Unit 1.1 Flashcards
1
Q
What are Qualified institutional buyers?
A
A institutional investor that owns and invests a minimum of $100 million in securities on a discretionary basis
2
Q
What is the next step after filing the registration statement?
A
Cooling-off period
3
Q
How are Best Efforts deals closed and what risk does this avoid?
A
Best Efforts deals are closed by collecting client funds into an escrow account, so no underwriter capital is at risk
4
Q
What is the difference between the preliminary prospectus and the final prospectus?
A
Final prospectus contains two additional pieces of information: release date + POP
5
Q
What is an indication of interest?
A
A non-binding declaration by an investor of potential interest in purchasing some of the issue from the underwriter after the security is released for sale
6
Q
Are variable annuities exempt from the registration statement and prospectus requirements of the Securities act of 1933?
A
No
7
Q
What is it called when underwriters contract with the issuers to buy the securities and then sell the securities to the public at a higher price?
A
Firm commitment underwriting
8
Q
In what time frame will an investor buying a APO non-NMS security in the secondary market be entitled to a final prospectus?
A
40 days
9
Q
What type of Broker-dealer/investment banker works with an issuer to bring its securities to the market and sell them to the investing public?
A
Underwriter
10
Q
What is an announcement and description of securities to be offered while in the Cooling-off period that provides minimum information
A
Tombstone Advertisement
11
Q
What terms are synonymous with private placement stock?
A
Restricted, unregistered, letter stock, legend stock
12
Q
In what time frame will an investor buying a APO NMS security in the secondary market be entitled to a final prospectus?
A
No requirement (0 days)
13
Q
What information can be in a Tombstone Advertisement?
A
- Name of the Issuer
- Type of Security to be offered
- Number of Shares to be sold
- POP
- Names of Underwriting members (when placed by the underwriters instead of the issuer)
- Advisory statement
14
Q
What are NMS securities?
A
Stocks that are listed on an exchange or the NASDAQ
15
Q
When is the effective/release date reached?
A
Sometime on or after 20 days of cooling off (cooling period)
16
Q
When can securities under 147 be resold to non-state residents?
A
6 months after the initial purchase
17
Q
Are the securities issued by a company that owns a national/state bank exempt?
A
No
18
Q
What entities are excluded from Regulation of the JOBS act?
A
Investment companies (private equity funds, venture capital funds, and hedge funds)
19
Q
How does the cooling-off period end?
A
Delivery of a final prospectus
20
Q
What are stocks that are listed on an exchange or the NASDAQ
A
NMS securities
21
Q
Under Rule 506(b) of Regulation D how can an entity be exempt of registration?
A
If it is a private/nonpublic offering and there are no more than 35 non-accredited investors
22
Q
The securities act of 1933 is also known as what?
A
Paper Act
23
Q
What is the date that securities can be sold called?
A
The effective date
24
Q
What are the two types of “best efforts underwriting?”
A
All-or-none, mini-max
25
What must all companies raising capital in a nonpublic offering that qualify under the Regulation D exemption file and how?
Form D, online
26
What is Blue-sky/Blue-sky filings?
The process of coordinating the federal and state registrations to sell a security
27
In what tier of regulation A of the JOBS act can Securities be offered up to $20M in a 12 Month period, of the $20M no more than $6M can be sold on behalf of existing selling shareholders
Tier 2
28
What type of underwriting sets a minimum amount of securities that the issuer needs to raise, and a maximum amount of securities that they are willing to sell?
mini-max underwriting
29
What are requirements for a company to be exempt from registration under Rule 147/ the intrastate offering rule
1. Offerings take place entirely in one state
2. Issuer has its principal office in said state
3. All purchasers are residents of said state
4. Company receives at least 80% of its income in the state OR
5. At least 80% of the issuer's assets are located within the state OR
6. At least 80% of the offering proceeds are used within the sate OR
7. The majority of the company's emplohyees work in the state
30
What is best efforts underwriting?
Investment Banker acting as Agent, underwriters sell securities to the investor acting simply as an agent
31
What is it called when the issuer of a security receives the funds from an offering?
Primary market transaction
32
When securities are offered via a self registration, what must be filed with the SEC before each sale
Supplemental prospectus
33
What is a preliminary prospectus/red herring?
A document that must be made available to any customer who expresses interest in the securities that includes most of the company's important details but excludes particular specifics such as the IPO price and the number of shares offered for sale
34
What is a retail investor?
