Issuing Securities

Question 1

Negotiated vs. Competitive Underwritings

Answer 1

Negotiated = issuer and inv. Banker negotiate the offering terms like the amount of securities to be offered, offering price or yield and underwriting fees. STANDARD IN CORPORATE SEC.

Competitive= state or muni gov. Invites inv. Banker to bid for a new issue of bonds. Securities go to underwriters who’s bid results in lowest net interest cost to the issuer

Question 2

Firm commitment

Answer 2

Underwriter contracts with the issuer to buy the securities at a specified price and quantity on a certain date. Details are in an LOI.

Under this commitment, any unsold securities or losses are prorated among the underwriter firms according to their participation.

Question 3

All or none underwriting commitment

Answer 3

Underwriters must sell all of the shares or cancel the underwriting. This. Is outlined in an agreement between the issuer and underwriter.

Question 4

Best Efforts underwriting commitment

Answer 4

The underwriter sells as much as possible without liability for what cannot be sold. The underwriter is acting in an agent capacity with no financial risk.

Question 5

Mini-max underwriting commitment

Answer 5

A type of best efforts underwriting. They are most frequently found in limited partnership program offerings and funds collected from investors during the offering period must be held in escrow pending final disposition f the underwriting.

Question 6

Shelf Offering Rule 415

Answer 6

An SEC provision allowing an issuer to register. New issue security without selling the entire issue at once. The issuer may sell limited portions of the issue over a 3 year period without reregistering the security or incurring penalties.

Question 7

Deficiency Letter

Answer 7

The sec’s notification of additions or corrections that a prospective issuer must make to a registration statement before the SEC will clear the offering for distribution.

Question 8

Stabilizing Price

Answer 8

Bidding at or below the public offering price of a new issue security. Underwriting mangers may enter stabilizing bids during the offering period to prevent the price from dropping sharply.

Question 9

Pegging

Answer 9

When a stabilizing bid is placed above the the POP. This is strictly prohibited.

Question 10

Market out clause

Answer 10

A market out clause is used to limit the risks associated with a firm underwriting. It specifies conditions under which the offering may be canceled

Question 11

Rule 144a

Answer 11

Allows non registered foreign and domestic securities to be sold to certain institutional investors in the US without holding period requirements.

Question 12

Rule 145

Answer 12

Rule 145 of the 1933 act is intended to protect stockholders of any company that proposes to reorganize its ownership structure, acquire another company, or merge with another company. A full disclosure document (proxy statement) must be sent to stockholders o inform the of the proposition.

Question 13

FINRA rule 5130

Answer 13

Protecting the public and restricted persons prohibitions. This rule is designed to protect the integrity of the public offering process. This rule applies only to IPOs of common stock.

Question 14

Regulation s

Answer 14

Offers and sales made outside the US by us issuers are excluded from the registration provisions of the Securities act of 1933. Therefore, they do not need to file but still needs to be reported to the SEC.