Securities Underwriting

Question 1

the document that corporate founders must file in their home state of business in order to become a corporation

Answer 1

Corporate Charter (bylaws)

Question 2

also known as Truth in Securities Act, Paper Act, Full Disclosure Act, Prospectus Act, New Issues Act

Answer 2

Securities Act of 1933

Question 3

regulates new issues of corporate securities, requires issuer to provide full and fair disclosure of itself and offering, and prevents fraud and deception

Answer 3

Securities Act of 1933

Question 4

act which established the SEC, regulates OTC market and exchanges

Answer 4

Securities Exchange Act of 1934

Question 5

regulates credit on margin, insider transactions, customer accounts, trading activity

Answer 5

Securities Exchange Act of 1934

Question 6

prohibits bonds of $50 million or more from being offered without an indenture, requires companies to hire a trustee responsible for protecting the rights of bondholders

Answer 6

Trust Indenture Act

Question 7

protects investors by disclosing coupon rate, maturity date, collateral backing, etc

Answer 7

Trust Indenture

Question 8

unless exempt, companies must file what before going public?

Answer 8

Registration Statement and Prospectus

Question 9

what does a registration statement include?

Answer 9

-Company Info
-Articles of Incorporation
-Underwriters and their commissions
-Offering Price
-Names and addresses of all control personnel (directors, officers, 10% share holders)
-Company’s Capitalization (financing related debt and equity)
-Complete Financial Statements
-Legal Proceedings against Company
-Net proceeds from any securities sold by issuer in last two years
-Names and addresses of attorneys who have passed on legality of issue and copy of their opinions
-Agreements or Indentures affecting security being offered

Question 10

registration statement for corporations

Answer 10

Schedule A

Question 11

registration statement for local governments

Answer 11

Schedule B

Question 12

allows issuers to sell securities that were previously registered with the SEC without additional permission for up to 3 years

Answer 12

Shelf Registration

Question 13

the time during which the SEC reviews the registration statement

Answer 13

20 Day Cooling Off Period

Question 14

what the SEC issues when they require amendments to the registration statement

Answer 14

Deficiency Letter

Question 15

suspends a misleading registration statement

Answer 15

Stop Order

Question 16

an announcement but not an offer of a new security for sale; the only advertisement allowed during cooling-off period

Answer 16

Tombstone Ad

Question 17

True or False: the SEC is in charge of approving issues

Answer 17

False

Question 18

must be made available to any persons interested in a new issue during cooling off period; used to obtain indications of interest

Answer 18

Preliminary Prospectus