Primary and Secondary Markets Flashcards
(106 cards)
1
Q
What is a primary market
A
securities are sold by issuers to raise money
2
Q
What is a secondary market
A
securities trade between investors
3
Q
Whats another name for the secondary market
A
capital market
4
Q
What is a primary offer
A
an offer made in the primary market
5
Q
What does the Securities Act of 1933 require for a new issue
A
it be registered with the SEC before public sale
5
Q
What does the issuer need to provide the investor before they purchase
A
a prospectus
6
Q
What are the two main types of primary offerings
A
IPOs
APOs
7
Q
Whats does APO standfor
A
Additional public offering
also follow-on or subsequent public offering
7
Q
In securities, the term person refers to
A
a natural person or legal entity
8
Q
Secs not listed on national exchanges are called
A
non NMS secs
9
Q
What are municipal bonds also called
A
munis
10
Q
What is another name for debt issues
A
bonds
11
Q
An underwriter is a type of what
A
broker dealer
12
Q
what another name for an underwriter
A
investment banker
13
Q
What do underwriters (IBs) do
A
work with issuers to set up offerings
14
Q
What are the top level different types of underwriting agreements
A
Best Efforts
Firm Commitment
15
Q
What are the types of best efforts underwriting
A
All on none
mini max
16
Q
What is best efforts underwriting
A
acting only as agent so not require to pruchase the shares if funds cant be raised
17
Q
How are best efforts deals closed
A
collecting client funds in escrow
18
Q
What is an all or nothing underwriting
A
all shares must be sold or underwriting is canceled
19
Q
Where are client funds held during AON offerings
A
escrow
20
Q
What is a mini max offering
A
sets a min shares that need to be sold, once hit, the underwriter can expand the offer to a set max
21
Q
What another phrase for best efforts underwriting
A
investment banker acting as agent
22
Q
What is a firm commitment deal
A
the underWs commit to buying all shares from issuers themselves for a discount then resell the shares to public for normal price
23
What is a syndicate
a group of BDs/IBs
24
How are syndicates structured
a group of BDs come together to share risk and reward
someone is the managing underwriter
25
What is sometimes brought into syndicates
a selling group made of other BDs
26
Do selling groups share risk or hold the shares in invetory
no
27
3 types of investors
institutional
retail
accredited
28
Examples of institutional investors
banks
insurance comps
employee benefit plans
29
What are the type of employee benefit plans that might be institutional investors
pensions
hedge funds
investment advisers
mutual funds
30
What is a qualified instit ivestor
owns and invests min 100 mill
31
What are accredited investors
all institu investors
retail that hit the following creiteria:
made 200k for past 2yrs and will this yr
(if using a joint acc then 300k)
or net worth of 1mil not including home equity
natural person with prof creds given by an accredited educational instit
holders in good standing of series 7, 65, and 82
32
Where can you find the criteria for accredited investors in the Sec Act of 33
Rule 501
33
muni advisers can do a little assistance in what when providing advise for creating issues, and what cant happen
underwriting functions like an official notice but they cant be paid
34
The paper act requires what to protect invs
regis of new issues
full and fair disclosure about self and offering
necessary material info for investors to judge the issues merit are available
regulating the underwriting and dist of primary issues
providing crim penalts for fraud
35
What are some steps that the SEC reqs before issue is brought to market
File a regis statement (s1)
cooling off period
final filling of prospectus
36
What does an S1 (regis statement) contain
a prospectus
desscription of the business
name and addy of comp officers directors, their salaries, and 5 yr business hist of each
amount of secs that the officers director own
ID of all investors that own 10% or more
comps capitalization incl equity and debt
how proceed will be used
any legal proceedings
37
the accuracy and adequacy of the regis statement and prospectus is whos responsibility
the issuers
38
What cant happen during cooling off period
solicitation of the sec
39
What can happen during cooling off
tombstone ad
40
What are tombstone ads limited to
name of issuer
type of sec being offered
numb of shares to be sold
POP
Name of underwriters if used
41
What does a tombstone ad need to unclude
advisory statement:
This announcement is neither an offer to sell nor a solicitation of an offer for any of these secs. This offer is made only by prospectus.
42
What is a prelim pros or red herring
used for guaging investor interest and indications of interest
43
Prelim pros has to be what
made available to any customer who expresses interest during the cool off
44
What an indic of interest
declaration of an investors potential interest
45
What are state regis requirements or blue sky filings
the process of coordinating the fed and sstate regis
46
What is delivered at the end of the cool off period
final prospectus to all who pruchase at IPO
47
What does a prospectus need to have
descrip of offering
price
selling discounts
Effective date
use of proceeds
descip of underwriting
hist of business
risks
descrip of management
material financial info
legal opinion about the corp formation
SEC disclaimer
48
What is a hybrid/combo/split offering
an IPO in which the issuer allows the sale of shares of existing shareholders along with newly issued shares
49
What is a shelf offering
registering new shares to be sold, but can wait to sell them at a later date
50
How long do shelf offerings last
2 years unless a well known seasoned issuer they can extend to 3 years
51
Any sec listed on major exchange will meet what criteria regarding shelf offerings
well known seasoned issuer
52
Investors that buy new secs (that recently IPO'd) on the secondary market are entitled to the final prospectus if bought within what range from the IPO
IPOs of NMS 25days
APOs of NMS 0days
IPOs of non NMS 90 days
APOs of non NMS 40
53
What are some examples of exempt issuers
US gov
munis
national and state banks
Building and loans and savings and loans
charitable religious educational and nonprofit assoc.
