Investment Banking Flashcards Preview

Series 7 > Investment Banking > Flashcards

Flashcards in Investment Banking Deck (43):
1

Investment banking

How to raise money from the public

2

Negotiated offering

Issuer chooses the IB directly, most common

3

Competitive offering

IB chosen through auction, letter of intent

4

UW

Buys securities from issuer, sells them to the public

5

Syndicate

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

6

Managing (lead) UW

Manages syndicate and negotiates with issuer

7

Selling group

No underwriting, no risk, just helps sell

8

Chinese wall

Separates IB from B/D

9

3 types of UW agreements

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

10

Investments not regulated by SEC

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

Options and RETs ARE securities and regulated

11

Primary offering

Authorized but unissued securities, shelf registration 2 or 3 yrs

12

Well known seasoned issuer

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

13

Seasoned issuer

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

14

Unseasoned issuer

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

15

Non-reporting issuer

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

16

Public float

Outstanding stocks not held by insiders

17

Secondary offering

Stock held by insiders or treasury stock

18

Combined (split) offering

Primary and secondary offering

19

Red herring

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

20

Effective registration date

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

21

Issuer directed sales

No need for syndicate or selling group

22

Securities act 1933

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

23

Corporate charter

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

24

Trust indenture act 1939

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

25

Price of new issues determined by:

1. Earnings
2. Comparisons
3. Mkt conditions

26

Exempt securities

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

27

Reg A

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

Exempt Transaction

28

Reg S

US companies offering securities outside the US

exempt transaction

29

Reg D

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

PPM private placement memo AKA PROSPECTUS

Exempt transaction

30

Accredited investors

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

Restricted stock

Stock purchased through private placement

Exempt transaction

32

State registration (blue sky)

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

33

Methods of state registration

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

Cooling off period

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

35

Allocation of orders

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

36

Distribution of profits, Spread:

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

Spread = takedown + managers fee

37

Takedown

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

Types of syndicates

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

39

Market out clause

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

40

Sticky issue

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

41

Hot issue

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

42

Over allotment (oversubscribed)

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

Corporate financing department rule

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