Ch 2 deck 8 Flashcards
In registration period regular business communications are allowed
By reporting issuers (including forward looking info)
By non-reporting issuers (but NO forward looking info)
For an IPO, In the post-effective period, research analysts that work for a company that is either a lead manager or a co-manager may not
make public appearances regarding the issuer for 40 days from the beginning of the offering.
time during post effective period in which research analysts may not make public appearances regarding the issuer is called
quiet period
For a follow-on offering, In the post-effective period, research analysts that work for a company that is either a lead manager or a co-manager may not
make public appearances regarding the issuer for 10 days from the beginning of the offering. (called quiet period)
There is an exception to the “quiet period” rule for
“actively traded” securities
Allowed in the post-effective period
offers
sales
In the post effective period sales must be
accompanied or proceeded by a prospectus
FINRA rule 5130 was put in place to make sure that an initial public offering is offered fairly to
all public investors
FINRA rule 5130 was put in place to make sure that an IPO does not give an advantage
to insiders or people in the financial industry
FINRA Rule 5130 prohibits a member firm (broker/dealer) from selling shares of an IPO
to an account in which a “restricted person” has a beneficial interest
FINRA Rule 5130 Restricted persons are
–FINRA members and other broker-dealers
–
Broker-dealer personnel including registered representatives and including their family members
- Anyone working for a broker dealer (not just registered reps)
–Lawyers, accountants, financial consultants, or anyone else acting in a fiduciary capacity to the lead underwriter
–Portfolio managers
–
Individuals with a significant ownership interest (+10%) in the broker-dealer
-
Under FINRA Rule 5130 Broker-dealers and agents of broker-dealers may not retain shares
of the IPO for their own accounts to sell at a later time (unless exceptions are met)
FINRA Rule 6130 prohibits a member or associated person from executing a transaction in a security being distributed in an IPO otherwise than
on an exchange before the security opens for trading on the exchange.
Under FINRA Rule 6130 sales in the security cannot be executed until
the security opens for trading
Rule 430A allows companies to retroactively insert
pricing information into the registration statement as of the registration statement’s effective date.
Pricing information submitted with the registration is usually
in the form of a price range
This allows companies can insert the chosen price after the registration statement has become effective by
filing a 424(b) prospectus supplement with the new price
When a company files a 424(b) prospectus supplement with a new price the SEC
Does not need to review this supplement
A company can file a 424(b) prospectus supplement with a new price the SEC if the change in price is
not 20% greater or less than the upper and lower limits of the range
If a company cannot file a 424(b) prospectus supplement with a new price because the new price is outside limits, it must
revise the registration statement and file a post-effective amendment to the registration statement
Rule 430A allowing retroactive insertion of pricing is available for
firm commitments offerings
424(b) prospectus supplement with a new price must be filed within
15 business days of effective date of registration
If an issuer fails to file a 424(b) prospectus supplement with a new price within 15 days it must
file a post-effective amendment to the registration statement
The price range submitted with the registration statement is usually
range of $2 for stocks under $20
a range of 20% of highest point in the range for stocks over $20
