Series 24 Session Three Flashcards

1
Q

Name the 6 types of offerings.

A

1) primary
2) secondary
3) combination
4) IPO
5) Additional issue
6) Rule 415 - shelf registration

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2
Q

Self registration is valid for how many years?

A

2 years

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3
Q

Self registration is valid for how many years for well-known seasoned issuers?

A

3 years

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4
Q

What are the requirements to be considered a well-known seasoned issuer (WKSI)?

A

$700 million in equity; $1 billion in debt

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5
Q

All or none and mini-maxi are what type of underwriting?

A

Best efforts

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6
Q

In western underwriting, how are unsold shares handled?

A

Westerns underwriting is divided. The member has liability only for their unsold share

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7
Q

In eastern underwriting, how are unsold shares handled?

A

Eastern underwriting is undivided. All members shares in unsold shares according to their percentage of participation.

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8
Q

When can a selling group be formed?

A

after filing a registration statement

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9
Q

What are two components of the selling group agreement?

A

estimated price and concession amount

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10
Q

What form is required to register a new issue?

A

S-1

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11
Q

How long is the cooling-off period for a new issue filing?

A

20 days

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12
Q

What are the prospectus delivery requirements for an exchange listed IPO?

A

25 days

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13
Q

What are the prospectus delivery requirements for a non-exchange IPO?

A

90 days

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14
Q

What are the prospectus delivery requirements for an exchange listed APO?

A

N/A

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15
Q

What are the prospectus delivery requirements for a non-exchange APO?

A

40 days

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16
Q

B/Ds not participating in the underwriting may publish research on a new issue if what?

A

If the report is published in the normal course of business and the firm receives no compensation directly or indirectly from any participant of the underwriting.

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17
Q

B/Ds who are participating in a new issue can publish research on what type of securities?

A

nonconvertible debt/nonconvertible preferred stock

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18
Q

B/Ds can publish research on additionl issue offerings (actively traded security) if

A

1) it is contained in a publication distributed regularly 2) includes a comprehensive list fo all securities being recommended 3) current recommendation is no more favorable than in the past.

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19
Q

Who are considered restricted persons?

A

1) member firms and employee
2) finders and fiduciaries (CPAs, etc.)
3) portfolio managers
4) owners of 10% or more including family members
5) immediate family of any of the above.

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20
Q

To testify that they are not a restricted person, a letter of representation must have been received within how many months prior to the sale?

A

12 months

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21
Q

The initial affirmation must be positive affirmation or negative consent?

A

positive affirmation

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22
Q

Annual re-affirmation must be positive affirmation or negative consent?

A

negative consent

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23
Q

When indications of interest are low, the syndicate manager may sell to purchasers otherwise restricted. This is known as what?

A

standby purchase

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24
Q

If standby purchase is allowed what two components are required?

A

1) the standby purchase must be outlined and disclosed in the prospectus
2) sale is subject to 3-month lock-up

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25
Q

The standby rule does not apply to employees of firms engaged in the sale of what two security types?

A

DPPs and investment company securities

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26
Q

State exemptions if what happens?

A

80% of business assets in the state;
80% of the revenue in the state;
80% of proceeds of the issue are in the state;
100 % of purchasers are residents of the state.;
9-month resale restriction

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27
Q

What are the dollar requirements of Reg A offerings?

A

$ 5 million or less in 12 months

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28
Q

What is the limit of accredited investors of a private placement?

A

No limit. You can rip off all the rich people you want

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29
Q

What is the limit of non-accredited investors of a private placement?

A

35

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30
Q

What constitutes an accredited investor?

A

Net worth of more than $1 million; income of more than $200,000 or income of more than $300,000 of family income

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31
Q

How long must a private placement be held before resale?

A

6 months

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32
Q

Private placements are exempt from registration is

A

1) Form D has been or will be filed.
2) Does not exceed $5 million
3) no non-accredited investors
4) no advertising

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33
Q

Private placements can be offered online. How?

A

online questionnaire to qualify investors; once qualified, a password is provided

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34
Q

Securities distributed off-shore by US issuers need not be registered with the SEC under what conditions?

A

1) the offer and sale is made in an offshore account
2) there are no directed selling efforts in the US
3) cannot sell to anyone in the US
4) must stay outside the US for 12 months

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35
Q

What are restricted securities?

A

securities received from other than a registered public offering.

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36
Q

What is the hold requirement for both control and non-control stock?

A

6 months

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37
Q

Volume limitations apply to what?

A

all control stock

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38
Q

Form 144 is good for how many days?

A

90 days

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39
Q

Form 144 is filed with which agency and when?

A

filed with SEC no later than sale date

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40
Q

Filing Form 144 is waived if amount to be sold is less than how many shared and what value during what period of time?

A

5000 shares or less; value of less than $50,000; in a 90-day period

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41
Q

SEC Rule 10b-13 says tender offers must be open for how many business days?

A

20 business days

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42
Q

While the tender offer is open, one cannot buy what three things?

A

stock, convertibles or options

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43
Q

No short tendering. True or False

A

True

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44
Q

Amendments are open for how many days following the change according to SEC Rule 10b-13.

A

10 business days

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45
Q

SEC Rule 10b-18 says transactions on any given day can only be effected through how many market makers?

A

One

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46
Q

Transactions on any given day cannot exceed what percentage of average daily trading volume (ADTV)

A

25%

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47
Q

Transactions cannot affect the opening or closing of a security. True or False?

A

True

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48
Q

Safe harbor is available if the issuer is not involved in the first trade of the day or any trade in the last half hour of trading. What is the time period for issues with ADTV value of what amounts?

A

$1 million or more and a public float value of $150 million or more

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49
Q

the price can be no higher than what?

A

the highest current independent bid or last sale

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50
Q

When member firms are selling their own securities, can employees buy? why or what not?

A

Yes. considered issuer directed sales

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51
Q

When member firms are selling their own securities, who is engaged to price the IPO?

A

an independent underwriter

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52
Q

When member firms are are selling their own securities, what type of permission is required for discretionary accounts

A

written permission

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53
Q

When member firms are selling their own securities, how are customer checks handled?

A

in escrow pending net capital computation

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54
Q

Corporate Finance Department (CFD) requires filing of information related to what?

A

fairness of underwriting compensation

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55
Q

The manager files information within how many business days of filing the registration statement.

A

Within 1 business day

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56
Q

CFD considers what type of securities as unreasonable?

A

1) stock, options, or warrants of more than 5 years

2) options or warrants with exercise prices below public offering price (POP)

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57
Q

The underwriter can be reimbursed for expenses if what?

A

these are typically paid by the issuer

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58
Q

With insider trading, both the tipper and tippee are liable only if what?

A

if the info is used to trade for profit or avoid a loss

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59
Q

What are the civil penalties for violations of insider trading?

A

the greater of $1 million or treble damages (amount you made or the loss you avoided)

60
Q

What are the criminal penalties for violations of insider trading.

A

imprisonment for 20 years and fines up to $5 million for natural persons and $25 million for business entities

61
Q

With insider training, contemporaneous traders can sue for up to how many years after the violation?

A

5 years

62
Q

In rendering a fairness opinion, a firm must disclose what?

A

1) if firm was financial adviser to any party to the transaction and if it will receive compensation upon completion of the transaction
2) any relationship that existed in the past 2 years regardless of compensation
3) if the information that formed the opinion was independently verified

63
Q

Hart- Scott-Rodina says pre-merger notification to the FTC is required for transactions of what amount?

A

$68.2 million or more

64
Q

Hart-Scott-Rodino requires information to be filed by both parties in a merger for what purpose?

A

to determine if anti-trust laws will be violated

65
Q

Hart-Scott-Rodino says firms must wait how many days after filing a merger request?

A

30 days

66
Q

Which type of stock always has a holding period

A

restricted stock

67
Q

Which type of stock can be sold immediately but has volume limits that always apply

A

control stock

68
Q

Non-registered foreign and domestic securities can be sold to certain institutional investors in the US with or without a holding period?

A

without the 6 month holding period

69
Q

What constitutes a qualified institutional buyer (QIB)?

A

A minimum of $100 million in assets

70
Q

Rule 144 deals with the sale of what 4 types of securities?

A

1) legend certificates
2) control stock
3) restricted securities
4) securities received from other than a public offering

71
Q

When selling 144 stock, a member firms must act in what type of capacity?

A

agency capacity unless a market maker

72
Q

Members may not solicit buyers of 144 stock unless what 2 things?

A

1) customer has expressed interest in the previous 10 business days
2) member has express interest in the previous 60 calendar dayys

73
Q

The buyer of 144 stock is subject to what holding period or volume restrictions?

A

None because the sale effectively registers the shares.

74
Q

Corporate insiders are required to file information on changes to their holding to the SEC within how many days? Form 3

A

10 calendar days

75
Q

Anybody is required to report a change in holdings within how many days

A

2 business days

76
Q

Who are considered insiders (not insider information.)?

A

1) officers
2) directors
3) or shareholders with more than 10% of shares

77
Q

Non-affiliates (outsiders) are required to report (using form 13-D for individuals) when what occurs?

A

when an investor, investor group or other entity acquires a 5% or more interest in an issuer

78
Q

Non-affiliates (outsiders) are required to report (using form 13-G for mutual funds and pensions) when what occurs?

A

when an investment company acquires a 5% or more interest in an issuer

79
Q

Who gets the reports (three entities) when outsiders acquire more than 5% of an interest

A

1) SEC
2) Issuer
3) market where the securities trade

80
Q

Who does not get the report when outsiders acquire more than 5% of an interest?

A

it does not go to shareholders

81
Q

When are Forms 13-D and 13-G related to reporting 5% interest are due when?

A

within 45 days of the end of the year

82
Q

Form 10-k (audited financials) are due when?

A

within 90 days of the end of the year; 60 days plus a 30 day extenstion

83
Q

Form 10-q (quarterly financials) are due when?

A

within 45 days of the end of the quarter; 30 days plus a 15 day extension

84
Q

Form 8-K (news events) are due when?

A

within 4 business days of the event

85
Q

Rule 10b-18 applies to an issuer buying their own stock (IBM buys more IBM stock). Transactions cannot exceed what % of the average daily trading volume (ADTV)?

A

25%

86
Q

Rule 10b-18 applies to an issuer buying their own stock (IBM buys more IBM stock) do block purchases count against the daily purchase limit?

A

yes

87
Q

Rule 10b-18 applies to an issuer buying their own stock (IBM buys more IBM stock) there can be how many market makes or DMM on any given day?

A

one

88
Q

Rule 10b-18 applies to an issuer buying their own stock (IBM buys more stock) and the purchase cannot affect opening or closing of the security. Give more detail.

A

1) issuer cannot be the first transaction of the day

2) issuer can’t trade during the last half hour. Except WKSI - 10 minutes before close and at least 1 millions shares

89
Q

Rule 10b-18 applies to an issuer buying their own stock (IBM buys more stock) and the purchase cannot affect opening or closing of the security. The price can be no higher than what?

A

the highest independent bid or last sale, whichever is highest

90
Q

Rule 10b-13 applies to tender offers. How long must the offer remain open?

A

20 business days

91
Q

The target company of a tender offer has how many business days to provide a statement to shareholders?

A

10 business days

92
Q

You cannot short a tender offer. True or False

A

True

93
Q

Regulation M deals with what

A

additional issues

94
Q

With Reg M (additional issues) the restricted period is what

A

1 to 5 business days

95
Q

Reg M (additional issues) allows unsolicited orders. True or False

A

True

96
Q

Rule 103 says if a market maker who is a syndicate member elects to function as a passive market maker during the restrcited period under what conditions?

A

1) only if a firm commitment underwriting
2) an independent market must exist
3) notification one business day in advance 4) bids no higher than the highest independent bid

97
Q

Rule 104 - stabilizing bids says these bids can be used in certain conditions. What are they?

A

1) stabilizing bids are disclosed in the prospectus 2) used when secondary trading of a new issue falls below POP 3) only for fixed price, firm commitment underwritings 4) no higher than at or below POP 5) must indicate whether or not it is a penalty bid

98
Q

Under SEC Rule 10b-13, a target company has how many business days to provide shareholders with a statement regarding acceptance, rejection, or no opinion?

A

10 business days

99
Q

Blue Sky refers to what?

A

state registration

100
Q

What are the three Blue Sky state registration types?

A

1) coordination (most common) 2) notification (filing - simplest) 3) qualification - most difficult

101
Q

What is Chinese Wall?

A

separation between departments to prevent insider trading

102
Q

What is the definition of insider

A

anyone who has access to inside information

103
Q

Obtaining insider information is not a violation. True or False

A

True - disclosing the information and using it for gain or to prevent loss is a violation

104
Q

What is the bounty amount available to informants?

A

up to 10% of the civil penalty

105
Q

If a representative possesses material inside information about a publicly traded company, under what circumstance may be communicate this information to a customer?

A

Under no circumstance

106
Q

Sarbanes - Oxley was enacted in 2002 in response to what?

A

major accounting firm scandals

107
Q

Sarbanes-Oxley enhanced standards for the board of directors, the management, and public accounting firms. It requires what three things?

A

1) auditor independence
2) corporate governance
3) financial disclosure

108
Q

Firms must disclose conflict of interest when issuing a fairness opinion. What must be disclosed?

