Unit 1: The New Issues Market Flashcards
The spread in a municipal competitive bid is
The difference between the bid and production (the price at which the bonds are reoffered to the public).
Bid refers to the winning bid and is the price the syndicate pays to buy the bonds from the issuer. The term production is a sales term and refers to the price at which the bonds are reoffered to the public. The difference between the two is the spread.
A legal contract known as an indenture between a bond issuer and a trustee appointed to represent the bondholders is required for
corporate bond issues of $50 million or more sold interstate.
The Trust Indenture Act of 1939 requires corporate bond issues of $50 million or more sold interstate to be issued under a trust indenture, which is a legal contract between the bond issuer and a trustee representing bondholders.
Under SEC Rule 134, a tombstone advertisement includes all of the following except
the net proceeds to the issuer.
Under SEC Rule 134, a tombstone advertisement may be placed by the syndicate manager on or before the offering’s effective date and is limited to the name of the issuer, type of security being offered, number of shares to be sold, public offering price, and names of the syndicate members. Please note: you did note have to know that Rule 134 deals with tombstone ads because the question tells you so.
Which of the following describe an underwriter’s financial liability if a syndicate is established as an Eastern account?
An Eastern account has both undivided liability when purchasing the bonds from the issuer and undivided responsibility for bonds that remain unsold.
Within a firm commitment underwriting, which document details the responsibilities and liabilities of each firm?
The agreement among underwriters, also called the syndicate letter, is signed by representatives of all syndicate members and establishes a joint account to sell newly issued securities.
