Unit 5 Supervision of Investment Banking and Research Flashcards
For an additional issue offering in which the subject sec is quoted on the OTCBB, an interdealer quotation system, the prospectus delivery requirement period is
40 days
The SEC Exchange Act of 1934 applies to all of the following
- registration of BD
- use of credit on the purchase of sec
- secondary market trading
Which of the following sec are exempt from the registration under the Uniform Sec Act?
US and Canadian government sec
Under FINRA rules on underwritings, an affiliated relationship exists between a member firm and an issuer of the ownership interest between the two equals
10% or more
Records of each suitability determination made in connection with the sale of a member’s sec must be retained for
3 years
The SEC Act of 1933 applies to all of the following
- registration of new issues
- full and fair disclosure
- prospectus preparation
Standby purchasers are not subject to FINRA Rule 5130 provided
- the standby arrangement is disclosed in the final prospectus
- the standby arrangement is in writing
- the syndicate manager represents, in writing, that it was unable to find any other purchasers for the sec
- the sec are locked up for 3 months
Sec Act Rule 144 addresses the sale of
- letter stock
- control stock
If there is a restricted period under REG M, a syndicate member that is not a MM is prohibited from all of the following
- purchasing the subject sec
- inducing the purchase of the subject sec
- making a bid for the subject sec
The winning bid in a competitive offering is the one that provides the issuer with
the lowest net interest cost
All of the following events would be reported on Form 8-K by a NASDAQ issuer
- the issuance of unregistered shares under Reg S
- a change in executive officers
- a major acquisition
An overallotment provision in an underwriting agreement must be disclosed in
the prospectus and the registration statement
Under SEC Rule 10b-13, a company that is the target of a tender offer must provide its shareholders with a statement indicating acceptance or rejection of the offer within how many business days of the announcement?
10 Days
Prior to placing a stabilizing bid, SEC Rule 104 requires that the syndicate manager
1.notify NASDAQ as to whether the bid will be a penalty bi or a penalty-free bid
2. provide NASDAQ with a copy of the cover page of the prospectus
3. advise NASDAQ as to whether the syndicate will engage in any short covering
Under the SEC Rule 415, a shelf registration, once effective, allows an unseasoned issuer to sell sec for up to how long from the effective date?
2 years
An offering in which an underwriter unconditionally agrees to purchase all shares not subscribed to by shareholders in a rights distribution is termed
a standby underwriting
All of the following items of compensation would be considered unreasonable by the Corporate Financing Department
- any freely transferable stock
- any options exercisable below the public offering price
- any right of first refusal for future offerings with a life of more than 3 years
Which of the following are defined as sec
- Variable annuities
- Investment companies
A Schedule 13-D filing is made when
an unaffiliated entity acquires a 5% or more interest in an issuer
Under SEC Rule 10B-18, a safe harbor is provided to an issuer buying back its own stock in the open market if the issuer
- is not involved in the first transaction of the day
- is not involved in any purchase during the last half-hour of trading
Under SEC Rule 103, once a passive market marker reaches or exceeds its daily net purchase limit, the market maker must
seek an excused withdrawal for the remainder of the trading day
The Trust Indenture Act of 1939 applies to
- corporate bonds
- sold interstate
Under SEC Rule 10b-13, all of the following would be prohibited from tendering shares
- an investor long call option
- an investor short against the box
- an investor short stock
Does not include an investor long stock
An underwriting that provides a floor and a ceiling on the number of shares an issuer is willing to sell is termed
mini-max
Under SEC Rule 104, stabilization is permitted in
- fixed price offering
- firm commitment offerings
All of the following offerings must be filed with FINRA’s Corporate Financing Department
- direct participation programs
- rights offerings
- offering in which a member from is going public
Under Reg D, all of the following are accredited investors
- an officer or director of the issuer
- an institution
- an individual with annual income of $200,000 for the past 2 years
A single offer or sale of a sec to a nonresident of a particular state would void the exception provide by
Rule 147
A US company wishes to raise additional capital through the issuance of a $750 million ongoing non-convertible debenture offering relying on a safe harbor from registration and without a qualified indenture. The sales of these sec will be conducted privately with the assistance of an agent who will place the sec with qualified institutional buyers only. Which is true?
The issuer is required to submit to the SEC a Form D within 15 days of the first sale of the sec
An underwriter will act as an agent in all of the following offerings
- best efforts
- mini-max
- all-or-none
A person acquiring greater than 5% of any equity sec must submit Form 13D with the Commission within how many days?
