Issuing - Primary Markets 8% Flashcards Preview

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Flashcards in Issuing - Primary Markets 8% Deck (60)
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When is a final prospectus due?

25 days from effective date for securities that qualify for listing on the exchange

OTC securities not listed on Nasdaq;
- 90 days from effective date if corporation has not previously
stock to the public.
- 40 days if stock has been previously issued.


Who can offer a Free Writing Prospectus?

Well established company distributing shares through:
Add-on offering
subsequent primary offering

May contain information that is not in the registration statement.

Such companies are called: WKSI - well known seasoned issuers.



Well Known Seasoned issuer:
- has not missed a debt or dividend payment in the last three years.
- has $700m outstanding cap trading in secondary market


Regulation M

Capital Markets
and investment banking

Requires a chinese wall between investment banker and underwriter

Places market restrictions on market participants associated with public offerings including:
APO's, IPO's and subsequent primary offerings


What % ownership makes an insider?

10% or more


Restricted Period (prior to effective date)

The time during which the offering participants may not influence the price of the underwritten security.

Tier 1 - no restriction period (ADTV - average daily trading volume exceeds $1 million and public float is $150 million or more)

Tier 2 - one day prior to effective date (ADTV - $100k up to tier 1 and public float of at least $25 million)

Tier 3 - 5 days prior to effective date (do not qualify for tier 1 or 2)

Under regulation m


Passive Market Making

an underwriter on an APO who is also a market maker during the offering period

May only change its inventory net purchase position by more that 30% of its average trading volume.
(net purchase position equals shares purchased - shares sold)
(positive number is a net purchase
( negative number is a net sale


Short Position

An investor borrows securities and sells those securities



A process during the primary offering that allows the syndicate to buy back shares if the price in the Secondary market falls below those in the Primary Market when there are still shares to be sold in the primary market. It must be disclosed in the prospectus


Penalty Bid

associated with the stabilization process. A penalty charged to the syndicate, or selling group, when it buys back shares from those who purchased at POP. the group loses its concessions. Must be disclosed in prospectus


Analysts and research reports

May not participate in roadshows
Restricted from publishing research during the offering period

if analyst follows issuer in conjunction with other companies of the same sector, may publish as long as security isn't highlighted or its position changed.
if research is on the issuer's bonds, it is allowed because it is a non-equivalent security.
however, if the bonds are convertible, restriction would apply

analyst cannot talk to the security department without legal or compliance personnel present.


Exempt Securities

Municipal securities
nonprofit (church bonds)
commercial paper (maturity of no more than 270 days, usually used to finance inventory)
issues of banks and trust companies (not bank holding companies)
Issues of small business investment companies(SBIC does SBA Loans)


Exempt Offerings

allows issuer to offer nonexempt, yet unregistered securities

Intrastate Offerings

Regulation A offerings

Regulation D Private Placements


Intrastate Offerings

Under Rule 147 of 33 Act, securities are exempt if all the following conditions are met:
80% of the:
-corporation's gross revenues are derived from operations,
-offerings proceeds are used to expand operations
*within one state
100% of the purchasers are principal residents of that state
Purchasers of the stock hold if for 9 months before it can be sold
out of state


Regulation A Offerings

Small issue or Small Dollar Exemption from registration
New issue of less that $5 million during a 12 month period
File an offering statement (called A1) with SEC and distribute an
offering statement to prospective buyers
must be given 48 hours prior or at time of purchase with a 5-day
right of recision
Sales Must be reported to SEC every 6 months


Regulation D Private Placements

referred to as letter stock or restricted stock

Conditions to be met:
Sophisticated Buyer
Offering Memorandum - equivalent to a prospectus
must receive assurance - a letter from the buyer that the buyer
does not intend to make a quick sale of the offering
The securities canot be sold to more than 35 nonaccredited
can be sold to an unlimited number of accredited investors
Purchaser Representative - who the unaccredited investor must use
to purchase offering
Cannot be advertised through media to general public


Rule 144

- Allows Public resale of restricted and control securities under certain conditions
- Addresses resale in the secondary market of previously unreg shares
- shares sold by insider or control persons at an issuing corporation


Rule 144 - Holding Period

The time restricted securities must be held before sold in the marketplace

Subject to SEC reporting requirements - 6 months - if not - 1 year

Control persons must hold for 90 days


Rule 144 - Trading Volume Formula

volume limit is either 1% of outstanding shares or trading volume for the last 4 weeks (the question usually gives 5 weeks volume) whichever is greater


Rule 144 - Notice of Proposed Sale with the SEC

if the sale involves more than 5,000 shares or if the aggregate dollar amount is great than $50,000 in any 3 month period, must file no later than date of sale.

if not sold within 3 months of filing, must file amended notice


Rule 144a Portal System

Allows a qualified institutional buyer to purchase unregistered securities outside of the US and import them if they buy form broker/dealers.

Qualified Institutional Buyer (QIB) has at least $100 million in assets under discretionary management


Regulation S

address off shore sales of restricted stock

requires a 1 year holding period


Secondary Offerings or Rule 144 trades

Security sale poceeds go to a party other than issuer
- a corporate office sells unregistered shares to the public
- a registration statement is filed
- can be combined with an APO
- an employees stock options that are used to purchase unreg shares


Tender Offer

- takeover through a formal offer to existing shareholders at a price above the market
- must remain open for 20 days once made
- if tender offer increases during this period it must pay the
difference to any who sold before the period and tender must
remain open 10 more days


Net Long

- investor has the ability to deliver shares
- options and warrants must be exercised to be net long


Rule 145

- mergers and acquisitions
- substituting one stock for another
- transferring assets from one person to another
- exempts these from filing reg stmnt:
- Stock splits
- Changes in par value
- Stock dividends



- Files an S3 and granted 3 year shelf offering
- For WKSI and SI



Seasoned Issuer
- has $75m of outstanding cap and has not missed an interest or
dividend in the last 3 years


Unseasoned Issuer

- less than SI
- must file S1 for APO
- granted shelf offering of 2 years


Shelf Offerings

- Creates a window in time in which issuer may offer add'l shares to the public.
- The window may be 2-3 years depending on size
- Benefit is issuer does not have to file with SEC during this period
- priced "at the market"