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Series 7 > Underwriting Securities > Flashcards

Underwriting Securities Flashcards

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Series 7 Top-off Exam flashcards
1
Q

For an entity to become a corporations, they must file a _________.

A

Corporate Charter

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2
Q

If a company wants to go public, they must file what two things with the SEC?

A

Registration Statement

Prospectus

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3
Q

Three methods of state security registration are?

A
  1. Notification
  2. Coordination
  3. Qualification
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4
Q

These entities help the issuer decide what securities to issue, the selling price, how much to issue, etc.

A

Investment Bank

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5
Q

These entities purchase the securities from the issuer and sell them to the public.

A

Underwriter

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6
Q

According to this, an issuer of corporate securities must provide full and fair disclosure about itself and the offering.

A

Securities Act of 1933

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7
Q

This was enacted to protect investors by regulating over the counter market and exchanges.

A

Securities Act of 1934

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8
Q

This act prohibits bond issues valued at over $5M from being offered to investors without an indenture.

A

Trust Indenture Act of 1939

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9
Q

Brokerage firms that are not part of a syndicate but help distribute shares to the public without a financial commitment.

A

Selling Group

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10
Q

Spread Equation

A

Public Offering Price-Price paid to the issuer
AND
Syndicate Managers Fee + Takedown

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11
Q

Takedown Equation

A

Additional Takedown + Concession

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12
Q

The profit that the selling group makes when selling shares or bonds to the public.

A

Concession

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13
Q

The fee that the underwriting group pays to a securities firm that is not part of the syndicate, but that still sells shares in the offering.

A

Reallowance

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14
Q

Western (divided) account

A

Each syndicate member is responsible only for the shares/bonds originally allocated to it.

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15
Q

Eastern (divided) account

A

Each syndicate member is responsible not only for the shares/bonds originally allocated to it, but also a portion of shares/bonds left unsold by other members.

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16
Q

After the issuer files a registration statement with the SEC, this is a 20 day period during which the SEC reviews the registration statement.

A

Cooling Off Period

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17
Q

Final Prospectus will include:

A
  1. Final Offering Price
  2. Underwriters Spread
  3. Delivery Date
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18
Q

Independent entity that maintains a record of stock and bond owners.

A

Registrar

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19
Q

Maintains a record of stock and bond owners and also mails and cancels stock certificates as necessary.

A

Transfer Agent

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20
Q

This is the first time an issuer sells stock to the public.

A

Initial Public Offering

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21
Q

An offering of new securities from an issuer that has previously issued securities. Profits go to issuer.

A

Primary Offering

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22
Q

A sale of a large block of outstanding securities or treasury stock. Profits do not go to issuer.

A

Secondary Offering

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23
Q

A combination of a primary and secondary offering, with both new and outstanding securities.

A

Split or combined offering.

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24
Q

Issuing more stock will cause earnings per share to increase or decrease?

A

Decrease.

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25
Q

What are the two reasons a security might be exempt from the registration requirements of the Securities Act of 1933?

A
  1. The issuer has a high level of creditworthiness

2. Another government agency has jurisdiction over the issuer.

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26
Q

Name the 6 types of securities that are exempt from the registration requirements.

A
  1. Issued by US gov’t or federal agencies.
  2. Municipal Bonds
  3. Issues by banks and credit unions
  4. Public Utility stocks or bonds
  5. Issued by religious, educational, or non-profit organizations.
  6. Notes, bills of exchange, bankers acceptances, and commercial paper with an initial maturity of 270 days or less.
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27
Q

Name the 4 types of transactions that are exempt from the full registration requirements.

A
  1. Intrastate offerings.
  2. Regulation A offerings
  3. Regulation D offerings
  4. Rule 144
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28
Q

Covers the sale of restricted, unregistered, or control securities.

A

Rule 144

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29
Q

According to Rule 144, sellers of these securities must wait from ______to_____ to sell. Additionally, the most an investor can sell at one time is _______, whichever is greater.

A

6 months to 1 year.

1 percent of the outstanding shares or the average weekly trading volume for the previous 4 weeks

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30
Q

Intrastate offerings are exempt from registering with the SEC under this rule.

A

Rule 147

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31
Q

This regulation exempts offering of securities worth $5M or less from being registered with SEC.

A

Regulation A

32
Q

This regulation exempts offerings to no more than 35 unaccredited investors per year from registering with SEC.

A

Regulation D - Private Placements

33
Q

A process in which both the purchase price and the offering price for a new issue are negotiated between the issuer and a single underwriter

A

Negotiated Underwriting

34
Q

A step in the initial public offering process whereby an underwriter submits a sealed bid to a company that is making its first issue of stock.

A

Competitive bid

35
Q

The issuing corporation has determined that it wants an agreement outlining that the underwriter must either sell all of the shares or cancel the underwriting.

A

All or None Underwriting

36
Q

SEC provision that allows an issuer to register a new issue security without selling the entire issue at once.

