issuing securities

Question 1

underwriter (broker dealer) is retained by _____ to:

Answer 1

retained by issuer

• advise on raising capital
• sell securities to public

Question 2

what is the securities act of 1933?

Answer 2

• final prospectus sent to customer

- all new issues required to registered with the SEC

Question 3

describe process of registering an issue with the SEC

Answer 3

1. issuer provides a full disclosure
2. cooling off period
3. effective date (release date)

Question 4

minimum length of the cooling off period?

Answer 4

20 day minimum

Question 5

what happens during the cooling off period?

Answer 5

• deficiency letter
• due diligence
• indications of interest
• preliminary prospectus (red herring)

Question 6

what is the preliminary prospectus (red herring)?

Answer 6

new indications of interest on a new issue before issue is actually released to sell

Question 7

what is not included in the preliminary prospectus?

Answer 7

• no price

- no date

Question 8

when is the price set on a new issue?

Answer 8

day before new shares are sold

Question 9

what is the effective date and who sets it?

Answer 9

• date shares can be sold

- SEC sets date

Question 10

what is an IPO?

Answer 10

initial public offering

Question 11

what is an APO?

Answer 11

additional public offering

Question 12

what is the green shoe doctrine?

Answer 12

if there’s over demand for shares, you can add an additional 15% of shares without re-registering issues.

Question 13

what is the shelf registration length for APOs?

Answer 13

3 years

Question 14

describe a secondary offering

Answer 14

is a resale of treasury stock

-no prospectus required

Question 15

what are the 2 types of underwriting commitments?

Answer 15

• best efforts

- firm commitment

Question 16

what are the 2 types of best offer commitments?

Answer 16

• all or none

- mini/max

Question 17

what components define the underwriting syndicate process?

Answer 17

• syndicate is formed
• selling group
• underwriting spread

Question 18

what is the syndicate letter?

Answer 18

outlines the syndicate formation and is an agreement among underwritiers

Question 19

describe a selling group’s liability

Answer 19

selling groups have no liability for unsold securities but will make money on any shares sold.

Question 20

describe order of the underwriting syndicate

Answer 20

• issuer
• underwriting agreement
• underwrites/syndicate
• syndicate letter
• selling group agreement
• selling group

Question 21

define components of a corporate underwriting spread

Answer 21

• management fee
• underwriting fee
• concession

Question 22

define components of a municipal underwriting spread

Answer 22

• management fee

- total takedown (additional takedown + concession)

Question 23

managers of underwriting syndicates receive what amount in the spread?

Answer 23

receive full spread

Question 24

syndicates of underwritings receive what amount in the spread?

Answer 24

corp spread
-underwriting fee and concession
muni spread
-total takedown (additional takedown a+ concession)

Question 25

what will selling groups receive in the spread?

Answer 25

will receive concessions

Question 26

who assumes liability for unsold shares and who does not?

Answer 26

- the syndicate has liability for unsold shares | - selling group does not have liability

Question 27

what determines price of IPOs?

Answer 27

- similar company's prices - current market conditions - indications of interest (red herrings)

Question 28

what determines price on APOs?

Answer 28

current price pinpoints what investors will pay

Question 29

what is included in the prospectus?

Answer 29

- sec disclaimer - use of proceeds - financial statements - descriptions of business - info on officers and directors

Question 30

when is the prospectus delivered?

Answer 30

with or before delivery of final confirmation

Question 31

what are restricted people not allowed to buy?

Answer 31

IPOs of common stock at the public offering price (POP)

Question 32

who is exempt from the Securities Act of 1933?

Answer 32

- securities issued by govt - securities maturing in 270 days or less - small offerings (5 mill or less maturing in 12 months) - intrastate offerings - private placements

Question 33

what do banker's acceptances have to deal with?

Answer 33

import/exporting of foreign trades

Question 34

describe regulation A

Answer 34

small offerings | -offering of 5 mill or less maturing in less than 12 months

Question 35

describe regulation U

Answer 35

says that banks cannot lend money to customers in order to invest in stock market

Question 36

describe rule 147

Answer 36

offering is issued within on state

Question 37

describe registration of rule 147

Answer 37

needs to be registered at state-level

Question 38

describe issuer who qualifies for rule 147

Answer 38

- main office in state where issue is sold | - 80% of assets and business in same state

Question 39

describe investors who qualify for rule 147

Answer 39

- all are residences of state | - cannot resale to nonresidents for at least nine months

Question 40

describe regulation D

Answer 40

has to deal with private issued stock | ex. chick-fil-a

Question 41

describe an accredited individual investor in a reg D issue

Answer 41

- 1 mill min net worth (not including house) OR | - $200,000 ($300,000 joint) annual income

Question 42

describe the limits on accredited and non accredited investors of a reg D issue

Answer 42

- no limit on accredited investors | - no more than 35 non accredited investors

Question 43

describe rule 144

Answer 43

it has to do with the secondary resale of private placement stock

Question 44

cheat for rule 144

Answer 44

- can sell greater of 1% of outstanding shares, or - average weekly volume of most recent four weeks - can sell only 4 times per year (have to wait 90 days between each trade)

Question 45

describe rule 144A

Answer 45

- unregistered foreign securities - institutional customers only (QIB) - no six month holding period

Question 46

QIB stands for?

Answer 46

Qualified institutional buyer