An investor who is investing their own assets, also any investor that does not qualify as an institution
35
In what time frame will an investor buying a IPO NMS security in the secondary market be entitled to a final prospectus?
25 days
36
What is the function of the Primary market?
Where securities are sold by the issuer to the investing public in issuer transactions
37
What is an entity that pools money to purchase securities and other investment assets?
Institutional investor
38
What is the purpose of the securities act of 1933?
To ensure the investing public is fully informed about a security and its issuing company when the security is first sold in the primary market
39
What is period of time after filing a registration statement (S-1) where the submission is under review by the SEC?
Cooling-off period
40
What is an IPO in which a corporation allows some of the existing shareholders to sell their shares along with the newly issued shares?
Split/combination offering
41
What is called when a corporation wants an agreement where the underwriter must either sell all the shares or cancel the underwriting?
All-or-none, (AON)
42
Are investors that purchase shares in the secondary market entitled to its final prospectus?
Yes, if they purchase it within the specified timeframe
43
What is the purpose of the Primary market for governments?
To raise money for projects and programs
44
Are securities that have maturities of 270 days or less exempt from the registration statement and prospectus requirements of the Securities act of 1933?
Yes
45
What qualifications must a retail investor meet to be an accredited investor?
Either
1. Insiders of the security's issuer (officers, board members, major stockholders)
2. Have an income of at least $200K or more the past two years and are expected to meet same criteria in the current year (if the purchase is in a joint account it is $300K), OR, have a net worth of $1M or more (not including equity in the primary residence)
3. Qualified based on certain professional certifications, designations, or credentials issued by an accredited educational institution,
4. Holders of Series 7, 65, and 82 licenses
46
Is Commercial paper exempt from the registration statement and prospectus requirements of the Securities act of 1933?
Yes
47
What requirements are there to be a Tier 2 Investor?
Be an accredited investor as defined in 501 of regulation D, OR Limit the investment to a maximum of the greater of 10% if the investor's net worth or 10% of the investor's net income per offering
48
What are municipal advisors?
A type of investment banker that advises municipalities on the issuing of municipal debt and other types of municipal securities
49
Under what rule can businesses solicit or advertise exempt securities offerings (private placements)?
Rule 506(c) Regulation D
50
In what tier of regulation A of the JOBS act can securities be offered up to $75M in a 12 Month period, of the $75M no more than $22.5M can be sold on behalf of existing selling shareholders
Tier 2
51
What is the purpose of the Primary market for corporations?
To raise capital quickly to expand
52
What is the primary disclosure document for municipal securities?
Official Statement
53
What happens to the funds in an AON (All-or-none) underwriting?
Funds collected from investors during the offering period must be held in escrow pending final disposition of the underwriting due to the uncertainty of the outcome of an AON offering
54
What are some examples of institutional investors?
Banks, insurance companies, employee benefit plans like pensions, hedge funds, investment advisers, and mutual funds
55
What are the three steps the Securities act of 1933 requires before a new issue is brought to market?
1. Distribution of a registration statement
2. Cooling-off period
3. Filing of Final prospectus
56
What is a joint venture where Broker-Dealers share both the risk and the profits from offerings in large firm commitment underwritings?
Syndicate
57
What is the name for the first time an issuer distributes securities to the public?
IPO, initial public offering
58
Who are investment bankers that advise municipalities on the issuing of municipal debt and other types of municipal securities?
Municipal advisors
59
How long is a Shelf offering registration good for?
2 years, 3 if the issuer is a WKSI
60
What is the other name for Preliminary prospectus?
Red herring
61
What is the official name of the Paper Act
Securities act of 1933
62
What must a registration statement (S-1) contain?
1. A description of the Issuer's business
2. Names, addresses, salaries, and five-year business history of company officers and directors
3. Amount of corporate securities company officers and directors own and identification of investors who own 10% or more of the company
4. Company's capitalization, including its equity and debt
5. Description of how the proceeds will be used
6. Whether the company is involved in any legal proceedings
63
What is a institutional investor that owns and invests a minimum of $100 million in securities on a discretionary basis?
Qualified institutional buyer (QIB)
64
What is an institutional investor?
An entity that pools money to purchase securities and other investment assets
65
What is an APO/Follow-On Offering?
