Transactions Flashcards
What is an issuer transaction?
A trade where the issuer receives money from the sale of securities (a trade of new securities)
AKA primary (market) transaction
What is a non-issuer transaction?
A trade where the proceeds of the sale of the securities are received by an investor instead of an issuer (a trade of an outstanding security between investors)
AKA secondary (market) transaction
What is a primary transaction?
A trade where the issuer receives money from the sale of securities (a trade of new securities)
AKA secondary (market) transaction
What is a secondary transaction?
A trade where the proceeds of the sale of the securities are received by an investor instead of an issuer (a trade of an outstanding security between investors)
AKA secondary (market) transaction
What is an exempt transaction?
A transaction exempt from the control of the state Administrator because of the manner in which a sale is made or because of the person to whom the sale is made.
A transaction is an action and must be judged by the merits of each instance.
- For example, an agent can sell a security that is not exempt from registration in the state if the purchaser of the security is a bank or other institutional buyer. Why? Because the sale of securities to certain financial institutions is an exempt transaction, the sale can be made without registration. This means that the securities sold in exempt transactions do not have to be registered in the state. If such securities were not sold in exempt transactions, such as to an individual investor, they would have to be registered in the state.
What are testable types of exempt transactions
- Isolated nonissuer
- Unsolicited brokerage
- Underwriter
- Bankruptcy
- Guardian
- Conservator
- Institutional investor
- Limited offering (private placement)
- Preorganization certificates
- Transactions with existing security holders
- Nonissuer transactions by pledgees
What are isolated nonissuer transactions?
Secondary (nonissuer) transactions, whether effected through a broker-dealer or not, occuring infrequently (very few transactions per agent per year).
Usually do not involve securities professionals.
Exempt from the oversight of the Administrator because the issuer is not receiving any of the proceeds, and the parties involved are not trading as part of a regular practice.
What are unsolicited brokerage transactions?
Initiated by the client, not the agent.
The most common of the exempt transactions.
To protect against fraud, the Administrator may by rule require that the customer acknowledge upon a specified form that the sale was unsolicited and that a signed copy of the form be kept by the broker-dealer for a specified period.
If the transaction with a retail customer is solicited, it is not exempt.
What are underwriter transactions?
Between the issuer (or any other person on whose behalf the offering is made) and broker-dealers performing in the capacity of an underwriter (such as a firm commitment underwriting).
As well as those between underwriters themselves (as when functioning as members of a selling syndicate).
What are bankruptcy, guardian, or conservator transactions?
Made with
* executors
* administrators
* marshals
* sheriffs
* trustees in bankruptcy
* other fiduciaries
What are institutional investor transactions?
Primarily with financial institutions, such as
* banks
* savings institutions
* trust companies
* insurance companies
* investment companies
* employee benefit plans with assets of at least $1M
Also includes transactions between the above and a broker-dealer, whether acting for itself or in some fiduciary capacity.
What are limited offering (private placement) transactions?
Any offering, also called a private placement,
directed at
- not more than 10 persons ( called offerees) other than institutional investors during the previous 12 consecutive months
provided that:
- all of the noninstitutional buyers are purchasing for investment purposes only
- no commissions or other remuneration is paid for soliciting noninstitutional investors
- no general solicitation or advertising is used
What are preorganization certificates transactions?
Offer or sale of a preorganization certificate or
subscription where
- no commission or other remuneration is paid or given directly or indirectly for soliciting any subscriber
- the number of subscribers does not exceed 10
- no payment is made by any subscriber
FYI.
A new corporation cannot receive a charter unless their documents of incorporation provide evidence that minimum funding is assured. Because the purpose of these preorganization certificates is to enable a new enterprise to obtain the minimum number of subscriptions required by the corporation law, the USA places a limitation on the number
of subscribers rather than the number of offerees. Hence, there may be a publicly advertised offering of preorganization subscriptions. But there may be no payment until effective registration, unless another exemption is available. This tool itself simply postpones registration; it does not excuse registration altogether.
What are transactions with existing security holders ?
A transaction made under an offer to existing security holders of the issuer
- includes holders of
– convertible securities
– rights
– warrants - exempt as long as no commission or other form of remuneration is paid directly or indirectly for soliciting that security holder
What are nonissuer transactions by pledgees transactions?
Nonissuer transaction executed by a bonafide pledgee
Pledgee: The one who received the security as collateral for a loan)
Example: Imagine that you pledged stock as collateral for a loan and defaulted on your obligation. The lender will sell your stock to try to recoup his loss and, under the USA, this is considered an exempt transaction.
