New Issues Under 1933 Act Flashcards Preview

Series 62 > New Issues Under 1933 Act > Flashcards

Flashcards in New Issues Under 1933 Act Deck (40):
1

All type of primary distribution (IPO, private placement, secondary offering) share what feature?

Issuer (usually the corporation) receives the proceeds

2

What's a PIPE?

Private investment in public equity – BD helps an issuer distribute restricted (ie unregistered) securities from an issuer that already has publicly traded securities to accredited investors - usually quickly resold

3

What's the key requirement of the Securities Act of 1933?

Non-exempt securities must be registered with the SEC and prepare a prospectus. Registration document filed with SEC is a public document

4

What are the four principal registration forms?

S-1: basic forms used in most IPOs
S-3: short form used by seasoned issuer's with $75m floated common equity where issuer in good order
S-4: issues as a result of mergers, acquisitions, consolidations etc
S-8: issue through employee benefit plan

5

What's the general period for a registration statement to become effective?

20 days. Amendments restart the clock unless they are limited to same class of stock

6

When can underwriters talk to customers about an issue?

During the waiting period, however they may only take expressions of interest and can't sell or accept payment

7

When can underwriters sell an issue?

In the posteffective period only

8

When must prospectuses be supplied in the secondary market?

Nonreporting at time of issue:
If it will be listed – 25 days after effective date
Will not be listed and not an IPO - 40 d
Will not be listed and is an IPO - 90d

If reporting at time of issue, does not apply

9

SEC Rule 3a4-1 governs sale of securities by associated person of an issuer. What are the key features?

- no commission or transaction based comp
- not associated with a BD (now or for last year)
- not subject to statutory disqualification
- sells only to financial institutions
- primarily performs other duties
- does it only once per year

10

What types of issuer can use Form S-3

Well known seasoned issuers and seasoned issuers
Unseasoned issuers and non-reporting issuers have to use S-1

11

What's SEC rule 415 / shelf registration?

A registration allowing offerings on a continuous basis (usually 3 years).

Allows distribution when market conditions most favourable.

WKSIs get automatic shelf provisions ASR

12

What's an At-The-Market offering?

New securities sold into secondary market at prevailing market price - can be over a period of time not all at once (in contrast to a registered secondary)

13

What's a free writing prospectus?

Press releases, emails, marketing materials, term sheets etc used by an eligible issuer (eg WKSI) about an offer that don't include all details of a statutory prospectus

14

What types of securities are exempt from the 1933 Act's registration and prospectus requirements?

- US govt and govt agency securities
- Municipal securities
- Securities issued by nonprofits
- Commercial Paper
- Securities issued by domestic banks and trust companies
- Securities issued by small business investment companies

15

What are the main types of Exempt Offering?

- Regulation A (new issue of $5m exempt under act)
- Regulation D (private placement)
- Rule 144 (restricted and control stock)
- Rule 145 (mergers etc)
- Rule 147 (intrastate)
- Regulation S (offshore)

16

What are the main conditions of Regulation D? (private placement exempt offering)

- reasonable belief buyer is a sophisticated investor
- private placement memorandum (same info as a prospectus)
- issuer assured buyer does not intend to make a quick sale (lock up agreement)
- sold to no more than 35 non- accredited investors

17

What are the criteria for an accredited investor?

- Net worth of at least $1m OR
- individual gross income of $200k ($300k joint with spouse) for each of past two years

18

What's the difference between restricted stock and control stock?

Restricted Stock: unregistered stock acquired through private placement

Control Stock: registered stock acquired by an affiliate (control) person in secondary market

19

What defines a control person?

An officer, director, other insider or their family members

20

Rule 144 requires SEC notification for sale of restricted and control stock EXCEPT...

Sale does not exceed 5,000 shares OR dollar amount not more than $50k

21

What are the volume limitations on Rule 144 sales?

- For exchange and Nasdaq listed stock – over 90 days no more than greater of 1% of outstanding shares or 4w average weekly trading volume
- for restricted stock held for more than a year by non affiliates there is no restriction

22

What are the holding periods for restricted stock (for non insiders)?

First six months - no resale
Six months to one year - volume restrictions
After one year - none

23

What does Rule 144a allow?

Sale of restricted securities to Qualified Institutional Buyers without Rule 144 conditions

(Creates more liquid private placement market)

24

What does Regulation S allow?

US companies may issue unlimited securities outside US without filing with SEC.
Must be genuinely offshore to non US investors.
Cannot be resold in US for a period (debt - 40 days / equity - one year)

25

What are filing requirements under FINRA rule 5123?

In private placement, issuer doesn't have to file, so FINRA requires BD to file PPM as record (no approval) unless buyer is institutional or QIB

26

What's a best efforts, all or none distribution?

Underwriters not required to purchase entire issue, but if entire issue can't be sold, the issue is cancelled

27

What's a standby underwriting?

Underwriter agrees to buy shares not purchased by existing shareholders in a rights offering

28

What are steps in an underwriting?

1. BD performs due diligence
2. Forms syndicate
3. Syndicate agreement
4. Recruit selling group
5. Selling group agreement
6. Determine Public Offering Price

29

What must a seller do under the New Issue Rule?

Obtain representation in writing from buyer that it is eligible under New Issue Rule (that it is a bona fide member of public for any new issue of registered securities)

30

What's the quiet period for participating BDs (including syndicate) in an offering?

For IPOs no public appearances for 40 days for manager/co-manager and 25 days for syndicate members

For follow-ins, 10 days for manager / co-manager unless stock actively traded where there is no restriction

31

Qualified Independent Underwriter must have a minimum investment banking expertise of...

3 years

32

Order of underwriting...

1. Managing underwriter signs letter of intent
2. Prepare preliminary prospectus
3. Form underwriting group
4. Pricing

33

Final settlement of a syndicate account must be no later than...

90 days after syndicate settlement date

34

How can a corporation raise funds without using an underwriter?

Rights offering to existing shareholders

35

What are the lockout periods in a firm issuing research reports on an IPO which it has underwritten?

Manager or co-manager must wait 40 days for an IPO and 10 for a secondary.
Syndicate/selling group members: 25 days

36

When is an associated person on an issuer NOT an RR?

No commission or transaction based comp at all; nor
- associated with a BD; nor
- subject to disqualification

37

What's gun jumping?

Prohibited communications between filing of a registration statement and the effective date

38

Criteria for a WKSI?

- eligible for an S-3
- within 60 days have market cap of $700m or more OR in last three years issued $1bn+ of debt securities

39

When can restricted persons buy IPOs?

Under certain exemptions such as issuer directed sales. Restricted persons can buy shares of a new issue if they are employees or directors of the issuer

40

How many days must pass before a member of a syndicate can extend credit to a customer on a new issue?

30 days