Additional Public/Primary offering/subsequent public offering, any time an issuer distributes securities to the public after the IPO
66
In what type of underwriting is the Investment banker acting as principal?
Firm commitment underwriting
67
What is the limit of accredited investors that may invest in a private placement?
None
68
What are the other names for Private Placement stock and why?
Lettered stock, because a private placement investor sign a letter stating they intend to hold the stock for investment purposes only
Legend stock, as the stock certificate may bear a legend indicating it cannot be transferred without registration or exemption
69
What is it called when a publicly traded company registers new securities without selling any or of the shares until later?
Shelf offering [registration]
70
What is a split/combination offering?
An IPO in which a corporation allows some of the existing shareholders to sell their shares along with the newly issued shares.
71
What is the Cooling-off period?
The period of time after filing a registration statement (S-1) where the submission is under review by the SEC
72
What is a primary market transaction?
When the issuer of the security is receiving the funds from an offering
73
Under what rule can an an entity be exempt of registration if it is a private/nonpublic offering and there are no more than 35 non-accredited investors?
Rule 506(b) of Regulation D
74
What is the name(s) of the disclosure document for non-private placement exempt securities?
Offering circular, notice of sale
75
Is variable universal life insurance exempt from the registration statement and prospectus requirements of the Securities act of 1933?
No
76
What is a shelf offering registration?
A registration option for issuers who are already a publicly traded company to register new securities without selling any or of the shares until later. They can sell some of the shares initially and wait to sell the remaining shares later. Once filed, registration is good for two years
77
What are the exempt transactions under tier 1 of Regulation A of the JOBS act?
Securities offerings up to $20M in a 12 Month period, of the $20M no more than $6M can be sold on behalf of existing selling shareholders
78
Are separate account products exempt from the registration statement and prospectus requirements of the Securities act of 1933?
No
79
Under what rule can a company be exempt from registration if their principal office and all purchasers are in the state of registration and residents of said state respectively?
Rule 147: Intrastate offering rule
80
What is a mini-max underwriting ?
A best efforts underwriting that sets a minimum amount of securities that the issuer needs to raise, and a maximum amount of securities that they are willing to sell
81
What is the difference between a shelf offering registration filed by a WKSI vs a Regular issuer
Shelf offering registration good for 2 years for regular issuers, 3 for WKSI's
82
What are non-NMS securities?
Stocks that are not listed on an exchange or the NASDAQ
83
What is the Official Statement?
Primary disclosure document for municipal securities?
84
What are non-exempt securities?
Securities that are required to be registered in order to be sold to the public
85
In what instances is Form D filed?
Must be filed by all companies raising capital in a nonpublic offering that qualify under the Regulation D exemption?
86
Broadly, what are accredited investors?
A subset of investors made up of all institutional investors and certain retail investors
87
What is an Underwriter?
A type of Broker-dealer/investment banker that work with an issuer to bring its securities to the market and sell them to the investing public
88
What is an IPO?
Initial public offering, the first time an issuer distributes securities to the public
89
what is the subset of investors made up of all institutional investors and certain retail investors?
Accredited investors
90
What issuers are exempt from the registration and prospectus requirements of the Securities act of 1933?
1. U.S Government
2. Municipalities
3. National, State banks (but not bank holding companies)
4. Building and loans, saving and loans (S&Ls)
5.Charitable, religious, educational, and nonprofit associations
6. Common Carriers
91
What is a non-binding declaration by an investor of potential interest in purchasing some of the issue from an underwriter after a security is released for sale?
Indication of interest
92
What has the following characteristics? Is a primary offering, and comes after the IPO
APO, additional public/primary offering
93
What are underwriters not committed to in Best Efforts Underwriting
In Best Efforts Underwriting underwriters are not committed to purchasing the shares themselves and therefore are not at risk
94
Are bankers' acceptances exempt from the registration statement and prospectus requirements of the Securities act of 1933?
Yes
95
What legislation is responsible for ensuring the investing public is fully informed about a security and its issuing company when the security is first sold in the primary market
Securities act of 1933?
96
What is the Offering circular?
Disclosure document for non-private placement exempt securities
97
What is Lettered stock?
Private Placement stock
98
What are stocks that are not listed on an exchange or the NASDAQ
non-NMS securities
99
Can securities be sold during the cooling-off period?
No
100
Under Rule 506(c) Regulation D what requirements must a company meet to advertise securities offerings (private placements)?
