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SIE Exam 2024 > Chapter 4: Types of Offering > Flashcards

Chapter 4: Types of Offering Flashcards

1
Q

Public Offerings

A

Enables a company or corporation to offer securities like stocks or bonds to the public to generate capital

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2
Q

Private Offerings (Reg. D)

A

Offered to a small pool of investors and are not open to the public

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3
Q

Underwriting Commitment

A

Liability of the underwriter

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4
Q

Firm Commitment Underwriting

A

Contractual agreement between underwriters and the issuer; mandates that the underwriters purchase all the securities directly from the issuer

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5
Q

Best Efforts Underwriting

A

Underwriter promises to try and sell most of the company’s securities to investors; underwriter is not liable for any unsold securities

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6
Q

Best Efforts All-or-None Underwriting

A

Underwriters must put their best efforts into selling all of company’s securities to investors; requires the entire offering to sell for the deal to close

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7
Q

Best Efforts Mini-Maxi Underwriting

A

Underwriter must sell the minimum required and once reached, can sell up to the maximum

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8
Q

Standby Underwriting

A

Underwriter commits to buying any shares that the public doesn’t subscribe to during an issuance

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9
Q

Shelf Registration

A

Allows a company to register many securities with the SEC and sell them whenever the economy’s condition is favorable

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10
Q

Market-Out Clause

A

Grants the underwriter freedom to terminate the agreement without facing any penalties

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11
Q

Primary Market

A

Market where securities are issued for the first time

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12
Q

Initial Public Offering (IPO)

A

Allows investors to buy securities directly from the company, facilitated by the financial institution that performed the initial underwriting

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13
Q

Who all is included in the Primary Market?

A

-Issuer
-Underwriting Manager
-Syndicate
-Selling Group

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14
Q

Issuer

A

Investment company/domestic/foreign government that creates, registers, and sells securities

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15
Q

Underwriting Manager

A

Typically investment banker who manages all underwriting activities

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16
Q

Syndicate

A

Group whose members sell shares to applicants by working with underwriters

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17
Q

Selling Group

A

Dealers and financial firms responsible for marketing or selling new or second-issued securities

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18
Q

Underwriting Spread

A

Difference between the price underwriters pay to buy securities and price at which they sell them to the public

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19
Q

Concession

A

Part of the spread paid to the selling group for their service of selling securities to the investors

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20
Q

Registration

A

When a company files required documents with the SEC before an IPO

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21
Q

Three Periods of the Registration Process

A

-Pre-Registration
-Cooling-Off
-Post-Registration

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22
Q

Pre-Registration Period

A

Time frame before the issuer submits registration documentation

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23
Q

Throughout the pre-registration period, what does the issuer do?

A

Collects data about the firm and its financial records but is prohibited from making any offers to sell securities

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24
Q

Cooling-Off Period

A

Interval from when a registration statement is lodged to its enforcement date

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25
What is the minimum time frame of the cooling-off period?
20 days
26
Post-Registration Period
Date the registration has been declared effective by the SEC and the company and underwriters meet to price the offering
27
What happens after the company and underwriters meet to price the offering?
The issuer and managing underwriters write and execute the underwriting agreement; can last more than a year
28
After-Market Prospectus Requirements
Legal requirements that must be fulfilled when a company offers its securities
29
Non-Listed IPO
Company is not listed on the stock exchange; should be filed within 90 days of offering
30
Non-Listed, Follow-On Offering
Offering made by a company not on stock exchange but already made IPO and listing additional securities to raise more capital; filed within 40 days
31
Security IPO on an Exchange
Issuing shares for the first time on the NYSE or Nasdaq; wiled within 25 days
32
Follow-On Offering Listed on an Exchange
Offering made by a company already registered with the NYSE or Nasdaq and issuing additional securities; timeline determined by SEC
33
Prospectus
Formal document required by SEC that provides details about an investment offering to the public and is filed for offerings of securities
34
Statutory Prospectus
Filed with SEC before offering occurs, contains all relevant info about the company, operation, financial condition, and securities
35
Preliminary Prospectus
Contains info about issuer's company, made to brief prospective investors about a company's operations and financial position
36
Summary Prospectus
Contains pertinent info like summary of company's background and financial information, shorter version of statutory, gives quick look
37
Free-Writing Prospectus
Contains details not mentioned in the registration statement but must be known by potential investors
38
Exempt Securities
Do not have to be registered with the regulatory authorities like the SEC under federal securities laws
39
Who are exempt securities usually sold to?
Private agencies
40
Government and Agency Securities
Loan investors make to government agencies or federally backed private corporations
41
Municipal Securities
Launched by state or local administrations or their established bodies, like agencies or special districts
42
Are banks and insurance agencies required to file with the SEC?
No because they have their own regulations and the SEC is meant to protect uninformed investors
43
Are nonprofit organizations required to file with the SEC?
No, because they are not in business to make a profit but and are typically endorsed by local/federal government
44
How are debt securities exempt from filing with the SEC?
If they have a maturity of no more than 270 days
45
Small businesses can be exempt from SEC filing when?
Private investment companies issue securities to help them finance
46
Exempt Transaction
Not required to be registered with any regulatory body, provided the number of securities issued is negligible compared to the issuer's perations
47
Regulation D
States that any offer to sell securities must be registered with a regulatory body, usually the SEC
48
Private Placement
Offerings exempt from the SEC's regulation requirements under Regulation D
49
Who are private placement offers typically for?
Friends, family, accredited investors, and institutional investors
50
Rule 504
Allows certain issuers to offer and sell up to $10 million of securities in 12 months
51
Rule 506(b)
Securities offered can only be bought by accredited investors and up to 35 unaccredited investors to qualify for registration exemption
52
Rule 506(c)
Allows the issuer to offer securities to unlimited accredited investors, provided their accredited status is verified
53
General Obligation (GO) Bond
Municipal bond supported by the issuer's reliability and ability to collect taxes from the residents
54
GO Bonds are often used to fund what?
Highways, public spaces, apparatus, and overpasses
55
Revenue Bonds
Project-specific and are not financed by tax dollars
56
Competitive Sale
Multiple underwriters submit bids and securities are awarded to the best offer
57
Negotiated Sale
Underwriter is chosen by the issuer and demands/needs are negotiated
58
Presale
When final security pricing is established after seeking customer interest
59
Municipal Documents
Convey legal information during the issue of municipal securities
60
Pieces of Municipal Documents
-Official Statement -Legal Opinion -New Issue Confirmation -Committee on Uniform Securities Identification Procedures
61
Official Statement
Provides details on company's securities, financial condition, and risks involved
62
Legal Opinion
Written by lawyer or law firm in which the issuer's securities are legally analyzed to be valid
63
New Issue Confirmation
Written summary of the transaction details of the purchase/sale of new securities delivered to investors
64
Committee on Uniform Securities Identification Procedures (CUSIP)
9-character alphanumeric code that identities and tracks North American securities through their life cycle
65
Electronic Municipal Market Access (EMMA)
Source of municipal securities details and related financial data
66
Rule 144
Provides exemption and permits the sale of restricted or controlled securities to the public if several conditions are fulfilled
67
Rule 144A
SEC regulation that permits the resale of privately placed securities to Qualified Institutional Buyers (QIB)
68
Rule 506
Allows the issuing of large quantities of securities in private placements
69
Rule 145
Deems that exchanges of securities in certain business combinations involve an offer and sale that would require registration under the Securities Act unless an exemption is available
70
Reclassification
Replacing one security with another
71
Merger/Consolidation
Securities are transformed into or swapped for securities of another company
72
Rule 147
Allows a company to raise funds without registering with the SEC
73
Rule 147A
Allows offering of securities to out-of-state residents

SIE Exam 2024 (20 decks)

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