Securities Underwriting Flashcards
Securities Act of 1933
regulates new issues of corporate securities. An issuer of corporate securities must provide full and fair disclosure about itself and the offering. Included in this act are rules to prevent fraud and deception.
Securities Exchange Act of 1934
enacted to protect investors by regulating the over-the-counter (OTC) market and exchanges, such as the New York Stock Exchange
The extension of credit in margin accounts (see Chapter 12) Transactions by insiders Customer accounts Trading activities
Trust Indenture Act:Me
This act was originally known as the Trust Indenture Act of 1939 and prohibited bond issues valued at more than $5 million from being offered to investors without an indenture. The $5 million was subsequently raised to $50 million. A trust indenture is a written agreement that protects investors by disclosing the particulars of the issue (coupon
part of the Trust Indenture Act, all companies must hire a trustee who’s responsible for protecting the rights of bondholders.
Registration Statement
Also known as Schedule A. Must be filed by companies issuing securities.
Schedule B is municipalities issuing mostly bonds.
Funded Debt
Floating Debt
Shelf Registration
allows issuers to sell securities that were previously registered with the SEC without additional permission.
Lasts up to 3 years.
Cooling off Period
Lasts 20 Days after registration statement submitted (Filing Date)
Indications of Interest
Before selling stocks, or bonds. Not binding. Can change mind. Can be done during cooling off period.
Tombstone Ad
Advertisement of security for sale
Preliminary Prospectus
Underwriters and selling group members use the preliminary prospectus to obtain indications of interest from prospective customers. The preliminary prospectus must be made available to all customers who are interested in the new issue during the cooling-off period.
Due-Dilegence Meeting
This meeting is required by law. During this meeting, the underwriter provides information about the issue and what the issuer will use the proceeds of the sale for.
Blue Sky Laws
state laws that apply to securities offerings and sales — say that to sell a security to a customer, the broker–dealer (brokerage firm), the registered representative, and the security must be registered in the customer’s home state
Notification (Registration Filing)
Companies that previously sold securities in a state can renew their previous application.
Coordination
This method involves registering with the SEC and states at the same time.
Qualification
Companies use this registration method for securities that are exempt from federal (SEC) registration but require registration with the states
Investment Banking Firm
An investment banking firm is an institution (a broker–dealer) that’s in the business of helping issuers raise money