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SIE > Primary and Secondary Markets > Flashcards

Primary and Secondary Markets Flashcards

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SIE Exam flashcards
1
Q

What is a primary market

A

securities are sold by issuers to raise money

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2
Q

What is a secondary market

A

securities trade between investors

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3
Q

Whats another name for the secondary market

A

capital market

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4
Q

What is a primary offer

A

an offer made in the primary market

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5
Q

What does the Securities Act of 1933 require for a new issue

A

it be registered with the SEC before public sale

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5
Q

What does the issuer need to provide the investor before they purchase

A

a prospectus

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6
Q

What are the two main types of primary offerings

A

IPOs
APOs

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7
Q

Whats does APO standfor

A

Additional public offering
also follow-on or subsequent public offering

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7
Q

In securities, the term person refers to

A

a natural person or legal entity

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8
Q

Secs not listed on national exchanges are called

A

non NMS secs

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9
Q

What are municipal bonds also called

A

munis

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10
Q

What is another name for debt issues

A

bonds

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11
Q

An underwriter is a type of what

A

broker dealer

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12
Q

what another name for an underwriter

A

investment banker

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13
Q

What do underwriters (IBs) do

A

work with issuers to set up offerings

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14
Q

What are the top level different types of underwriting agreements

A

Best Efforts
Firm Commitment

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15
Q

What are the types of best efforts underwriting

A

All on none
mini max

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16
Q

What is best efforts underwriting

A

acting only as agent so not require to pruchase the shares if funds cant be raised

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17
Q

How are best efforts deals closed

A

collecting client funds in escrow

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18
Q

What is an all or nothing underwriting

A

all shares must be sold or underwriting is canceled

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19
Q

Where are client funds held during AON offerings

A

escrow

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20
Q

What is a mini max offering

A

sets a min shares that need to be sold, once hit, the underwriter can expand the offer to a set max

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21
Q

What another phrase for best efforts underwriting

A

investment banker acting as agent

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22
Q

What is a firm commitment deal

A

the underWs commit to buying all shares from issuers themselves for a discount then resell the shares to public for normal price

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23
Q

What is a syndicate

A

a group of BDs/IBs

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24
Q

How are syndicates structured

A

a group of BDs come together to share risk and reward
someone is the managing underwriter

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25
Q

What is sometimes brought into syndicates

A

a selling group made of other BDs

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26
Q

Do selling groups share risk or hold the shares in invetory

A

no

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27
Q

3 types of investors

A

institutional
retail
accredited

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28
Q

Examples of institutional investors

A

banks
insurance comps
employee benefit plans

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29
Q

What are the type of employee benefit plans that might be institutional investors

A

pensions
hedge funds
investment advisers
mutual funds

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30
Q

What is a qualified instit ivestor

A

owns and invests min 100 mill

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31
Q

What are accredited investors

A

all institu investors
retail that hit the following creiteria:
made 200k for past 2yrs and will this yr
(if using a joint acc then 300k)
or net worth of 1mil not including home equity
natural person with prof creds given by an accredited educational instit
holders in good standing of series 7, 65, and 82

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32
Q

Where can you find the criteria for accredited investors in the Sec Act of 33

A

Rule 501

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33
Q

muni advisers can do a little assistance in what when providing advise for creating issues, and what cant happen

A

underwriting functions like an official notice but they cant be paid

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34
Q

The paper act requires what to protect invs

A

regis of new issues
full and fair disclosure about self and offering
necessary material info for investors to judge the issues merit are available
regulating the underwriting and dist of primary issues
providing crim penalts for fraud

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35
Q

What are some steps that the SEC reqs before issue is brought to market

A

File a regis statement (s1)
cooling off period
final filling of prospectus

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36
Q

What does an S1 (regis statement) contain

A

a prospectus
desscription of the business
name and addy of comp officers directors, their salaries, and 5 yr business hist of each
amount of secs that the officers director own
ID of all investors that own 10% or more
comps capitalization incl equity and debt
how proceed will be used
any legal proceedings

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37
Q

the accuracy and adequacy of the regis statement and prospectus is whos responsibility

A

the issuers

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38
Q

What cant happen during cooling off period

A

solicitation of the sec

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39
Q

What can happen during cooling off

A

tombstone ad

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40
Q

What are tombstone ads limited to

A

name of issuer
type of sec being offered
numb of shares to be sold
POP
Name of underwriters if used

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41
Q

What does a tombstone ad need to unclude

A

advisory statement:
This announcement is neither an offer to sell nor a solicitation of an offer for any of these secs. This offer is made only by prospectus.

42
Q

What is a prelim pros or red herring

A

used for guaging investor interest and indications of interest

43
Q

Prelim pros has to be what

A

made available to any customer who expresses interest during the cool off

44
Q

What an indic of interest

A

declaration of an investors potential interest

45
Q

What are state regis requirements or blue sky filings

A

the process of coordinating the fed and sstate regis

46
Q

What is delivered at the end of the cool off period

A

final prospectus to all who pruchase at IPO

47
Q

What does a prospectus need to have

A

descrip of offering
price
selling discounts
Effective date
use of proceeds
descip of underwriting
hist of business
risks
descrip of management
material financial info
legal opinion about the corp formation
SEC disclaimer

48
Q

What is a hybrid/combo/split offering

A

an IPO in which the issuer allows the sale of shares of existing shareholders along with newly issued shares

49
Q

What is a shelf offering

A

registering new shares to be sold, but can wait to sell them at a later date

50
Q

How long do shelf offerings last

A

2 years unless a well known seasoned issuer they can extend to 3 years

51
Q

Any sec listed on major exchange will meet what criteria regarding shelf offerings

