares
  • Unsold shares will be divided amongst members based on liability participation

Includes Standby Underwriting

A

Firm Commitment Underwriting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q
  • Special type of firm commitment
  • Associated with stock rights offerings
  • Standby underwriter assures that shares offered through stock rights will be sold
  • If unsold shares remain, standby underwriter purchases remaining shares from issuer
A

Standby Underwriting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q
  • Best efforts given by syndicate on behalf of issuer
  • Issuer must keep any unsold shares
  • Issuer takes the risk
  • Uses escrow account, money held by impartial third party

Two types

  • All or None
  • Mini-Max
A

Best Efforts Underwriting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Entire issue must be sold or the deal is canceled

  • Sales proceeds held in escrow until all shares sold
  • Once sold, escrow agent release the funds to the issuer and underwriter
  • If not all sold, sales proceeds in escrow are refunded to investors
A

All or None Underwriting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q
  • Specified minimum amount must be sold or it is canceled
  • Escrow account holds sales proceeds until minimum is reached
  • Once sold, escrow breaks up and funds are released
  • Syndicate continues selling until shares depleted or selling period ends
A

Mini-Max Underwriting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q
  • Additional broker/dealers allowed by syndicate to sell shares to public
  • Must sign written agreement
  • No liability for unsold shares
  • Receives SELLING CONCESSION
A

Selling Group

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q
  • Difference between Public Offering Price (POP) and what issuer receives
  • Fairness judged by FINRA’s Committee on Corporate Financing
  • Managing Underwriter must filed documents with committee before effective date

Components

  • Manager’s Fee
  • Syndicate Fee
  • Selling Concession
A

Underwriting Spread

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q
  • Managing underwriter receives fee for every share sold
  • Smallest portion of spread
  • Meant to reimburse managing underwriter for expenses and compensate for extra work (due diligence, liaison between issuer and syndicate members)
A

Manager’s Fee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

-Divided among syndicate members based on liability participation

Ex: Syndicate member liable for 20%, receives syndicate fee based on shares sold or 20% of offering

A

Syndicate Fee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q
  • Largest component of spread

- Paid to syndicate or selling group member

A

Selling Concession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Shares given to syndicate members may not be transferable for a period of 180 days

A

Lockup Period

35
Q
  • Issuer sells shares to the public for the first time

- Underwriter examines pricing of similar companies to assess overall market conditions

A

IPO (Initial Public Offering)

36
Q
  • Broker/Dealers and registered persons are prohibited from buying the IPO from syndicate
  • Shares must be offered to public
A

FINRA Rule 5130

37
Q
  • Fiduciaries for managing underwriters including accountants and attorneys
  • Immediate family members (siblings, children, parents and in-laws)
  • Person who owns more than 10% of portfolio an established portfolio
A

IPO Restricted Persons

38
Q

Person who owns more than 10% of a portfolio that is buying IPO shares will be carved out of the purchase and divided up among other portfolio

A

Carve Out Provision

39
Q
  • Registered person’s immediate family member who had sale directed towards them by issuer
  • Registered persons qualified only to sell investment companies, variable products or direct participation programs
A

IPO Exempt Restricted Persons

40
Q
  • IPO purchasers must sign this to claim their non-restricted status every 12 months
  • Accomplished with negative consent letter
A

Positive Affirmation

41
Q
  • Addresses conflicts of interest when issuer brings own shares to market
  • Broker/Dealer must hire qualified independent underwriter
  • Applies when broker/dealer is controlled by or controls company whose shares are being offered
A

FINRA Rule 5121

42
Q

Must have done at least three offerings of at least 50% of this size in the last 3 years

A

Qualified Independent Underwriter

43
Q
  • Add On offering
  • File S3
  • Company has already gone through an IPO
  • Publicly traded issuer offers more shares to the public
A

Additional Public Offering

44
Q
  • Called shelf offering because once filed, securities sit on shelf waiting to be sold
  • Usually sold at current market price of outstanding shares
  • Begins when issuer files registration statement with SEC which creates window of time for APO
  • Window is 2 to 3 years
A

Shelf Offering

45
Q

Has $700,000,000 of outstanding capitalization in secondary market

A

Well-Known Seasoned Issuer

46
Q
  • Has $75,000,000 of outstanding capitalization in secondary market
  • Has not missed an interest or dividend payment interest or dividend payment in last 3 years
A

Seasoned Issuer

47
Q

Must file a full S1 and only has a 2 year window

A

Unseasoned Issuer

48
Q

-Exempts stock splits, changes in par value and stock dividends from registration filing

A

Rule 145

49
Q
  • When a publicly traded company separates one of its divisions into its own entity
  • Finding comes from parent company by debt or equity position
  • Could be sold to another entity
A

Spinoff

50
Q
  • Formal offer to existing shareholders to purchase stock at price above current market value
  • Must remain open for minimum of 20 days
  • If price changed, need additional 10 days
  • Used in hostile takeovers
A

Tender Offer

51
Q

Investor has ability to deliver shares

A

Net Long

52
Q
  • Security sales proceeds go to other party such as major shareholder or another corporation
  • Either registered secondary offerings or Rule 144 trades
A

Secondary Offering

53
Q
  • Corporate officer sells previously unregistered shares to the public
  • Proceeds go to officer, not corporation
  • Can be combined with primary offering
  • Employee exercises options and wants to sell stock in open market
A

