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Ser 7 > Ch 11 - The primary market > Flashcards

Ch 11 - The primary market Flashcards

(60 cards)

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1
Q

Issuers

A

Sell securities to raise capital

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2
Q

Underwriters

A

Hired by issuers to sell new issues
Also known as investment banks

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3
Q

Securities Exchange Commission (SEC)

A

Requires issuers to register securities unless an exemption exists

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4
Q

Firm underwriting commitments

A

Underwriter liable for unsold shares
Also known as:
-Principal transactions
-Dealer transactions

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5
Q

Standby underwriting

A

Type of firm commitment
Underwriter “stands by” during rights offering
Unsold shares in rights offering bought by the underwriter

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6
Q

Best efforts underwriting commitments

A

Issuer liable for unsold shares
Also known as agency transactions

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7
Q

Mini-max commitments

A

Type of best efforts commitment
Minimum shares must be sold, up to a maximum

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8
Q

All or none commitments

A

Type of best efforts commitment
All shares must be sold

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9
Q

Initial public offerings (IPOs)

A

First public sale of a security

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10
Q

Additional public offerings (APOs)

A

Public sale of security after initial sale

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11
Q

Private placements

A

Security sales to private audiences

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12
Q

Primary market transactions

A

Sale proceeds go to the issuer
Examples:
-IPOs
-APOs
-Private placements

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13
Q

Secondary offerings

A

Registered sale of securities
Proceeds do not go to the issuer
Typically involves issuer executives

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14
Q

Combination (split) offering

A

Primary and secondary offerings together
Some proceeds go to the issuer
Other proceeds go to shareholders (typically executives)

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15
Q

PIPES

A

Private placement of public equity
Offered to accredited investors only
Typically at a discount to market value

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16
Q

market-out clause

A

placed in underwriting contract to avoid liability from unforeseen market circumstances

if an event creates an adverse market environment (like large market correction), the underwriter can enact this & cancel the offering

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17
Q

Best efforts underwriting commitments

A

=agency
=min-max
=all or none

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18
Q

Firm underwriting commitments

A

=dealer
=principle
=Standby 

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19
Q

Securities Act of 1933

A

Governs the primary market
Requires disclosures on new issues

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20
Q

Registration form

A

Issuers file with SEC prior to IPO
Details issuer’s background and financials
SEC checks the completeness
SEC does not check the accuracy

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21
Q

Prospectus

A

Created with registration form info
Gives investors details on security

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22
Q

20-day cooling off period

A

1/ Begins when the registration form is filed

2/ Legal activities:
Distribute preliminary prospectus (aka RED HEARRINGS)
Take indications of interest
Publish a tombstone

3/ Illegal activities:
Recommend the new issue
Advertise the new issue
Sell the new issue
Take a deposit for the new issue

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23
Q

Tombstones

A

Legal advertising in cooling off period

Contains this information:
Name of issuer
Type of security
# of shares or units to be sold
Gross proceeds of the offering
Name of lead underwriter
Name of syndicate members
Estimated public offering price

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24
Q

Indications of interest

A

Collected to forecast demand
Allowed during the cooling off period
Not binding on customer or firm

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25
Deficiency letter
Issued by SEC Pauses the cooling off period Provided if the registration form is incomplete
26
Effective date
First day the new issue can be legally sold SEC provides when the registration form is reviewed and deemed complete
27
Prohibited common stock IPO investors
Finders and fiduciaries Passive owners of broker-dealers Member firms Member firm employees, and: -Immediate family members (parents, sibling, children, in-laws) -Dependents
28
Public offering price (POP)
Sale price of new issues
29
Prospectus
Provided to investors buying IPOs
30
Access equals delivery
Prospectus considered delivered if available publicly online Issuers post prospectuses to EDGAR ( SEC’s Electronic Data Gathering, Analysis, and Retrieval system)
31
Exempt securities
Not required to register in any circumstance List: Government securities Insurance company securities (unless a variable contract) Bank securities (not bank holding company securities) Non-profit securities Commercial paper and banker’s acceptances Railroad ETCs
32
prospectus delivery requirement (after close of a registered offering)
listed ipo = 25 days unlisted APO = 40 days Unlisted IPO = 90 days Listed APO = no req
33
Bank holding companies
Companies that own banks Not exempt from SEC registration
34
Exempt transactions
Security is exempt only if sold a specific way List: Regulation A+ Regulation D Rule 147
35
Regulation A+
Small dollar offering rule Sell up to $75 million in 12 month period Disclosures made in offering circular 2 tiers T1 -allow up to 20m to be sold T2 - allow up to 75m to be sold & comes with purchase limits for non-accredited investors, who cannot invest more than 10% of their net income or networth (whichever is greater)
36
Regulation D
Private placement rule Unlimited sales to accredited investors No more than 35 non-accredited investors Disclosures made in offering memorandum
37
Accredited investors
Income-based (annual) Single: $200k income for 2+ years Joint: $300k income for 2+ years $1 million of net worth, excluding residence Holding the Series 7, 65, or 82 licenses Officer or director of the issuer Institution with $5 million+ in assets Any entity where all owners are accredited investors
38
Rule 147 offerings
Avoid SEC registration if sold intrastate No holding period for resale within the state 6-month holding period for resale out of state
39
Regulation T
controlled by fed reserve requies 50% deposit for initial securities purchase and short sales in margin accounts covers relationship between leading bD and the borrowing customer
40
Regulation U
determines the parameters of relationship between BD and banks for purpose of margin loan
41
registration by filing
occurs when a security is registered with SEC only must provide a notice filing to the sated admin (exempt from state registration)
42
register by coordniation
simotaneously regist with stata & sec
43
Registration by qualification
available to issuers selling their securities in one state only. Securities claiming a Rule 147 federal exemption Registration by qualification involves registration with the state administrator only and does not include SEC registration.
44
Rule 144
Rule covering restricted and control stock married couple = combined position
45
Restricted stock
Stock not registered with the SEC Subject to a 6-month holding period
46
Control stock
Stock owned by an affiliate (insider) Subject to volume limitations
47
Affiliate
Officer, director, or 10% shareholder Security sales are subject to volume limitations
48
Form 144
Filed if control or restricted stock intended to be traded in the next 90 days Only must be filed if more than 5,000 shares, or $50,000 total value sold
49
EDGAR
Electronic filing system for SEC forms Form 144 and Form 4 are filed on this system
50
Form 4
Filed if an insider trades common stock aka statement of beneficial changes in ownership for insiders alerts public of insider inc/dec their positions Must be filed within 2 business days of trade
51
QIB (qualified institutional buyer)
$100 million or more of investable assets
52
Rule 144A
QIBs are not subject to rule 144 QIBs avoid holding periods and volume limitations
53
volume limits
allows greater of 1% of outstanding shares or 4 week trading average to be sold every 90 days (4x/yr) 4 week trading average prior to filing form 144 control shares are hold by insider/affliliate
54
Form S-1
sec securities registration form filed when issuer plans on offering securities publically
55
Form D
filed by issuer offering sercurities via private placement
56
Shelf registration rule
Allows issuers to quickly offer securities Issuer files “blank” registration form -Reviewed by the SEC -Granted as effective if all required disclosures provided The security may be sold quickly within the next 3 years When the security is ready to be sold: -Issuer contacts SEC, provides information left “blank” -The security can then be sold 48 hours later -Allows avoidance of the 20-day cooling-off period
57
Rule 145
Require registration and shareholder approval: -Reclassifications -Mergers or consolidations -Transfer of assets Do not require registration: -Stock splits -Stock dividends
58
Regulation S
Registration is not required for securities sold outside of the US
59
Green shoe clause
The underwriter can request 15% more shares from the issuer Instituted if demand is high
60
Stabilizing bids
Underwriter buys IPO securities back from the market with lack of demands, this is a legal form of market manipulation Bids must be at or below POP (usually purchase @ so to encourage price go higher)

Ser 7 (16 decks)

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