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SIE Study Sets > SIE Ch 1.1 > Flashcards

SIE Ch 1.1 Flashcards

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1
Q

Primary Market

A

Where securities are sold by the Issuer (By a Co. or Government) to the public. Issuer SELLS to raise capital

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2
Q

Issuer Transactions

A

when securities are bought and sold on the Primary market

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3
Q

Secondary Market

A

Securities trades between investors

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4
Q

Capital Markets

A

where Secondary Market securities are sold.

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5
Q

Primary offer

A

an issuer that is SELLING securities to raise capital

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6
Q

A person who owns a mutual fund…

A

holds a partial share of a corp. owns the same return as the largest stockholder of that company.

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7
Q

How many shares can a corp issue?

A

As many as the corp. bylaws say that it can.

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8
Q

What does the Gov. use the primary market for?

A

To raise money for infrastructure projects, and other projects for the common good.

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9
Q

Issuers

A

sell the security on the primary market. can be Corps. Municipalities, the Gov./Gov. agents

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10
Q

Corps.

A

Can issue both stocks and bonds

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11
Q

Stocks

A

equities

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12
Q

Bonds

A

debt issues

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13
Q

Municipalities

A

Governments at the state or lower level (counties/cities). Have municipal Bonds

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14
Q

Federal Gov. and agencies

A

Largest issuer of debt (Bonds) in the us is the treasury dept.

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15
Q

govies

A

debt issued by the government (bonds)

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16
Q

Underwriters (Broker-Dealers, Investment Bankers)

A

Works with an issuer to bring its securities to the market and sell them to the investing public

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17
Q

Underwriting commitments

A

Agreements/commitments underwriters make

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18
Q

Initial Public Offering (IPO)

A

The FIRST time an issuer distributes securities to the public

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19
Q

Additional Public Offering (APO)

A

Additional shares of stock. Issuer recieves app procedes of the sale. Offered after an IPO. STILL IN PRIMARY MARKET

20
Q

syndicates

A

a joint venture where BDs share the risk and profits from the offering. One of the members of the syndicate acts as the MANAGING UNDERWRITER

21
Q

Investors

A

IN THE PRIMARY MARKET: People buying new and intending to hold the security for a long time

22
Q

Institutional Investor

A

an entity that pools money to purchase securities and other investment assets. (banks, insurance Co., pensions, hedge funds, investment advisors, mutual funds

23
Q

Qualified Institutional Buyers (QIBs)

A

This owns and invests a minimum of $100 mil in securities on a discretionary basis.

24
Q

Retail Investors

A

Invests in their own assets. Any investor that does NOT QUALIFY as an institution. (usually less Knowledgable. Usually have higher communication and disclosure expectations. (secondary markets)

25
Q

Accredited Investor

A

A subset: all institutional investors and certain retail investors. (secondary markets)

26
Q

Retail Investors that qualify as accredited (have at least one) p. 5

A
  • Insiders of securities issuer( Officers, Board members, major stockholders)
  • Income of min $200k in the past 2 years are expected to meet that criteria in the current year.
  • Holders of the serese 7, series 65, and series ,82 licenses
    (will be in the primary market)
27
Q

Municipal Advisors

A

a type of investment banker that advise municipalities on the issuing of municipal debt and other municipal securities

28
Q

Securities act of 1933 (the Paper Act)

A

to ensure they the investing public is fully informed about a security and its issuing company when the security is first sold in the primary market.

29
Q

The securities act of 1933 (paper act) protects what?

A
  • requiers regestration of new issues
  • requiers issuer to provide full and fair disclosure about its self and the offering
  • requiers issuer to make available all material info necessary for an investor to judge the issues merit
  • regulating the underwriting and distribution or primary issues
  • provides criminal penalties for fraud in the issuance of new securities
30
Q

Registration Statement p.9

A

If an issuer wants so sell a security that doesnt meet the paper act requirements they will need to file this statement with the SEC

31
Q

Prospectus

A

a disclosure document (needed for the registration statement)

32
Q

What does the registration statement have in it?

A
  • description of the issuers business
  • names/addresses of Co. officers and directors, their salaries, and a 5 year business history of each
  • the # of corp securities the officers and directors own and an ID of investors that own 10% or more of the Co.
  • The Co.’s capitalization, equity and debts
  • a description of how the proceeds will be used
  • if the Co. is involved with any legal proceedings
33
Q

Cooling off period

A

the time between regestration filing with the SEC and the effective date. After filing a registration statement the cooling off period is 20 days min. (the period is often longer and the SEC can send it back for corrections).

34
Q

Tomb stone add information is limited to…

A
  • Name of issuer
  • type of security being offered
  • # of shares to be sold
  • POP, of a range if the POP is not yet set
  • Names of the underwriting members (when placed by the underwriters instead of the issuer)
35
Q

Preliminary Prospectus AKA Red Herring

A

can be used as a prospecting tool allowing issuers and underwriters to gage investor interest and gather indications of interest (MUST BE MADE AVAILABLE TO ANY CUSTOMER WHO EXPRESSES INTEREST THE SECURITIES DURING THE COOLING OFF PERIOD)

36
Q

The final price (POP)

A

not required for the preliminary prospectus

37
Q

The final Prospectus

A

Made available at release. will be delivered to all who purchase the new security at the IPO.

38
Q

The final Prospectus MUST have…

A

Description of offering
- offering price
- selling discounts
- release (effective) date
- use of the proceeds
- description of the underwriting (not the actual contract)
- history of the business
- history of the buisness
risks to the purchase
- description of managment
material financial info\legal opinion concerning the formation of the corp.
- SEC disclaimer

39
Q

Shelf offering

A

an issuer who is ALREADY publicly traded can register new securities without selling any of the shares until later (good for 2 years)

40
Q

Exempt issuers: exempt from regestration and prospectus requiernments of the paper act if they are…

A
  • The US Gov
  • municipalities
  • national/state banks
  • building and loans and savings loans (S&Ls)
  • charities/churchees/educational/nonprofit orgs
  • common carriers (railroad equipment, trust certificates
41
Q

Exempt issues: Some securities that are exemtpt from regestration statement and prospectus of the paper act are…

A
  • commercial paper, bankers’ acceptance, and other securities that have maturities of 270 days or less
  • insurance policies and fixed annuity contracts
42
Q

Small Offering

A

Tier 1: securities offerings up to $20 mill in a 12 month period (no more than 6 mill can be sold on behalf of existing selling shareholders

43
Q

Medium Offering

A

Tier 2: Offerings up to $75 mill in a 12 month period. no more than 22.5 mill can be sold on behalf of existing selling shareholders

44
Q

Rule 147

A

Offerings that take place entierly in one state are exempt from registration when the issuer has its principal office (HQ) in the state and all purchases are residents of the state

45
Q

mini-max

A

fixing a minimum dollar amount to be sold in order to move forward with the entire offering

46
Q

difference between public offering and private placement

A

po: exempt fromregestration requierments
pp:

47
Q

Firm Commitment

A

the underwriter buys the entire offer into inventory and then redistributes it to the public.

SIE Study Sets (2 decks)

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