Registered Secondary Offering

54
Q
  • Delivered in 25 days of the effective date
  • OTC securites is 90 days after effective date for companies who haven’t previously issued stock
  • 40 days if stock has been previously issued
A

Final Prospectus

55
Q

-Issued by well known seasoned issuers (WKSI) distributing shares through add on, or subsequent primary offering

A

Free Writing Prospectus

56
Q
  • Places restrictions on market participants when associated with IPOs or APOs and subsequent primary offerings
  • Participants cannot manipulate offering prices
A

Regulation M

57
Q
  • Issuer
  • Underwriting Syndicate
  • Selling Group Members
  • Market Makers
  • Insiders of issuing corporation
A

Regulation M Participants

58
Q

Shareholder that owns 10% or more of issuer’s stock

A

Insider

59
Q
  • Separation between investment banking and underwriting functions, trading and market making
  • Investment bankers have sensitive information
A

Chinese Wall

60
Q

-Period during which the offering participants are restricted from doing anything that could influence price

A

Restricted Period

61
Q
  • Average Daily Trading Volume exceeds $1 mil and public float is valued at $150 mil
  • No restricted period because they are actively traded
A

Tier 1 Corporation

62
Q
  • Restricted period is one day prior to effective date
  • $100k in average daiy trading volume
  • $25 mil public float
A

Tier 2 Corporation

63
Q

-Restricted period is 5 days prior to effective date

A

Tier 3 Corporation

64
Q
  • Underwriter on APO who is also market maker in underlying security during offering period
  • Broker dealer can by and sell shares
  • Cannot change inventory net purchase position by more than 30% of ADTV
  • Meant to prevent underwriter from manipulating price of security
A

Passive Market Maker

65
Q

-Position where investor borrows securities and sells them

A

Short Position

66
Q
  • Considered market manipulation
  • Investors drive price down
  • Cannot purchase shares below POP to cover short positions
A

APO Short Selling

67
Q
  • Underwriter places purchasing bid below POP on outstanding shares sold from primary offering
  • Must be disclosed on prospectus
  • Meant to stabilize share price from falling lower
  • Meant to help syndicate continue selling primary offering shares
A

Stabilization

68
Q
  • Charged to syndicate or selling group member when customer sells shares back to underwriter at stabilizing bid
  • Seller loses concession
  • Disclosed in prospectus
A

Penalty Bid

69
Q
  • Cannot participate in roadshows for offering
  • Restricted from publishing research on security during offering period
  • Cannot talk to investment banking department without compliance or legal personnel
  • Analyst must be separately managed and not compensated based on investment banking activity
A

Analyst Restrictions

70
Q
  • If analyst follows issuer on regular basis and produces research on issuer or sector
  • Can publish research as long as issuer’s security isn’t highlighted
  • Cannot publish research involving convertible bonds
A

Analyst Exceptions

71
Q
  • Government and agency
  • Municipals
  • Non profits
  • Commercial Paper
  • Issues of domestic banks and trust companies
  • Issues of small business investment companies
A

Exempt Securities

72
Q
  • Rule 147 Intrastate Offerings
  • Regulation A
  • Regulation D
A

Exempt Offerings

73
Q
  • Intrastate Offering exemption
  • 80% of gross revenue derived from operation within one state
  • 80% of assets held in state
  • 80% of proceeds used to expand operations within state
  • 100% of purchasers are principal state residents
  • Purchasers of stock hold it for 9 months
A

Rule 147

74
Q
  • Small issue or small dollar exemption
  • Less than $5 mil during 12 month period
  • If done by affiliated person, maximum amount to be raised is $1.5 mil in 12 months
  • File A1 offering statement
  • Offering circular sent to purchaser either 48 hours before purchase
  • At time of purchase with 5 day right of recission
  • Sales must be reported every 6 months to SEC
A

Regulation A

75
Q

Enables investors to get money back if they change their minds

A

Right of Recission

76
Q

Reduced legal fees and shorter document preparation time

A

Reg A Advantage

77
Q
  • Private Placement
  • Buyers must be sophisticated
  • Provided with offering memorandum
  • Issuer must receive assurance that buyer will not make quick sale
  • Cannot be sold to more than 35 nonaccreddited investors
  • Cannot be advertised
A

Regulation D

78
Q

-Financial institution
-Private business development company
Director or officer of issuer
-Individual with net worth $1 mil or annual income of $200k for past 2 years
-Married with $300 over two years

A

Accredited Investor

79
Q
  • Needed for nonaccredited investors

- Must not be associated with issuer unless by blood, marriage or adoption

A

Purchaser Representative

80
Q
  • Allows public resale of restricted and control securities
  • Must be held at least 6 months or 1 year
  • Adequate current info about issuer
  • Trading volume limit of either 1% of outstanding shares or trading volume for the last 4 weeks
  • Must be handled as routine trading transaction
  • File notice of proposed sale
A

Rule 144

81
Q

Notice filed with SEC If sale involves more than 5000 shares or if dollar amount is greater than $50,000 in 3 month period

A

Notice of Proposed Sale

82
Q

Allows purchase of restricted stock outside of US by Qualified Institutional Buyer

A

Rule 144A

83
Q

Has at least $100 million in assets under discretionary management

A

Qualified Insitutional Buyer

84
Q

-Requires 1 year holding period of off shore sales dealing with restricted stock

A

Regulation S

Series 7 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions