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Series 7 > Investment Banking > Flashcards

Investment Banking Flashcards

1
Q

Investment banking

A

How to raise money from the public

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2
Q

Negotiated offering

A

Issuer chooses the IB directly, most common

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3
Q

Competitive offering

A

IB chosen through auction, letter of intent

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4
Q

UW

A

Buys securities from issuer, sells them to the public

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5
Q

Syndicate

A

Group of UW’s chosen by IB of issuer, risk is subdivided

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6
Q

Managing (lead) UW

A

Manages syndicate and negotiates with issuer

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7
Q

Selling group

A

No underwriting, no risk, just helps sell

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8
Q

Chinese wall

A

Separates IB from B/D

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9
Q

3 types of UW agreements

A
  1. Firm commitment - unsold securities retained by syndicate, must maintain escrow acct
  2. Best efforts - unsold securities returned to issuer includes A. AON entire offering sold or cancelled and returned to issuer B. Min/Max minimum amount sold to avoid cancellation, unsold returned to issuer, must maintain escrow acct
  3. Stand-by rights - purchases shares not bought during rights offering, firm commitment
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10
Q

Investments not regulated by SEC

A

LI , fixed annuities, commodities, futures, regular CDs, currencies, real estate

Options and RETs ARE securities and regulated

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11
Q

Primary offering

A

Authorized but unissued securities, shelf registration 2 or 3 yrs

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12
Q

Well known seasoned issuer

A

At least 700mm public float or 1bill of non convertible bonds issued w/in last 3 yrs, shelf registration 3 yrs

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13
Q

Seasoned issuer

A

An issuer w/at least 75mm in public float, shelf registration valid for 3 yrs

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14
Q

Unseasoned issuer

A

Less than 75mm in public float, files qtrly and annual w/SEC, 2 yr shelf registration

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15
Q

Non-reporting issuer

A

Not required to file with SEC i.e. Private company, not publicly traded

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16
Q

Public float

A

Outstanding stocks not held by insiders

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17
Q

Secondary offering

A

Stock held by insiders or treasury stock

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18
Q

Combined (split) offering

A

Primary and secondary offering

19
Q

Red herring

A

Preliminary prospectus, not final, subject to completion, cannot be delivered electronically

20
Q

Effective registration date

A

1st day the offer starts trading, set by the SEC

21
Q

Issuer directed sales

A

No need for syndicate or selling group

22
Q

Securities act 1933

A

Regulated federal registration of new issues, requires issuer to make full disclosure of relevant info

23
Q

Corporate charter

A

Purpose, place, type of security, amount of securities, mgt rules

24
Q

Trust indenture act 1939

A

Indenture filed w/SEC for new issues of corporate bonds over $50mm

25
Q

Price of new issues determined by:

A
  1. Earnings
  2. Comparisons
  3. Mkt conditions
26
Q

Exempt securities

A

Govt securities, munis, commercial paper, non profit, bank issued securities, rail & trucking issued securities, small business investment co’s, intrastate offerings,

27
Q

Reg A

A

Offering of $50mm or less w/in 12 month period

Exempt Transaction

28
Q

Reg S

A

US companies offering securities outside the US

exempt transaction

29
Q

Reg D

A

Private Placement - no promotion allowed unless targeting accredited investors, website ok with password

PPM private placement memo AKA PROSPECTUS

Exempt transaction

30
Q

Accredited investors

A

Financial institutions, insiders (and family of), annual income of 200k (300k jt) for previous 2 yrs and coming yr, net worth $1mm excluding residence

31
Q

Restricted stock

A

Stock purchased through private placement

Exempt transaction

32
Q

State registration (blue sky)

A

B/D, rep, and security must all be registered in the customer’s state, unless exempt

33
Q

Methods of state registration

A
  1. Notification - filing, simplest form
  2. Coordination - registration effective w/SEC (same time), used for IPO
  3. Qualification - used for federal exempt, not state, hardest
34
Q

Cooling off period

A

Starts when filed w/SEC, lasts about 20 days, SEC reviews, may send stop order, can send red herring, cannot send money though

35
Q

Allocation of orders

A
  1. Pre sale
  2. Syndicate (group net)
  3. Designated
  4. Member
36
Q

Distribution of profits, Spread:

A

Difference btwn POP and amount paid to issuer includes takedown and managers fee

Spread = takedown + managers fee

37
Q

Takedown

A

Part of the spread, this is the biggest part which goes to the syndicate

Part 1 concession - profit to the selling group
Part 2 reallowance - profit paid to those outside selling group

38
Q

Types of syndicates

A
  1. Western (divided) account - members do not assist each other “Wild West”
  2. Eastern (undivided) account - unsold reallocated based on original allocation %
39
Q

Market out clause

A

Allows UW to w/d from offering due to negative mkt conditions, can happen up through the due diligence mtg

40
Q

Sticky issue

A

New issue, difficult to sell, cannot be sold at a discount to firms outside the syndicate or selling group w/o UW permission.

41
Q

Hot issue

A

New issue in high demand, trades at a premium w/in 1st 5 minutes

42
Q

Over allotment (oversubscribed)

A

Take indications of interest for securities than available

Greens how clause - can sell additional 15% of securities due to over allotment, still must register with SEC

43
Q

Corporate financing department rule

A

Part of FINRA that examines compensation to UW, looks at 6 month window for comp, cannot include registration or legal fees, UW must report comp to CFD w/in 1 day after docs filed w/ SEC

stock, options, warrants, are included but cannot be more than 10% of outstanding shares, 6 month holding period

Series 7 (13 decks)

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