Regulatory Flashcards
Requirements for Audit Committees?
SarbOx: each member be an independent member of BOD
Reg SK: must disclose if have a financial expert or not, and if yes, their name
NYSE and Nasdaq listing req: must have a financial expert
FINRA rule on selling away…
RR must disclose in writing to her BD. If receiving compensation, must also receive approval in writing.
What must be disclosed under FINRA Corporate Financing Rule?
Estimate of maximum offering price, estimate of maximum underwriting spread (or other compensation), affiliation of an insider with any member firm, detailed statement on other arrangements and compensation in prior 180 day period, statement demonstrating compliance with any exceptions
Rules on Correspondence?
Each member must have procedures relevant to their size on monitoring incoming and outgoing correspondence
Under Regulation M, what must managing underwriter do?
Request Underwriting Activity Report from FINRA, and if there is one, file a Restricted Period Notification Form identifying if participants will be PMM or are excused
SEC Rule 10b-18 (repurchase of its own securities by an issuer) includes what restrictions?
No more than 25% of ADTV
Use only one MM or ECN per day (can use another in after hours trading)
Pay no more than highest independent bid
Which category of listing has the most stringent conditions?
Nasdaq Global Select is more stringent than NYSE around publicly held shares and financials.
Order: Nasdaq Global Select, NYSE, Nasdaq Global, Nasdaq Capital
PMM in rising and falling markets…
FALLING: bid at independent bid; if that falls, may purchase 2x Minimum Quote Size or PMM Daily Limit before lowering bid (or withdrawing)
RISING: may but not must raise bid when best independent bid rises
Rules on audit of AML procedures?
Must be tested by an independent audit
Nasdaq Global Select Requirements?
Common across all three standards:
$4 minimum bid price
3 or 4 MM
Subject to corporate governance
Equity holders can only tender net-long positions. What would affect a long position?
Call options positions reduce long position (1 = 100 shares)
Long puts do not reduce it
How are deferred tax positions created?
Taxable income > accounting income: Tax asset
Accounting income > taxable income: Tax liability
TO CALCULATE: multiply excess by marginal tax rate
Who could buy at less than public offering price?
Syndicate and selling group members (all must be BDs and members of FINRA)
When can underwriters levy a penalty for flipping?
Only if they levy a penalty on the entire syndicate – not on individual syndicate members whose customers may have flipped (sold within 30 days of IPO)
Who can utilise a Reg A offer?
Companies registered in and based in US or Canada
Requirements of a company subject to a tender offer?
Notify shareholders within 10 days, with a recommendation, declaration of neutrality or statement that it is unable to take a position
What’s spinning?
Underwriter allocating shares to execs of a company which is or has been or may become a client. Exception: “issuer directed allocations” which the IB has played no part in
When can a BD sell shares in an IPO to a restricted person of that issuer?
Under “antidilution provision” where the person has held a position for one year plus, to allow them to maintain their %, provided that they hold the issued shares for three months
What defines relationship between client and IB?
Engagement Letter
When can Rule 145 shares be sold?
- Under Rule 144 conditions on public info, amount, manner of selling
- Not an affiliate, held for six months, with public info
- Has held shares >1 yr and not an affiliate for >3 months
What happens on an indictment?
Reported to FINRA, can stay employed until verdict is known
What must a BD do on hiring an RR?
Within 60 days, review the U5 filed by previous employer
RR must supply U5 within 2 days
When determining number of market makers for Exchange listing rules, what’s the status of ECNs?
Disregarded
What form gives details on insider sales?
Form 4
