Regulations Flashcards
Commercial Paper
Money market instrument issued by corporations. Exempt Security under Securities Act of 1933 as long as maturity does not exceed 270 days. Can be sold without a prospectus
Regulation A
Small dollar offerings, Tier 1 max of $20 million, Tier 2 (known as A+) max of $75 million.
Tier 2 offerings subject to purchase limitations for non-accredited investors.
Regulation D
Private placements not offered to the general public are exempt from registration
Rule 506
Under Regulation D, Exempt IF offering is made to max of 35 non-accredited investors, unlimited amount of accredited investors
Regulation S
Exempt if US issuer sets up non-US subsidiary and offers securities to only non-US residents
Rule 144A
Allows large institutional purchasers to trade private placement securities in the US without registration.
Issues traded QIB to QIB on PORTAL market.
QIB
Qualified Institutional Buyer
Cooling Off Period
20 day period after registration.
Selling, advertising, recommending and soliciting are prohibited.
Preliminary prospectus is permitted
Rule 147
Resale of of securities sold under intrastate exemption are restricted to intrastate for 6 months following initial offering.
Can be resold intrastate after 6 months. Cannot be publicly traded.
Securities Exchange Act of 1934
Covers abuses in secondary market. MISS PERMS
Manipulation, Insiders, SEC created, Short Sale Rules.
Proxy, Exchanges, Reports, Margin, Stabilization.
Anti Fraud Provisions in 1934
Apply to trading of exempt and non-exempt securities.
Both individuals and firms subject to rules.
Listed Securities
NOT traded in the Second Market.
Must register and register with and report to SEC.
Marginable under Reg T.
Subject to SHO.
Insiders
Officer, director, 10% shareholder or “affiliated person” (including lawyers and accountants)
Sarbanes-Oxley Act of 2002
Prevents fraud by corporate officers.
CEO and CFO must certify financial statements and disclosures.
Issuers must file audited financial statements with SEC.
Auditors cannot be affiliated with firm and vice versa.
Issuers must report special events within 4 business days
Insiders must report trades within 2 business days.
Valuation Date
Coverage purposes in SIPC liquidation during bankruptcy.
Date that SIPC files in court to be the trustee in the bankruptcy of the failed broker dealer.
“Spinning” of IPO shares
“Quid pro quo” where member firm gives officers IPO allocations in return for receiving underwriting business.
Cannot receive if company is investment banking client of member; if member has received compensation in past 12 months, if providing service in next three months.
Marketing Private Placements
Member firm must conduct reasonable investigation concerning the security and the issuers representations about it.
Regulation AC
Analysis Certification
Requires 3rd party researchers to certify each written research report.
If no analyst provides report, FINRA notified and reports must include disclosure for the next 120 days.
EMMA
Electronic and Municipal Market Access
MSRB website for public use
Registered rep in customer account
Sharing in a customer account is prohibited unless RR receives approval from principal.
Prohibited unless RR shares only in proportion to the capital contributed
Prohibited unless RR shares in both gain and loss
MSRB
Regulates municipal bank dealers and municipal brokers.
Options Disclosure Document
Explains basic risks, uses and important rules of options investing.
Must be accompanied or precede Options Advertising, Options Correspondence, and Options Sales Literature.
Designated registered options principal
Responsible for approval of options advertising, sales literature, and independently prepared reprints.
Regulation NMS
Requires execution within 1 second of order
Only applies to NASDAQ stocks
Bond counsel
Examines tax and legal aspects of proposed bond issue and renders opinion on whether the issue is valid
Tender Offer
Minimum life of initial offer is 5 days
Each “sweetening” is extended 5 business days
Regulation M Rule 105
Prevents market manipulation and “shorting” stock during 20-day cooling off period
Any short sales of issue during cooling off period that occur 5 days prior to effective date cannot be covered by purchasing the issue from the syndicate.
SRO
Self regulatory organizations are membership organizations
FINRA is an SRO. Writes and enforces rules for its members, audits members and collects dues
Rule 10b-5-1
Allows pre-arranged trades by insiders
Department of Treasury
Fines assessed for convictions involving insider trading laws are paid here
Research Report
Client communications that analyzes individual securities or companies that’s sent to at least 15 people
This includes presentations
MSRB Rule G-37
Municipal Finance Professional can give up to $250 to\ an elected official’s campaign in which the MFP is entitled to vote.
