Regulations of Securities Markets Flashcards
Form S-1
form submitted to register securities
Primary market
where new securities are sold to the public for the first time
Where do proceeds in the primary market go to?
The issuer
Where do IPOs and follow-on offerings take place
Primary market
Effective date
the date the SEC sets for the issue to be sold
Cooling-off period
Minimum of 20 days
Rule 147 Intrastate offering
securities purchased under this rule may not be sold outside of the state for 6 months
An exempt transaction that is a offering made to investors only in one state
rule 147 intrastate offering
investment banker
underwriter
underwriter
a BD that helps issuers with the public distribution of securites
indications of interest
the underwriting firms may collect names of customers who would like to put the new issue during the cooling off period (not binding)
SEC (securities and exchange commission)
the ultimate enforcer of federal securities laws, protects U.S. investors
Deficiency letter
SEC will issue this if they feel the registration statement is incomplete. the issuer will file an amendment and the cooling off period will begin again
Statutory Prospectus
final prospectus, an offer to sell and initial public offering. (for securities, mutual funds and variable insurance products)
underwriting agreement
written agreement outlining the underwriter fees and compensation
what is including in the underwriting agreement?
POP, underwriter spread per share, net proceeds to be received by the issuer and provisions of the contract.
Dealer
firm that acts as a principal, trading for its own account
Who charges a mark up on purchases or markdown on sales instead of being paid a commission
Dealer
Cost basis
original purchase price of a security, plus any costs associated with that purchase such as commissions
associated person
Any person under common control, or any employee of a BD including a RR. (any partner, officer, director, or branch manager)
underwriting spread
the difference between the POP and the amount the issuer receives in an offering
this compensates the managing underwriter, syndicate and selling group
underwriting spread
equity
(STOCK) a security representing financial value in a corporation
Liquidation priority (corporate bankruptcy)
- secured creditors
- taxes, unpaid wages, trade creditors
- debenture holders
- subordinated debenture holders
- preferred shareholders
- common shareholders
Exempt securites
securities that aren’t required to register with the SEC
Prospectus
document used for corporate securities to provide full and fair disclosure to investors. (must be provided at or prior to confirmation of sale)
purchasers of the new security must receive this for up to 90 days following the IPO
Prospectus
underwriting syndicate
members are liable for any shares that remain unsold at the end of the offering
securities exchange act of 1934
regulates the secondary market including, exchanges, over-the-counter (OTC) market, BDs, and RRs
This act created the SEC and allowed for the formation of SROs
Securities Exchange Act of 1934
Self-Regulatory Organizations (SROs)
Regulated the activities of its members through the creation and enforcement of industry rules.
Regulates Broker Dealers and Registered Representatives
FINRA
Regulates municipal securities business
MSRB
Regulates the trading of options contracts
CBOE
Issuer
any person who issues or proposes to issue a security in a primary offering
due diligence meeting
meeting held prior to the end of the cooling off period to ensure all parties involved are aware of the facts about the new issue
initial public offering (IPO)
the first time a corporation sells its stock to the public.
secondary market
trading of outstanding shares. proceeds from sales go to investor not the issuer.
securities act of 1933
regulates the primary market and requires registration of new issues
The main objective of this act is to provide investors with full and fair disclosure, established laws intended to prevent misrepresentation and fraudulent activities in the sale of securities
Securities Act of 1933
Restricted Stock
stock purchased through a private placement
This stock is prohibited from resale in the secondary market for a minimum of 6 months
restricted stock
Bond
company borrowing from investors and agrees to pay interest on the principal for a specified time period
Public offering price (POP)
the price the public pays which includes the underwriting spread.
SEC Disclaimer
“no approval clause” - must be displayed prominently on the cover of each prospectus
preliminary prospectus
the summary of the registration statement files with the SEC
what contains the material information about the offering, and the price range
preliminary prospectus
follow-on offering
a company sells additional securities after going public to raise more capital
filing date
the date at the end of the pre-registration period for a security after the registration statement is submitter to the SEC
Tombstone Ad
simple ad allowed during the cooling-off period
Ad that describes the nature of the offering and syndicate members from whom a prospectus may be obtained
Tombstone Ad
Private placement
an exempt transaction that is not a public offering
capitalization
total amount of money invested in the entity, including equity and debt
accredited investor
net worth of 1M, annual income of 200k or 300k with spouse
Security
an investment contract offered through a legal entity managing the efforts for an expected profit
Broker
a firm that act as an agent executing orders on behalf of customers, who gets paid a commission
broker- dealer (BD)
firms who effect transactions in securities for their own account or the accounts of others
Selling group
BD’s that are invited to participate in the sale of a new issue that do not have the liability for unsold shares.
This group receives concession based on the actual shares sold
selling group