A

Shelf Offering

37
Q

Issued by SEC and will indicate a significant omission or problem with a registered statement or prospectus.

A

Deficiency Letter

38
Q

Practice used by underwriters to even out the secondary market price of a new security after an IPO.

A

Stabilizing Bid

39
Q

This will be levied if syndicate members turn in shares on a stabilizing bid after the issue is sold out.

A

Penalty Bid

40
Q

Practice in which investors avoid purchasing shares underlying a put option

A

Pegging.

41
Q

This rule regulates private placement of unregistered securities to qualified institutional buyers.

A

Rule 144A

42
Q

This rule prohibits member firms from selling a new issue to any account where restricted persons are beneficial owners.

A

Rule 5130

43
Q

Provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than actually planned by the issuer by up to 15%.

A

Green-shoe option

44
Q

Corporate entity that falls within the accredited investor category.

A

Qualified institutional buyer

45
Q

Term for an ethical barrier between different divisions of a financial institution to avoid conflicts of interest.

A

Chinese Wall

46
Q

Issue of additional securities from an established company whose securities already trade on the secondary market.

A

Seasoned Issue

47
Q

What is another term for the preliminary prospectus?

A

Red Herring

48
Q

If the registration statement needs review or expansion, the SEC may suspend the review and issue a _____________.

A

Deficiency Letter

49
Q

This may be issued by the SEC if the requirements of the Securities Act of 1933 have not been met or if fraud is suspected in the underwriting process.

A

Stop Order

50
Q

What are the two items that must not be included in the preliminary prospectus?

A

Offering Price

Effective Date

51
Q

What are the three things underwriters may not do during the cooling off period?

A
  1. Offer to sell the securities
  2. Take Orders
  3. Distribute ads
52
Q

What are the three things that an underwriter may do during the cooling off period?

A
  1. Take indications of interest
  2. Distribute the red herring
  3. Publish tombstone advertisement
53
Q

Near the end of the cooling off period, the underwriter must conduct _________.

A

A formal due diligence meeting.

54
Q

The Maloney Act of 1938 amended the 1934 act to provide for __________________.

A

Establishment of self-regulatory bodies.

55
Q

This act covers new issues sold to the public.

A

Securities Act of 1933

56
Q

This act covers the secondary securities market.

A

Securities Act of 1934

57
Q

This is a best efforts underwriting with a floor and a ceiling on the $ amount of securities the issuer is willing to sell.

A

Mini-Max Offering

58
Q

This is when the underwriter takes on financial risk by actually purchasing the shares and is acting in a principal capacity.

A

Firm Commitment

59
Q

In this type of underwriting, the underwriter sells as much as possible but is not liable for unsold shares and is acting in an agency capacity.

A

Best Efforts

60
Q

When a company’s current stockholders do not exercise their preemptive rights in an additional offering, the corporation will engage an underwriter to purchase whatever shares remain unsold when the rights expire.

A

Stand-by Offering

61
Q

These are owned by directors, officers, or persons with a 10% or greater interest in voting stock.

A

Control securities

62
Q

These securities are acquired in some way other than a registered public offering.

A

Restricted securities

63
Q

In any 90 day period, an investor may sell the greater of ________ or __________ regarding restricted stock.

A

1% of total outstanding shares

Average weekly trading volume in the past four weeks

64
Q

Requires shareholder approval for mergers, acquisitions, and re-organizations. They must also be sent a full disclosure statement.

A

Rule 145

65
Q

Rule 145, which protects stockholders of any major restructuring, applies to which three situations?

A
  1. Reclassification
  2. Merger or consolidation
  3. Transfer of assets
66
Q

This regulation excludes offers and sales made outside the US from having to register with the SEC.

A

Regulation S

67
Q

This rule regulates the sale of control and restricted securities.

A

Rule 144

68
Q

Accredited investor

A

Net worth of $1M or more excluding primary residence, and $200,000 or more in the last two years or $300,000 jointly with a spouse.

69
Q

Priority or orders for syndicate to fill.

A

Presale
Group Net
Designated
Member

70
Q

Takedown

A

Profit made by syndicate members

71
Q

Is a prospectus required for Regulation A offerings?

A

No.

72
Q

Prospectus delivery requirement for IPO quoted on OTC Pink or OTCBB (non-NASDAQ).

A

90 days

73
Q

Prospectus delivery requirement for IPO listed on exchange or quoted on NASDAQ.

A

25 days

74
Q

Shelf offering registration lasts ____ years and the securities can be sold up to ___ years

A

2, 3

75
Q

Stabilizing price bids may be placed (at or below/at or above) the public offering price.

A

At or below

76
Q

Three items in spread allocation.

A

Managers fee
Syndicate fee
Selling concession

77
Q

Under Intrastate Offering Rule 147, resident purchasers may resell securities to a nonresident after ____ months from the end of distribution.

A

9

Series 7 (10 decks)

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