1. Are being offered under the Regulation D registration Exemption
2. All purchasers of the advertised securities must be accredited investors or the business must reasonably believe they are at the time of sale
3. The business must take reasonable steps to verify all purchasers are accredited
101
What is a document that must be made available to any customer who expresses interest in the securities that includes most of the company's important details but excludes particular specifics such as the IPO price and the number of shares offered for sale?
Preliminary prospectus/red herring
102
Who can issue securities?
Corporations, municipalities, and the federal government and its agencies
103
What issues (securities) are exempt from the registration statement and prospectus requirements of the Securities act of 1933?
Commercial paper, bankers' acceptances, securities that have maturities of 270 days or less, insurance policies, fixed annuity contracts
104
What is it called when underwriters sell securities to the investor acting simply as an agent?
Best Efforts underwriting
105
What is an investor who invests their own assets, and does not qualify as an institution?
Retail investor
106
What is the effective date?
The day after registration becomes effective. The day securities can be sold
107
What information is in the final prospectus?
1. Description of offering, 2. Offering price, 3. Selling discounts, 4. effective date, 5. use of the proceeds, 6. description of the underwriting (but not actual contract), 7. history of the business, 8. risks to the purchasers, 9. description of management, 10. material financial information, 11. legal opinion concerning formation of the corporation, SEC disclaimer
108
Who can issue municipal bonds and other types of debt?
Municipal governments (cities, counties, states)
109
What is a Tombstone Advertisement
An announcement and description of the securities to be offered while in the Cooling-off period that provide minimum information.
110
What is a syndicate?
A joint venture where Broker-Dealers share both the risk and the profits from offerings in large firm commitment underwritings
111
In what time frame will an investor buying a IPO non-NMS security in the secondary market be entitled to a final prospectus?
90 days
112
Restricted, unregistered, letter stock, and legend stock are all terms synonymous with ____?
Private placement stock
113
Who benefits from Regulation A of the JOBS act and how?
Small-Medium sized companies, the rule eases requirements to raise capital
114
What are securities that are required to be registered in order to be sold to the public?
non-exempt securities
115
What is Firm Commitment underwriting?
Invest Banker acting as Principal, A type of underwriting contract where the underwriters contract with the issuers to buy the securities and then sell the securities to the public at a higher price
116
What is the name of the registration statement issuers must file with the SEC to sell securities?
S-1
117
How does the Securities act of 1933 protect investors who buy new issues?
1. Requires registration of new issues
2. Requires a issuer to provide full and fair disclosure about itself and the offering
3. Requires an issuer to make available all material information necessary for an investor to judge the issue's merit
4. Regulates the underwriting and distribution of primary issues
5. Provides criminal penalties for fraud in the issuance of new securities
118
What is a WKSI
Well-known seasoned issuer
119
Besides placing a tombstone advertisement, what else can an issuer do during the cooling off period?
1. Deliver a preliminary prospectus,
2. Gather Indications of Interest
3. Due diligence
4. Address State Registration Requirements
5.
120
What is AON underwriting?
All-or-none, When a corporation wants an agreement where the underwriter must either sell all the shares or cancel the underwriting.
121
How long is the cooling-off period
Minimum of 20 days or more
122
Are fixed annuity contracts exempt from the registration statement and prospectus requirements of the Securities act of 1933?
Yes
123
What are the exempt transactions under tier 2 of Regulation A of the JOBS act?
Securities offerings up to $75M in a 12 Month period, of the $75M no more than $22.5M can be sold on behalf of existing selling shareholders
124
Where are securities are sold by the issuer to the investing public in issuer transactions?
Primary Market
125
What is the S-1?
Registration statement issuers must file with the SEC to sell securities
126
What is the process of coordinating the federal and state registrations to sell a security called?
Blue-Sky/ Blue-sky filings
127
What is legend stock?
Private Placement stock
128
Why might the SEC suspend the review/cooling off period?
If they determine the registration statement needs revision or expansion
129
Are insurance policies exempt from the registration statement and prospectus requirements of the Securities act of 1933?
Yes
130
Can securities under 147 be resold to non-state residents?
Yes but only after six months after the initial purchase
131
What are the three types of investors
retail, institutional, accredited
132
What are the two defining characteristics of an APO?
Is a primary offering, and comes after the IPO
133
What is the notice of sale?
Disclosure document for non-private placement exempt securities