common carriers
54
examples of exempt issues (secs)
commercial paper, bankers acceptances, and others that have maturities of 270 dayss of less
insurance policys
fixed annuities
55
The word variable or phrase "separate account product" mean wha t
the product must be regis with SEC
56
exampels of exempt offerings (transactions)
Reg A
Intrastate offerings
Reg D
57
What are the rules for advertising and solicitations for private placement offerings
all investors must be accredited
the issuer must take steps to verify the investors are accredited
58
What investors can purchase private placement stock
unlimited accredited
up to 35 non accredited
59
What letter must be signed for private placements
a letter stating only for investment
60
What are other names for private placements
lettered stock
legend stock
restricted
unregistered
61
What are the rules of intrastate offerings
can only issue in to persons that are residents of state
HQ in state
80% of assets, income, offering proceeds, and employees must be used/in state
62
Whats the waiting period for intrastate offerings to resell to nonresidents
6mo
63
describe two tiers of Reg A
Tier 1 : up to 20mil in 12 mo, no more than 6 mil from existing shareholders
Tiers 2: up to 75mil in 12 mo, no more than 22.5mil from existing shareholders, held to normal high disclosure standards
64
What are the qualifications to be an investor in Reg A tier2
be accredited
or max investment of 10% of net worth or income
65
Who is Reg A for
small and medium businesses, not hedge funds VCs or PE
66
What are the different members of exchanges
Designated market maker
floor broker
two dollar broker
floor trader
67
What is a designated market maker
responsible for maintaining a fair and orderly market
maintains inventory and liquidity
68
What is a floor broker
handles trades that execute on exchanges for their clients
69
What is a floor trader
execute trades on the floor for their firm not outside customers
70
What is a two dollar broker
floor broker overflow that can be hired for a fee
71
While exchanges might only have one MM for a sec, the OTC markets might
have multi competing for the trades from BDs
72
How does OTC markets work
client places order for a sec with BD, BD picks a MM to make it happen
73
What is the NASDAQ
the third market in which exchange listed secs are traded OTC
74
Most exchange listed secs are eligible to be traded OTC as long as
the trades are reported to the consolidated tape within 10 seconds after execution
75
What are the two criteria of exchanges and OTC markets
physical location for trades to happen
pricing system
76
What is the fourth market
Electronic comm networks (ECNs) where institu investors trading large volumes between eachother without BDs
77
What another name for ECNs
dark pools
78
What is a custodian
person who manages a minor's acc under the Uniform Transfers to Minors Act such as a firm that hold assets in a retirement acc
79
What is a trustee
a fiduciary for a trust
80
Investment advisors are always a
fiduciary
81
3 prong test for IAs
gives advice
regularly
for compensation
82
What acts govern IAs
IA act of 1940 and Uniform Sec Act
83
Examples of facilitators in the secondary market
BD firms like carrying firms,fully disclosed firms prime brokers
84
When a BD firm is a member of FINRA or other SROs they cant say what
they are endorsed approved or recommended by them
85
What is a carrying firms (clearing firms)
holds customer assets
must maintain asset levels above the customer accounts
86
How do carrying firms need to hold the assets
separately from their own
87
what is a fully disclosed (introducing)firm
essentially a middle man between a customer and a clearing firm
doesn't need to maintain assets above cust acc's
88
What is a prime broker
basically a carrying firm but more customized
the customer can use mult brokerage houses
89
A BD cannot act as a broker and a dealer on the same transaction T or F?
T
90
What is the quote for a sec
the bid and ask with the amount of stock availble at that quote
91
If you place a sell order for 40$/share but the buy limit is at 38, what will the transaction settle at
38$/share
92
What is the spread
diff between the bid and ask price
93
What type of trade takes priority
limit orders
market orders
time restrictions
fill restrictions
94
What are the time restrictions that can be placed on trades
day orders
good til canceled
market on open/closed
95
what is a day order
order canceled at end of day if not filled
96
what is a good til canceled order
stays open for 6mo periods
97
what is a fill or kill order
fills completely or cancels
98
What is an immediate or kill order
like a FOK but partial ex is okay
the remaining is canceled
99
What is an All or none order
Same as FOK but doesnt have to fill immediately
can be GTC or day restricted
100
What is regular day settlement
the standard 1-2 days post trade it takes to settle
101
Whats the only things that settle within a day
Tresury secs
options but not equity options
everything if cash settlement
102
What are the good delivery rules
endorsed by all whos name is on front of the cert
signed exactly as they appear
103
What are some deviations from the good delevery rules
& for and
Co for company
Inc for incorporated
104
When secs are held electro inst of paper certs, whats it called and what doesnt apply
held in street name
good delivery