10 days
Has aspects of both a primary and secondary offering
Split (combined) offering
An investor’s expression of a conditional wish to purchase a new security after that investor has read a preliminary prospectus
Indication of interest
Interval between the filing date of a registration statement and the date on which the sec becomes effective
Cooling-off period
Abbreviated prospectus distributed while an issuer’s registration statement is reviewed by the SEC
Red herring
Federal sec legislation mandating full and fair disclosure about new issues
Sec Act of 1933
Syndicate members are liable only to the extent of their participation
Divided account
All syndicate members share in liability proportionate to their participation
Undivided account
Type of underwriter that manages a firm commitment underwriting
Statutory
The smallest portion of the underwriting spread
Manager’s Fee
Paid to FINRA member firms that are not members of the underwriting group
Reallowance
The largest portion of the underwriting spread
Concession
Clause that allows an underwriter to back away from its firm commitment obligation
Market out
A type of offering that requires an escrow account for customer checks
All-or-none
The most widely used type of underwriting contract
Firm commitment
Underwriting used mostly for municipal and government issues
Competitive
Underwriting used mostly for corporate issues
Negotiated
Must sign the agreement among underwriters
Syndicate
Act as agent in the distribution of a new issue
Selling group
A member may accept a customer check during the cooling off period if it is postdated and held in an escrow account. True or False?
False
Checks received from customers during the waiting period must be returned.
Buyers of new issues must receive a final prospectus before the confirmation of sale. True or False?
False
Buyers of new issues must receive a final prospectus at or prior to the confirmation of sale.
Under the USA, coordination is available only to established companies that have previously registered with the state. True or False?
False
Coordination is available to first time issuers. Information is filed with the state and SEC concurrently. The sec becomes effective in the state when released by the SEC.
The prospectus delivery requirement for IPOs that are to be quoted on the Pink Open Market is 90 days. True or False?
True
The prospectus delivery requirement for IPOs that are to be listed is 40 days. True or False?
False
The prospectus delivery requirement for IPOs that are to be listed or quoted in NASDAQ is 25 days.
A firm can continue publishing research reports during the cooling off period if the se being recommended are not equivalent to the sec being underwritten. True or False?
True
The employees of a member engaged solely in the sale of mutual fund shares are not allowed to buy new equity issues at the POP. True or False?
False
An exception applies to employees of members engaged solely in the ssle of investment company sec and DPPs.
A selling group member received an allotment of sec from the book running manager at the agreed discounted price. The group member may deliver these sec to the account of its customers at the same concession price. True or False?
False
Prohibits certain issuer activities during the underwriting period
Rule 102
Allows passive market-making activity during the restricted period
Rule 103
Regulates stabilizing bids
Rule 104
Prohibits manipulative short sales in advance of a public offering
Rule 105
Limits activity of underwriters who also are market makers
Rule 101
Number of nonaccredited investors that can buy a private placement under Rule 506b of Reg D
35
Form 144 does not need filing of a shareholder sells fewer than this amount of shares
5000
Number of months a state resident must hold sec before sale to a nonstate resident under an intrastate offering
6
A company may sell up to this amount under a Reg A+ offering
$50 million
Intrastate offering also is known by this rule number
147
Number of seconds to report a trade in an NMS sec
10
Under Rule 144, customers may be called back if they expressed interest within this number of business days
10
Minimum amount of net worth for an accredited individual investor under Reg D
$1 million
Minimum amount of assets for QIBs under Rule 144A
$100 million
Ownership of more than this percentage if a firm’s outstanding stock qualifies an otherwise unaffiliated investor as a control person
10
A tender offer must remain open for at least 30 days from the date the terms were announced. True or False?
False
A tender offer must remain open for at least 20 business days from the date the terms were announced.
A customer is considered long stock under the short tender rule if he owns a call, right, or warrant. True or False?
False
For the purposes of the short tender rule, customers are considered long stock only if they have issued exercise instructions for calls, rights, or warrants.
When a member firm wishes to go public, it must engage the services of a qualified independent underwriter to price its IPO. True or False?
True
Representatives must get written permission from discretionary account customers prior to purchasing shares of the employer’s stock of these accounts. True or False?
True
The Corporate Financing Department considers options or warrants that are exercisable below the POP as unreasonable compensation only if they have life of more that 5 years. True or False?
False
Options or warrants exercisable at a price below the POP are unreasonable compensation regardless of their duration. Options or warrants also are considered unreasonable compensation if their life is more that 5 years.
Reimbursement of solicitation costs is considered part of the underwriters compensation package by the Corporate Financing Department. True or False?
True
A foreign issuer of stock traded on the NYSE must file a Form 8-K with the SEC withing 15 days of a reportable event. True or False?
False
Form 8-K must be filed by domestic issuers only.
A nonaffiliated investor that acquires a 5% ownership interest in an issuer of se must file a Form 4 with the SEC. True or False?
False
Nonaffiliated investors musta file a Schedule 13D within 10 days when they acquire a 5% or more beneficial ownership interest in an issuer of sec. Form 4 is filed by insiders of the issuer to report an ownership change and must be filed within 2 business days of any changes.