A

well known seasoned issuer

52
Q

Investors that buy new secs (that recently IPO’d) on the secondary market are entitled to the final prospectus if bought within what range from the IPO

A

IPOs of NMS 25days
APOs of NMS 0days
IPOs of non NMS 90 days
APOs of non NMS 40

53
Q

What are some examples of exempt issuers

A

US gov
munis
national and state banks
Building and loans and savings and loans
charitable religious educational and nonprofit assoc.
common carriers

54
Q

examples of exempt issues (secs)

A

commercial paper, bankers acceptances, and others that have maturities of 270 dayss of less
insurance policys
fixed annuities

55
Q

The word variable or phrase “separate account product” mean wha t

A

the product must be regis with SEC

56
Q

exampels of exempt offerings (transactions)

A

Reg A
Intrastate offerings
Reg D

57
Q

What are the rules for advertising and solicitations for private placement offerings

A

all investors must be accredited
the issuer must take steps to verify the investors are accredited

58
Q

What investors can purchase private placement stock

A

unlimited accredited
up to 35 non accredited

59
Q

What letter must be signed for private placements

A

a letter stating only for investment

60
Q

What are other names for private placements

A

lettered stock
legend stock
restricted
unregistered

61
Q

What are the rules of intrastate offerings

A

can only issue in to persons that are residents of state
HQ in state
80% of assets, income, offering proceeds, and employees must be used/in state

62
Q

Whats the waiting period for intrastate offerings to resell to nonresidents

A

6mo

63
Q

describe two tiers of Reg A

A

Tier 1 : up to 20mil in 12 mo, no more than 6 mil from existing shareholders
Tiers 2: up to 75mil in 12 mo, no more than 22.5mil from existing shareholders, held to normal high disclosure standards

64
Q

What are the qualifications to be an investor in Reg A tier2

A

be accredited
or max investment of 10% of net worth or income

65
Q

Who is Reg A for

A

small and medium businesses, not hedge funds VCs or PE

66
Q

What are the different members of exchanges

A

Designated market maker
floor broker
two dollar broker
floor trader

67
Q

What is a designated market maker

A

responsible for maintaining a fair and orderly market
maintains inventory and liquidity

68
Q

What is a floor broker

A

handles trades that execute on exchanges for their clients

69
Q

What is a floor trader

A

execute trades on the floor for their firm not outside customers

70
Q

What is a two dollar broker

A

floor broker overflow that can be hired for a fee

71
Q

While exchanges might only have one MM for a sec, the OTC markets might

A

have multi competing for the trades from BDs

72
Q

How does OTC markets work

A

client places order for a sec with BD, BD picks a MM to make it happen

73
Q

What is the NASDAQ

A

the third market in which exchange listed secs are traded OTC

74
Q

Most exchange listed secs are eligible to be traded OTC as long as

A

the trades are reported to the consolidated tape within 10 seconds after execution

75
Q

What are the two criteria of exchanges and OTC markets

A

physical location for trades to happen
pricing system

76
Q

What is the fourth market

A

Electronic comm networks (ECNs) where institu investors trading large volumes between eachother without BDs

77
Q

What another name for ECNs

A

dark pools

78
Q

What is a custodian

A

person who manages a minor’s acc under the Uniform Transfers to Minors Act such as a firm that hold assets in a retirement acc

79
Q

What is a trustee

A

a fiduciary for a trust

80
Q

Investment advisors are always a

A

fiduciary

81
Q

3 prong test for IAs

A

gives advice
regularly
for compensation

82
Q

What acts govern IAs

A

IA act of 1940 and Uniform Sec Act

83
Q

Examples of facilitators in the secondary market

A

BD firms like carrying firms,fully disclosed firms prime brokers

84
Q

When a BD firm is a member of FINRA or other SROs they cant say what

A

they are endorsed approved or recommended by them

85
Q

What is a carrying firms (clearing firms)

A

holds customer assets
must maintain asset levels above the customer accounts

86
Q

How do carrying firms need to hold the assets

A

separately from their own

87
Q

what is a fully disclosed (introducing)firm

A

essentially a middle man between a customer and a clearing firm
doesn’t need to maintain assets above cust acc’s

88
Q

What is a prime broker

A

basically a carrying firm but more customized
the customer can use mult brokerage houses

89
Q

A BD cannot act as a broker and a dealer on the same transaction T or F?

A

T

90
Q

What is the quote for a sec

A

the bid and ask with the amount of stock availble at that quote

91
Q

If you place a sell order for 40$/share but the buy limit is at 38, what will the transaction settle at

A

38$/share

92
Q

What is the spread

A

diff between the bid and ask price

93
Q

What type of trade takes priority

A

limit orders
market orders
time restrictions
fill restrictions

94
Q

What are the time restrictions that can be placed on trades

A

day orders
good til canceled
market on open/closed

95
Q

what is a day order

A

order canceled at end of day if not filled

96
Q

what is a good til canceled order

A

stays open for 6mo periods

97
Q

what is a fill or kill order

A

fills completely or cancels

98
Q

What is an immediate or kill order

A

like a FOK but partial ex is okay
the remaining is canceled

99
Q

What is an All or none order

A

Same as FOK but doesnt have to fill immediately
can be GTC or day restricted

100
Q

What is regular day settlement

A

the standard 1-2 days post trade it takes to settle

101
Q

Whats the only things that settle within a day

A

Tresury secs
options but not equity options
everything if cash settlement

102
Q

What are the good delivery rules

A

endorsed by all whos name is on front of the cert
signed exactly as they appear

103
Q

What are some deviations from the good delevery rules

A

& for and
Co for company
Inc for incorporated

104
Q

When secs are held electro inst of paper certs, whats it called and what doesnt apply

A

held in street name
good delivery

SIE (17 decks)

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