A

1) a prior existing relationship with any party to the transaction for the previous 24 months
2) financial arrangements

109
Q

What is gun jumping?

A

soliciting orders or conditioning the market prior to the effective date of the offering

110
Q

A reporting issuer, in a follow-up offering, is allowed to publish what?

A

factual business information and forward looking information

111
Q

A non-reporting, in an IPO, is allowed to publish what?

A

factual business information

112
Q

A road show is designed to provide information regarding a prospective public offering. A live show is considered what type of communication?

A

oral communication

113
Q

An electronic road show is considered what type of communication?

A

written communication

114
Q

What are the Reg A dollar requirements for affiliates?

A

$1.5 million

115
Q

How often are reports required for Reg A offerings?

A

twice per year

116
Q

Under Reg A a circular must be submitted how many hours before confirmation?

A

48

117
Q

Under Reg A when does circular sales literature and information have to be filed with the SEC?

A

10 days prior

118
Q

An offering in which one or more major stockholders in the corporation are selling all or a major portion of their holdings is a called a what offering?

A

secondary

119
Q

What securities are exempt from filing with the Corporate Financing Department for fairness of underwriters compensation?

A

1) non convertible debt/ preferred stock
2) redeemable investment co. securities (mutual funds)
3) exempt securities
4) Reg D offerings
5) shelf offerings

120
Q

What securities are not exempt from filing with the Corporate Financing Department?

A

1) closed end funds
2) Reg A offerings
3) 147 offerings, DPPs and rights

121
Q

Even if I participate in an underwriting, I can publish research on what kind of securities?

A

nonconvertible debt and nonconvertible preferred stock

122
Q

The prospectus delivery requirement for an additional offerings (APO) of an exchange listed stock is how many days?

A

0

123
Q

What is the number of shares and total proceed amounts to be a
deminimis exemption?

A

5,000 shares or $50,000 in sales proceeds are permitted without filing form 144

124
Q

Issuer directed sales allow the sale to employees of the issuers. What at the restrictions?

A

1) accounts where employees of members have an interest

2) accounts where finders and fiduciaries have an interest

125
Q

Reg S offerings are those distributed offshore by US issuers. What three rules apply?

A

1) the offer and sales must occur in an offshore transaction
2) no directed selling efforts in the US
3) stays outside the US for at least one year

126
Q

What does PIPE stand for?

A

Private Investments in Public Equity

127
Q

In a PIPE, what is purchased?

A

restricted securities directly from the issuer in a private placement

128
Q

What is Rule 144?

A

Rule 144 governs the sales of restricted and control stock?

129
Q

Who is considered an affiliate of an issuer?

A

1) director
2) officer
3) shareholder with 10% or more of voting stock

130
Q

Restricted stock has a holding period. Control stock can be sold immediately. What applies to control stock and restricted stock?

A

volume limits

131
Q

when you become an insider, you must file form what? and when are you required to file it?

A

Form 3: initial report within 1- days

132
Q

Once you are an insider, you must file what form to report changes in holdings and when are you required to file it?

A

Form 4 - within two business days

133
Q

13-D is filed when who acquires 5% or more interest in an issuer? and when is it required to be filed?

A

an investor or investor group; 10 days

134
Q

13-G is filed when who acquires 5% or more interest in an issuer? and when are you required to file it?

A

an investment company; 45 days after year end

135
Q

Reg M deals primarily with additional issues. what is the restricted period?

A

1-5 business days - syndicate members that are not MM are restricted from making a bid or inducing purchases during the restricted period.

136
Q

An offer of rescission for unsuitable or illegal sales must be accepted or rejected within how many days?

A

30 days

137
Q

What amount can be paid in bounty to informants?

A

up to 10% of the civil penalty

138
Q

What are contemporaneous trading rules?

A

It says the person you took advantage of has the right to sue in civil court for what they lost - nothing more

139
Q

What is PCOAB?

A

Public Company Oversite Account Board

140
Q

Rule 168 allows a reporting issuer, in a follow-up offering, to publish what?

A

factual information and forward-looking statements

141
Q

Tule 169 allows a non-reporting issuer, in an IPO, to publish what?

A

factual business information

142
Q

A recorded electronic road show is considered oral communication or written communication?

A

written communication

143
Q

a live electronic road show is considered oral communication or written communication?

A

oral communication

144
Q

If a road show is for an IPO, does it need to file with the SEC?

A

yes

145
Q

If a road not is not for an IPO, does it need to file with the SEC?

A

no