Unit 7 - Issuing Securities Flashcards
Define the Securities Act of 1933
regulates NEW ISSUES of CORP securities sold to the public.
Information regarding new securities under Securities Act of 1933 must be filed with who? (eg. OCC, FINRA, SEC)
SEC and published in a prospectus
Define the Securities Act of 1934
Secondary trading of securities. created the SEC to oversee the industry
Define the Maloney Act
established the self-regulatory bodies to regulate it’s own members (FINRA, MSRB, CBOE)
What are the three phases of underwriting?
- registration of securities 2. Cooling-off period 3. Effective date - offering period may begin
how long is the cooling-off period?
20 days
Are Rule 144 stocks liquid or illiquid?
illiquid
Can rule 144 stock be sold unrestricted by an affiliate?
no. Therefore, cannot be sold as call options because cannot be redeemed if shares were called
A due diligence meeting is held between which parties?
issuer and the underwriter
When is the due diligence meeting held?
Before the effective date and is one of the final meetings held before the sale of the security so that each party may review all aspects of the issue.
Before the filing of a registration statement for a new issue, an investment representative may NOT do which: sell, solicit, or get indications of interest?
may not do any of those before the registration statement is filed
Define Regulation D
Reg D provides a private placement exemption for securities that are sold to no more than 35 nonaccredited investors. There is no limit to the number of shares that can be issued nor the number of accredited investors who may purchase the shares.
after what amount of time can corporate insiders sell their stock at a profit?
after being held for a min of 6 months. if held less than 6 months, profits go to the company
What type of security is NOT exempt under Sec Act 1933?
commercial bank holding company securities because they have to register with the SEC
What does Rule 144A regulate?
the sale of restricted stock to institutional investors (aka QIBs - qualified institutional buyers)
Under Rule 144, what is the maximum shares that can be sold?
the greater of 1% of the total shares outstanding or the weekly average of the prior 4 weeks’ trading volume
Can member firm sell a new equity issue to one of its nonregistered employees?
No - Member firms and employees of members (registered and nonregistered) are prohibited from buying a new equity issue at the public offering price
Describe best efforts offering
the underwriter serves as an agent with no financial obligation for unsold securities
describe all-or-none offering
the underwriter agrees to devote its best efforts to sell the issue, but the entire offering is canceled if all shares cannot be sold
describe standby offering/underwriting
the underwriter agrees to purchase any unsold shares remaining after the expiration of a rights offering (firm commitment)
What is the underwriting spread made up of?
difference between the public offering price and the price an underwriter pays an issuer
What is usually the largest and smallest component of the underwriting spread?
concession tends to be the largest component of a corporate underwriting spread; the manager’s fee is generally the smallest component
Define Regulation S
A type of exempt transaction allowed by the SEC, permits US issuers to offer securities offshore to non-US residents only, without being registered with the SEC.
Name all exempt transactions rules or regulations
Reg A+ (small/med corp offering), Reg D (Private placement), Reg S (offers& sales made outside US by US issuer to non US), Reg 47 (intrastate securities), Reg 144, 144a, 145
