issuing securities Flashcards
underwriter (broker dealer) is retained by _____ to:
retained by issuer
- advise on raising capital
- sell securities to public
what is the securities act of 1933?
- final prospectus sent to customer
- all new issues required to registered with the SEC
describe process of registering an issue with the SEC
- issuer provides a full disclosure
- cooling off period
- effective date (release date)
minimum length of the cooling off period?
20 day minimum
what happens during the cooling off period?
- deficiency letter
- due diligence
- indications of interest
- preliminary prospectus (red herring)
what is the preliminary prospectus (red herring)?
new indications of interest on a new issue before issue is actually released to sell
what is not included in the preliminary prospectus?
- no price
- no date
when is the price set on a new issue?
day before new shares are sold
what is the effective date and who sets it?
- date shares can be sold
- SEC sets date
what is an IPO?
initial public offering
what is an APO?
additional public offering
what is the green shoe doctrine?
if there’s over demand for shares, you can add an additional 15% of shares without re-registering issues.
what is the shelf registration length for APOs?
3 years
describe a secondary offering
is a resale of treasury stock
-no prospectus required
what are the 2 types of underwriting commitments?
- best efforts
- firm commitment
what are the 2 types of best offer commitments?
- all or none
- mini/max
what components define the underwriting syndicate process?
- syndicate is formed
- selling group
- underwriting spread
what is the syndicate letter?
outlines the syndicate formation and is an agreement among underwritiers
describe a selling group’s liability
selling groups have no liability for unsold securities but will make money on any shares sold.
describe order of the underwriting syndicate
- issuer
- underwriting agreement
- underwrites/syndicate
- syndicate letter
- selling group agreement
- selling group
define components of a corporate underwriting spread
- management fee
- underwriting fee
- concession
define components of a municipal underwriting spread
- management fee
- total takedown (additional takedown + concession)
managers of underwriting syndicates receive what amount in the spread?
receive full spread
syndicates of underwritings receive what amount in the spread?
corp spread
-underwriting fee and concession
muni spread
-total takedown (additional takedown a+ concession)
what will selling groups receive in the spread?
will receive concessions
who assumes liability for unsold shares and who does not?
- the syndicate has liability for unsold shares
- selling group does not have liability
what determines price of IPOs?
- similar company’s prices
- current market conditions
- indications of interest (red herrings)
what determines price on APOs?
current price pinpoints what investors will pay
what is included in the prospectus?
- sec disclaimer
- use of proceeds
- financial statements
- descriptions of business
- info on officers and directors
when is the prospectus delivered?
with or before delivery of final confirmation
what are restricted people not allowed to buy?
IPOs of common stock at the public offering price (POP)
who is exempt from the Securities Act of 1933?
- 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
what do banker’s acceptances have to deal with?
import/exporting of foreign trades
describe regulation A
small offerings
-offering of 5 mill or less maturing in less than 12 months
describe regulation U
says that banks cannot lend money to customers in order to invest in stock market
describe rule 147
offering is issued within on state
describe registration of rule 147
needs to be registered at state-level
describe issuer who qualifies for rule 147
- main office in state where issue is sold
- 80% of assets and business in same state
describe investors who qualify for rule 147
- all are residences of state
- cannot resale to nonresidents for at least nine months
describe regulation D
has to deal with private issued stock
ex. chick-fil-a
describe an accredited individual investor in a reg D issue
- 1 mill min net worth (not including house) OR
- $200,000 ($300,000 joint) annual income
describe the limits on accredited and non accredited investors of a reg D issue
- no limit on accredited investors
- no more than 35 non accredited investors
describe rule 144
it has to do with the secondary resale of private placement stock
cheat for rule 144
- 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)
describe rule 144A
- unregistered foreign securities
- institutional customers only (QIB)
- no six month holding period
QIB stands for?
Qualified institutional buyer
